Peppercorn ground rents and 99year leases have not traditionally been uttered in the same sentence as Grosvenor Estate, smart central London's largest landlord - and also part-owners of Liffey Valley shopping centre being developed at Quarryvale, west Dublin.

But Grosvenor has changed. It knows that it needs the best residents living in its properties to keep values high. And to attract them, it now offers peppercorn ground rents (the landlord's annual due for use of the site), longer leases, and earlier renewal.

Grosvenor will now grant 99-year leases (except in Eaton Square, which it sees as a special case), and is ready to renew leases when they have 40 years (or less) left to run. Formerly, it would not renew leases until there was 20 years or less of life left in them.

And on enfranchisement (tenants obtaining the freehold of a property), there is a new attitude: we want to be approachable, do business and not be difficult, says Colin Redman, Grosvenor's London estate director.

This fundamental and realistic switch of attitude is a powerful boost to the long-term desirability of Belgravia and Mayfair, and is helping to maintain their values. In Mayfair, houses are now worth over £700 sterling a sq ft, says Mount Street agent Peter Wetherell, and the four penthouses recently sold at Fountain House on Park Lane for just under £1,000 a sq ft have established a new benchmark for apartments.

The changes make good commercial sense for Grosvenor. If it has the best type of residents, whether tenants or freeholders, who have the means to live in one of the sprucest parts of London, values will stay high, provided Grosvenor maintains the quality of the place. Tending the estate gardens is vital, as is sticking to the strict timetable for painting that makes Belgravia look so smart.

The moves that have put Grosvenor land back at the top of the London estates pile came about after estate agents told Grosvenor last year that values were being depressed because of its policy on leases, says Wetherell.

Redman agrees that Chelsea and Kensington were becoming more popular than Westminster (which includes Belgravia and Mayfair) because there were more freeholds. Now, however, demand in Belgravia is quite as strong, if not stronger.

Grosvenor has swept away its policy of granting only 65 or 75 year leases, with ground rents starting at £1,400 a year. Such rents put many of Grosvenor's properties above the threshold at which enfranchisement was allowed. But once the 1996 Housing Act removed the low rent test for leases longer than 35 years, ground rent was seen differently. It is an irritant for the tenant to pay and for the landlord to collect, says Redman.

Ground rent costs a lot of time and money, agrees Wetherell, especially in working out what the right amount should be in periodic reviews. In spite of its drawbacks, however, he still believes it is worth Grosvenor continuing to review and renegotiate ground rents on its existing leases.

On length of leases, 75 years was less than people wanted and led relatively quickly to properties becoming diminishing assets (the tenant's value in the property becoming quickly reduced).

AND only allowing renewal of leases at 20 years or less left a long pre-renewal period during which mortgage providers felt the time remaining on the lease provided insufficient security. It also meant leaseholders had to renew near the end of the term, by which time the balance of value in the property has swung to the freeholder, and which left them having to make a huge payment to renew.

The new policy is more flexible. Leases are available for 99 years at a peppercorn ground rent. This does mean, however, paying a larger premium to renew since, says Redman, it now includes the ground rent upfront. The final figure is likely to be within five or 10 per cent of the freehold value of the property.

Alternatively, Grosvenor will offer less costly medium-term leases of between 45 and 55 years. There are also tenancies as assured shorthold lets or short leases, which provide a good income for Grosvenor.

What cheers leaseholders most, Redman finds, is now being able to renew with 40 years still to run on a lease, at which point they still hold the majority of the value, and consequently need less cash to top up the term.

Eaton Square is the jewel in the estate crown, and here Grosvenor policy is to protect its freehold from enfranchisement by offering shorthold and short-lease lets, and 20 or 75-year leases.

As flats in converted houses form much of the accommodation in Eaton Square, Grosvenor can feel fairly confident of retaining this long-term asset.

Collective enfranchisement of flats is proving the least popular option under the new legislation, as it is hard to get the flatholders in a block to agree on how to run the building or split the costs, even if they pass all the legal tests. Grosvenor has had only three collective enfranchisements under the new legislation, and only five takers for 90-year lease extensions - another recent option.

But buying the freehold of one's house is popular. Of around 1,350 Grosvenor houses, 383 have been enfranchised since 1993.

Following an important decision on Grosvenor property in Eaton Mews South by the Leasehold Valuation Tribunal, which arbitrates in valuation disputes, the estate bases its leasehold negotiations on a 50:50 split of the marriage value (MV) and a yield of six per cent.

MV is the difference between the value of the freehold with vacant possession and the sum of the landlord's and tenant's interests - in effect, the sum either party would pay if buying the other's interest.

The yield is a figure used to calculate the sum that would need to be invested now in order to equal the freehold value of the property on expiry of the lease. The lower the yield, the more the tenant would need to pay now to achieve the future value. And the best property commands the lowest rate. In central London, it is established at six per cent.

Other factors involved in lease negotiations are assessing the vacant possession value of the freehold and the relative values in the property that belong to the freeholder or the leaseholder at any time during the term of the lease. Grosvenor has put this information for its properties on computer disc and released it to agents and surveyors. It is a complicated area, but, says Redman, "We are demystifying the process".

The Grosvenor Office is at 53 Davies Street, London W1Y 1FH (0171-408 0988)