What this guide assumes
That the route is already settled. Under the Land (Restrictions on Alienation) Act, No. 38 of 2014, freehold land is shut to a foreign national while a lease of up to ninety-nine years is expressly permitted in its place, for residential or for business use. The other routes the Act leaves open, and how to work out which one fits your circumstances, are laid out in Can foreigners buy land in Sri Lanka?, begin there if that decision is still live.
From this point the statute goes quiet. Ninety-nine years is a ceiling, not a specification. Once the term respects it, what the arrangement actually does for you is written in the deed rather than in the Act, and this guide is about the deed.
A long right to use is still not a title
Two interests exist in the same piece of land for the whole of the term. You hold the leasehold, possession and use, for the years stated, on the conditions the document sets. Somebody else holds the freehold reversion, the title the land returns to when the term runs out, and it stays theirs the entire time.
For a decade or three the distinction is invisible. That is what makes it worth naming, because it surfaces in three places.
On resale. A lease is a wasting asset from the day it is granted. Offer the interest in year sixty and what is on the table is thirty-nine years, not ninety-nine, and a buyer prices what remains rather than what was originally granted.
When the reversion moves. You are not the only person with an interest in the land while the term runs. Whether your lease survives a sale or a mortgage of the freehold, or the lessor’s death, is decided by the drafting, ask your notary, because the ninety-nine-year ceiling settles none of it.
At the end. Which is dealt with below, and is not only the final year’s problem.
The 15 per cent charge no longer runs
For a period after the 2014 Act came in, land leased to a foreign national carried a land lease tax of 15 per cent. How that charge was computed, and when it fell due, is not something the record cited here establishes, so any confident account of its mechanics, including the ones in older buyer guides, should be treated as unverified.
Its removal is what the record does carry. The vehicle was the Land (Restrictions on Alienation) (Amendment) Act, No. 3 of 2017, and Global Trade Alert is the source relied on for that here. Dating it is harder than establishing it. That same record gives an announcement date and an implementation date falling in different months, and other accounts put the charge as not levied from a point earlier again, which is why no single effective date is asserted on this page. Two consequences are not in doubt. The route costs less than it did while the tax ran, and any guidance still presenting the 15 per cent as payable is out of date.
Duty on the instrument is a separate question
None of that makes a lease free of transaction cost. The 4 per cent figure people quote for Sri Lankan property is the rate on a land sale, applied to the greater of the price agreed and the assessment the Provincial Department of Revenue holds, carried by the buyer, and settled before registration at the Land Registry. What stamp duty costs works through that base properly.
A lease is a different instrument, and what it attracts is a computation on its own terms. Ask the notary drawing it to put the figure in writing before a price is agreed rather than after. It is a question with a definite answer, and the answer is cheaper to have early.
Lease and tenancy are not the same instrument
Sri Lankan practice draws a firm line between two arrangements that casual speech runs together.
| Lease | Tenancy | |
|---|---|---|
| Term | Fixed, and stated in the document | Open-ended |
| Form | Must be in writing | May be verbal or written |
| Duration in practice | Years, up to the ninety-nine-year ceiling | Month to month |
| How it ends | On the terms the document itself sets | One month’s notice, either side |
A ninety-nine-year arrangement is unambiguously the left-hand column. Anything put to a foreign buyer as a “long-term tenancy” is therefore either badly named or is not the thing it is being called, and that is worth settling before money moves. Where the line falls in practice, including what happens when execution goes wrong, is covered separately.
The clauses that decide the next ninety-nine years
With the ceiling respected, the Act stops answering questions and the drafting starts. None of the following follows automatically from taking a ninety-nine-year lease, all of it is negotiable while there is still a negotiation, and a deed that is silent on any of it has not left the point neutral, it has left it to be argued later, by people who were not in the room.
Assignment. Whether the interest can be sold on, to whom, and whether the lessor’s consent gates it. Without that clause, an exit in year eleven is a conversation rather than a right.
Sub-letting. Whether any part of the land can be let out, and on what terms. This is what decides whether the property can produce income during years you are not using it.
Succession. What becomes of the lease on the lessee’s death, and to whom it passes.
The reversion. What happens to your interest if the freehold is sold or mortgaged while the term is running.
Renewal. Whether a mechanism exists at all, who can trigger it, on what notice, and how the new rent gets set. “Renewable by agreement” is not a mechanism.
Building and improvements. Whether the lessee may build, what consents that needs, and, the part that gets skipped, who owns the building once the term ends.
Rent. Whether it is fixed for the term, reviewed at intervals on a stated basis, or paid entirely at the start. A review clause with no stated basis is an argument scheduled for a future date.
