Long Term Leases

One idiosyncracy of my native England is that many property owners don't technically own their homes at all; instead, they have very long-term leases, which are typically initially 99 years long, and which can be bought and sold and speculated upon just like regular property. Now the Italians are getting into the act, too, proposing to sell 50-year leases on deteriorating national treasures such as the 14th-Century Villa Tolomei, outside Florence.

And if it works for buildings, why can't long-term leases like this work for art, as well? In Slate, Tim Harford reports on the proposal of MIT's Michael Kremer, who thinks that countries should lease out their antiquities for a few decades. The long-term nature of the lease would ensure that the leaseholder took good care of the object, while many of the perenially heated arguments about national patrimony would be rendered moot.

There's also no reason in theory why museums, too, shouldn't sell long-term leases as an alternative to deaccessioning works. A hedge-fund manager might well be primarily interested in having a magnificent painting on his wall: once he's dead, there's no reason it shouldn't ultimately revert back to the museum whence it came. If the lease is long-term enough, the hedge-fund manager, if he gets bored of the work, might even be able to sell it at a profit, just as many people sell their UK leasehold properties for more than they bought them for.

No one really knows what kind of discount the art market might apply to a 50-year lease as opposed to outright ownership, but certainly a 50-year bond trades at pretty much the same price as a perpetual bond with the same coupon, so the discount might be quite small. There's only one way to find out.