A Lesson About Land Ownership

All land in Second Life is divided into ‘sims’ (also called regions). A sim is a square section of land 256 meters by 256 meters in size (65536m2 in area)(m2=square meters). Every sim has a name. At the moment, there are approximately 30,000 sims in Second Life.

There are two types of market:

  • primary (wholesale, Linden Lab creates new sims and sells them to residents)
  • secondary (retail, existing sims/parcels are transferred between residents)

There are two types of land:

  • Mainland (mainland sims, also called mainland regions)
  • Estate (private regions, also called islands or island sims)

There are two types of land ownership:

  • freehold (outright ownership, right of use, right to create leaseholds)
  • leasehold (long-term, transferable right of use, conditional right to alter leaseholds)

Linden Lab owns the freehold for all mainland sims. Private individuals own the freehold for estate sims. Most of what is bought and sold in Second Life is leasehold.

Mainland:

When Linden Lab creates a new mainland sim, it sells a single leasehold for the whole sim at auction (primary market). The person who buys the sim (who buys the leasehold) may then subdivide the sim and sell leaseholds for individual parcels (inworld, on the secondary market). When one buys a mainland parcel, one is buying the leasehold for that parcel.

Since Linden Lab retains the freehold for the sim, a leaseholder can be confident that 1) Linden Lab will not arbitrarily cancel a leasehold and 2) with few exceptions, leaseholds can be altered (subdivide/join) and 3) all sales are final and absolute. The drawback is that one must have a Premium account to buy a sim at auction or own a mainland parcel.

Estate:

When Linden Lab creates an estate sim (private region), it sells the freehold for the sim to the individual who placed the order. The freehold cannot be subdivided. An estate owner can sell the sim (the freehold for the whole sim) to another individual or he can return the freehold to Linden Lab, at which point Linden Lab removes the sim from the grid. An estate owner may subdivide the sim and sell leaseholds for individual parcels. When one buys an estate parcel, one is buying the leasehold for that parcel.

Since a resident (not Linden Lab) owns the freehold for the sim, one must remember that 1) the estate owner (the resident who owns the freehold) may arbitrarily cancel a leasehold and 2) sales or alterations of leaseholds may be subject to terms and conditions specified by the estate owner.

Needless to say, the owners of large estate continents have spent years building good reputations. In a competitive market, their survival depends on honesty, integrity and sterling customer service. Yet, should some extraordinary event occur (the RL death or bankruptcy of an estate owner), it is possible for an entire continent to evaporate. To the best of my knowledge, this has never happened. What has happened is for a small-scale estate owner to arbitrarily cancel a leasehold, sell the sim without warning, abandon a sim or simply wipe it clean and keep it for himself. There have also been instances of deliberate fraud whereby estate parcels have been sold on the pretext of selling the freehold for the parcel.

Freehold, leasehold, lease and rental:

  • freehold (outright ownership, right of use, right to create leaseholds)
  • leasehold (long-term, transferable right of use, conditional right to alter leaseholds)
  • lease (short-term, non-transferable right of use of estate land)
  • rent (short-term, non-transferable right of use of mainland)

Because of problems and confusion with the leasehold system for estate sims, many estate owners have changed the way they ‘sell’ estate parcels. Instead of charging a high, upfront price for a leasehold, they charge a small fee to arrange a non-transferable lease (rental). Often, the price to ‘buy’ an estate parcel is equal to one month’s ‘rent’.

Mainland rentals are arranged differently from estate leases. Remember that unlike estate sims, the freehold to mainland sims is owned by Linden Lab. If a mainland parcel owner sells the leasehold, he no longer owns the land. That is why mainland is rented via the parcel owner’s group. The parcel owner grants the tenant powers (permissions) over the parcel without relinquishing ownership of the land.

There are four types of mainland in Second Life:

  • 40/40 terraform
  • double-prim
  • normal (4/4 terraform)
  • Linden Homes (512m2 with house, no terraform, no transfer, restricted use)

The term ’40/40′ derives from the ability to raise or lower land 40 meters from its ‘baked’ (default) topography. There are 50 such mainland sims in SL.

Double-prim land is Linden-themed mainland. When Linden Lab created these sims, it kept 50% of the land and sold the other 50% at auction as parcels. Because Linden Lab kept half the land (landscaped with a limited number of prims), Linden Lab could give the sim double prims (Region Object Bonus Factor: 2.00). Such sims can be found in Nova Albion (Miramare, Grignano, Barcola, Sistiana), Bay City, Nautilus and Zindra.

The vast majority of the mainland is normal land, which can be terraformed +4/-4 meters from its baked topography.

Linden Homes are provided by Linden Lab. They are a 512m2 parcel with a house that cannot be bought or sold on the open market. In fact, one is merely renting the land and house from Linden Lab. Significant restrictions apply to the use of the property.

There are three types of estate (private regions):

  • Full Regions (15,000 prims, supports 100 avatars)
  • Homesteads (3,750 prims, supports 20 avatars)
  • Openspace (750 prims, 10 avatars)

See also: A History of Private Island Pricing

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