Permitted use. What the deed allows the land to be used for, which is a narrower question than what may lawfully happen on it. Consent to build, or to subdivide, is granted by the local authority with jurisdiction over the site, on an application of its own, and a permissive lease does not supply it.
The end of the term prices the middle of it
At year ninety-nine the lease expires and the land remains with whoever holds the freehold then. For an individual taking a term now, that date sits beyond a personal horizon, which is exactly why the clause governing it gets read last or not at all.
It bites long before the final year, because the value of the interest falls as the term does. Put the interest up for sale in year sixty and thirty-nine years is what is being sold; a buyer with their own decades to plan for will price thirty-nine years. Renewal terms are not an end-of-life detail. They are part of what you are buying today and part of what you will be selling halfway through.
The same arithmetic reaches anything built on the land. A house with forty years of lease beneath it is worth what forty years of use is worth, unless the deed says otherwise, which is the practical reason the ownership-of-improvements clause deserves attention on the day it is drafted rather than in year ninety-eight.
You are also buying the lessor’s title
A lease can be no better than the title standing behind it. Whoever grants ninety-nine years has to hold the freehold, hold it cleanly, and be able to demonstrate it. A lessee who reads the lease but not the land has checked the wrong half of the transaction.
Two documents do most of that work, and each is treated fully elsewhere:
- A title search running back thirty-five years. Title, deeds and the thirty-five-year search explains why the search goes back that far and what it is looking for.
- A current plan prepared and certified by a registered licensed surveyor. How to read a survey plan goes through what to check on the sheet itself.
Be precise about what a plan carries. Under the Survey Act, No. 17 of 2002, copies of specified categories of certified plan are lodged with the Surveyor-General inside thirty days of certification, and on a question of land surveying or mapping the Surveyor-General’s determination is final and conclusive. That is narrower than it sounds. Lodgement is a record, not an approval, and it authorises nothing on the ground.
Extent is where a lease parts company with a purchase. Where an older deed describes the area loosely and a current survey disagrees, the survey describes the ground and the deed describes a hope, the point those four words on an old deed turns on. On a purchase that gap is a price problem, negotiable at the point of sale. On a ninety-nine-year lease it is a boundary you live inside, and correcting it afterwards means reopening a conversation with a lessor who has already been paid.
Two further items belong on the same list, and both concern people other than the lessor. Whether a mortgage or charge already sits over the land, because a lease granted over encumbered land is exposed to whatever happens to that charge. And whether anyone else holds a prior lease, tenancy or right of occupation over part of it, because possession does not always announce itself on a site visit.
None of this is exotic diligence. It is the work a Sri Lankan buyer does as a matter of course, carried out by someone who will be relying on the answer for the length of a ninety-nine-year term.
Pricing a long lease
There is no national land index in Sri Lanka to test a figure against. The Central Bank of Sri Lanka has published its Land Price Index bi-annually since 1998, and its coverage is the Colombo District alone. That is a real gap for a foreign lessee, because coastal and hill-country land sits outside the series entirely. Why the published figures keep pointing back at one district is worth reading before any number is treated as national.
Beyond Colombo, comparable local evidence is what answers the question, what similar land nearby has actually sold or leased for, and how long it took to do it. That is ground-level work rather than index work. On a ninety-nine-year term it also has to cover the rent structure and not only the capital figure, because a review basis agreed today runs for the rest of the term.
What to put to the notary
The position set out above is the statute and the published record. It is not advice, and a lease of this length should be drafted and reviewed by a notary or an attorney acting for you specifically. These are the questions that decide the next ninety-nine years.
- Does the lessor hold the freehold cleanly, and does the thirty-five-year search show it?
- Is there a mortgage, charge, prior lease, tenancy or occupation right over any part of the land?
- Does the extent on the deed match the current certified survey plan, and if not, which figure is the lease being granted on?
- Can the interest be assigned or sub-let, and is the lessor’s consent required?
- What happens to the lease if the freehold is sold or mortgaged, or the lessor dies?
- What happens to the lease if the lessee dies?
- Is there a renewal mechanism, who triggers it, on what notice, and how is the new rent fixed?
- May the lessee build, and who owns the building at the end of the term?
- Is the rent fixed, reviewed on a stated basis, or paid up front?
- What duty and what fees does this specific instrument attract, in writing, before a price is agreed?
Ask for the answers against the clause numbers of the draft rather than in general terms. A clause that cannot be pointed to is a clause that is not there.
Where A1 comes in
A1 works the property side of this. Finding land and buildings across Colombo, Kandy, Gampaha, Kurunegala, Matara, Galle and Nuwara Eliya, appraising them against comparable evidence, and negotiating terms with the other side. It does not draft instruments, advise on them or conduct conveyancing. Tell us the route your adviser has settled on and we will work inside it.