Understanding Long Residential Leases and Their Impact on Property Ownership in Scotland

LBTT and long residential leases for ADS purposes

For Scotland’s LBTT, a person with a long residential lease can be treated as owning the dwelling for Additional Dwelling Supplement purposes, even if they are still legally a tenant. This means an older long lease in Scotland, or an equivalent leasehold interest elsewhere, may count when working out whether a later property purchase is an additional dwelling.

• Ordinary residential tenancies usually do not count as ownership for ADS, but a residential lease granted for more than 20 years can count as ownership.
• Where a lease is a long residential lease, the tenant is treated as the owner and the landlord is not counted as the owner for ADS.
• Many old Scottish long leases converted into full ownership on 28 November 2015, but unconverted or exempt long leases may still count as owned dwellings for ADS.
• If a buyer acquires a qualifying lease, the transaction is treated like buying a residential ownership interest and may be charged at normal LBTT rates as well as ADS.
• A non-qualifying long lease may be exempt on acquisition, yet still count later as a dwelling owned when deciding if ADS applies to another purchase.
• Equivalent long leasehold interests outside Scotland, including elsewhere in the UK or overseas, must also be considered if they are effectively similar to ownership.

Scroll down for the full analysis.

LBTT and long residential leases: when a tenant is treated as owning a dwelling

This page explains how long residential leases are treated for Scotland’s Land and Buildings Transaction Tax, especially the Additional Dwelling Supplement (ADS). The key point is that some leaseholders are treated as owners of a dwelling, even though they are legally tenants under a lease. That can affect whether a later purchase counts as an additional dwelling and triggers ADS.

What this rule is about

ADS depends in part on how many dwellings a buyer owns at the end of the effective date of a transaction. In most cases, ordinary residential tenancies do not count as ownership. But long residential leases are treated differently.

The official material draws a distinction between:

• standard residential leases, such as short assured tenancies, which are exempt from LBTT and do not count as dwellings owned by the tenant for ADS purposes, and
• long residential leases, where the tenant may be treated as the owner of the dwelling.

This matters because a person may think they only rent their home, but for ADS purposes they may already be treated as owning one dwelling. If they then buy another property without replacing their only or main residence, ADS may apply.

What the official source says

The source says that a residential lease for 20 years or more is a long residential lease. A tenant under such a lease is treated as the owner of the dwelling, and the landlord is not treated as the owner for this purpose. That dwelling is therefore counted as one owned by the buyer when applying the ADS rules.

The source also explains an important Scottish background point. Because of the Land Tenure Reform (Scotland) Act 1974, leases of 20 years or more are no longer granted in Scotland. Older long leases may still matter, however.

Many older long residential leases converted automatically into ownership on 28 November 2015 under the Long Leases (Scotland) Act 2012. The source describes a “qualifying lease” for these purposes, broadly, as a lease which immediately before that date was registered, granted for more than 175 years with more than 100 years still to run, and had annual rent under £100.

Where a lease did convert, the interest is now ownership rather than leasehold. Where a long residential lease did not convert, or was exempt from conversion, the source says it still has to be counted as a dwelling owned by the buyer for ADS purposes if it remains a long residential lease.

The source also states that equivalent interests outside Scotland must be considered. If a buyer has a leasehold interest elsewhere in the UK or overseas that is equivalent to ownership in Scotland, that dwelling must also be counted as owned for the purposes of the LBTT legislation.

Finally, the source distinguishes between two types of acquisition:

• if the buyer acquires a “qualifying lease” of residential property, the legislation treats what is acquired as an ownership interest rather than a tenant’s interest, so the transaction is charged at standard residential LBTT rates and may also attract ADS; but
• if the buyer acquires a long residential lease which is not, for technical reasons, a qualifying lease, the transaction itself is exempt under Schedule 1 to the LBTT legislation, although the interest acquired still counts as ownership when later counting dwellings for ADS purposes.

What this means in practice

The practical question is not simply “Do I own a home?” It is also “Do I hold any long lease that the tax rules treat as ownership?”

For most modern Scottish residential occupiers, an ordinary tenancy will not count. But an older long lease, or an equivalent long leasehold interest elsewhere, may count as a dwelling already owned.

That can affect a later purchase in two main ways:

• if you buy another dwelling and keep the long-lease property, you may be treated as owning two dwellings at the end of the day, which can bring ADS into point;
• if you acquire a qualifying lease itself, the acquisition is treated as acquiring an ownership interest, so the purchase can be charged like a residential property purchase rather than being treated as a normal lease transaction.

The source also makes clear that the label on the interest is not decisive. A person may still be called a tenant under property law, but for ADS counting they can be treated as an owner.

How to analyse it

A sensible way to analyse the issue is to ask the following questions.

• Is the existing interest just a standard residential tenancy, or is it a long residential lease?
• Was the lease granted for a term of more than 20 years?
• If it is an old Scottish long lease, did it convert into ownership on 28 November 2015 under the Long Leases (Scotland) Act 2012?
• If it did not convert, was that because it failed the statutory conditions for conversion, or because it was exempt from conversion?
• Whether converted or unconverted, does the buyer still hold an interest that must be counted as ownership for ADS purposes?
• If the interest is outside Scotland, is it leasehold in a way that is equivalent to ownership in Scotland?
• At the end of the effective date of the new purchase, how many dwellings is the buyer treated as owning?
• Has the buyer sold a previous main residence, or are they keeping the earlier dwelling?

The source material is particularly concerned with the counting exercise at the end of the effective date. That is the point at which the buyer’s property position is tested for ADS.

Example

Illustration: A person lives in a dwelling under an old residential lease originally granted for 150 years. The lease has not converted into ownership, but it is still a long residential lease because it was granted for more than 20 years. They then buy a second property to use as a holiday home.

On the source’s approach, they are treated as owning the leased dwelling as well as the holiday home at the end of the effective date. If they have not sold a previous main residence, ADS applies.

By contrast, if they live under a 10-year residential lease and buy a home, that short lease does not make them an owner for ADS counting. On the facts given in the source, they would be treated as owning only the newly purchased dwelling, so ADS would not apply.

Why this can be difficult in practice

The difficult part is often identifying what sort of lease interest the buyer actually has. In Scotland, long residential leases are unusual in modern practice because new leases of 20 years or more are no longer granted. That means the issue often arises only with older titles or unusual arrangements.

There can also be technical questions about whether an old lease was a “qualifying lease” that converted into ownership in 2015, or whether it remained an unconverted long lease. The tax result may differ depending on whether you are looking at:

• the charge on the acquisition itself, or
• the later counting of dwellings for ADS purposes.

The source shows that these are not always the same. A transaction may itself be exempt as the acquisition of a non-qualifying long lease, yet the interest acquired can still count as ownership when deciding whether a later purchase is an additional dwelling.

Another fact-sensitive area is interests outside Scotland. The source says equivalent leasehold interests elsewhere in the UK or overseas must be counted if they are equivalent to ownership in Scotland. That requires a comparison of the legal substance of the foreign or non-Scottish interest, not just the terminology used.

Key takeaways

• An ordinary residential tenancy does not usually count as owning a dwelling for ADS, but a long residential lease can.
• A lease granted for more than 20 years is treated as a long residential lease, and the tenant is treated as the owner for ADS counting.
• Older Scottish long leases may have converted into ownership, and equivalent long leasehold interests elsewhere may also need to be counted.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Long Residential Leases and Their Impact on Property Ownership in Scotland

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