By Jones Osborn II

Long-term ground leases often run for a term of 99 years. Did you even wonder why such an odd number seems to appear so frequently in leases?

Why not an even 100 years?

Is there some law that limits leases to a maximum of 99 years?

Statutes. Actually, a few states have enacted statutes limiting the length of leases to 99 years. For example, Alabama limits all leases to a maximum of 99 years, and Nevada provides the same limit for all leases other than agricultural leases (which cannot exceed 25 years). California, North Dakota, and South Dakota limit leases of city lots to 99 years, and Illinois and Wisconsin limit certain leases by municipalities or governmental units to 99 years. A number of states have shorter limits for particular kinds of leases. For example, California limits agricultural leases to 51 years, Minnesota limits agricultural leases to 21 years, and Montana limits agricultural leases to 10 years and leases of city lots to 75 years. Arizona has no such statutory limit on any kind of lease.

General Rule. In the absence of a state statute to the contrary, there appears to be no limit on the permissible length of a lease. The leading case on the subject states:

"There being no statute in this state [Delaware] to the contrary, the law permitted the lease notwithstanding its length of two thousand years." (Emphasis added.)

Now that's a long lease!

This raises an interesting question: Can two parties enter into a lease that runs forever? Some courts have stated that perpetual leases are not favored and will not be enforced unless it is clear the parties actually intended the lease to run forever. However, it does not appear that any American court has ever flatly stated that perpetual leases are not enforceable if the intention of the parties is clear.

Conclusion. In most states there is no limit on the length of a lease. The parties are free to contract for whatever term they desire. In most cases, the 99-year term appears to be more of a custom than a legal requirement. If you're not sure whether there is a statutory limit in your state, be sure to check with local counsel before entering into a long term lease, because leases in excess of the legal limit may be void.

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The Delaware case mentioned above is Monbar, Inc. v. Monaghan, 18 Del.Ch. 395, 398, 162 A. 50, 52 (1932).