Leasehold is a right by which the owner of the land, the freeholder, provides a third party, the lessee, with the right to build, own or maintain a construction on the plot or site.
This right is registered as a “building” in the Land Registry and serves as a base for establishing a condominium which allows three buildings (in the legal sense) to be registered in the Land Registry: the plot (land), the leasehold and the condominium units which belong to individual owners.
The leaseholder (in this case all the condominium unit owners) pays a surface rental to the owner of the land. This rental is part of the condominium costs; each owner contributes in proportion to the area of his unit.
Leasehold is usually long-term but not more than 100 years. It is customarily renewed before it expires. As the case may be, the contract has an exit clause – in general a fair indemnity that the leaseholder pays to the freeholder.
This form of ownership is not yet common in Geneva, but well known in Zürich.
It is very common in London where more than half of the apartments are in leasehold, including most high-end addresses (such as Mayfair, Belgravia and Eaton Square).
Given the need to increase the density of construction in Geneva, we are convinced there will soon be more projects of this kind in central locations, such as the Adret-Pont-Rouge development.
With respect to the SAPHIR building, the leasehold rights are the following:
- Duration 100 years (maximum length)
- Annual rent of CHF 612.93/thousandth, increasing to CHF 674.22/thousandth after 10 years then CHF 735.51/thousandth after 16 years
- Residual fair exit indemnity = intrinsic value + expenditures (further costs linked to the construction)