Ground leases are a type of long-lasting lease agreement in which a proprietor can lease their residential or commercial property to an occupant who will make improvements to the land. Ground leases prevail among business leases since they enable companies to run on expensive realty residential or commercial property that they can't manage to buy out right. In turn, proprietors can gain from improvements to the land and tenants can save money on realty expenses.
mortgage-talk.com
A ground lease is a type of long-term lease agreement that permits a renter to build-and temporarily own-improvements on the rented land. Ground leases are common in business realty and can generally last approximately 20-99 years. During the lease term, the tenant normally develops residential or commercial property for service use. At the end of the term, they'll transfer ownership of the residential or commercial property to the property manager.

A big franchise may utilize a ground lease to broaden its business into city locations with high property costs. This would permit them to develop a branch in a largely populated area without needing to acquire pricey land upfront.

Because the ground lease process frequently includes development, renters might require to secure loans to cover building and construction and other related expenses.

Two primary types of ground lease agreements account for the threats connected with loans:

Subordinated ground leases put the loan lending institution's claims to the residential or commercial property above the property manager's. This develops a greater danger of losing the land if the tenant defaults, but enables the proprietor to negotiate greater rent payments with the renter. In turn, the occupant might have the ability to more quickly protect a loan with much better rate of interest.
Unsubordinated ground leases give the property owner top priority above the lender. This is a more stable and common option for property owners, but it may make it more hard for tenants to protect a loan. As an incentive, proprietors might provide lower rent costs to tenants who accept an unsubordinated ground lease.
FAQs

Who owns the building in a ground lease?

Generally, tenants in a ground lease only pay rent on the land itself and maintain ownership of any enhancements they make, such as buildings they build on the residential or commercial property. However, ownership of those improvements transfers to the landlord when the ground lease expires.

What takes place if you default on a ground lease?

That depends on the context of the lease and which celebration defaults. In a subordinated ground lease, the landlord risks losing ownership of the land if a tenant defaults on a loan. Conversely, the tenant might potentially lose the structure they developed if the proprietor defaults on financial obligations.

Who pays residential or commercial property taxes in a ground lease contract?

While it depends on the lease contract, tenants are normally responsible for residential or commercial property taxes, insurance, maintenance, and repair work.

What's the distinction in between ground leases vs. land leases?

Both ground and land leases lease land to a tenant. However, ground leases tend to permit tenants to develop the land, while a land lease might not.

Still have legal questions?

Our network of attorneys can help. Get endless 30-minute consultations on new legal subjects with our legal services strategy.

Discover more subjects

A

- Affidavit
- Alimony
- Annual Report
- Appreciation
- Articles of Incorporation
- Articles of Organization
- Asset Turnover Ratio

B

- Beneficiary
- Bill of Sale
- Bookkeeping
- Box 12 on W-2
- Breach of Contract
- Business License
- Entrpreneurs Group (BOG)

C

- CapEx
- Capital
- Cease and Desist Letter
- Cease and Desist Order
- Civil Union
- Codicil
- Commis
- Community Residential Or Commercial Property State
- Contested Divorce
- Contingent Beneficiary
- Copyright Infringement
- Corporate Resolution
- Covenant Marriage
- Current Ratio
- Custodial Parent

D

- DBA
- Deed of Trust
- Defamation of Character
- Depreciation
- Disregarded Entity
- Dissolution
- Domestic Partnership

E

- EIN Number
- EULA
- Easement
- Estate Sale
- Ex Parte
- Executor of a Will
- Expense Ratio

F

- FEIN
- FIFO Method
- FUTA
- Fiduciary Duty
- Financial Statement
- First-Class Postage
- Fixed Asset Turnover
- Fixed Cost
- Food Runner
- Foreign Qualification
- Franchise Business
- Franchise Tax

G

- GAAP
- Gift Tax
- Goodwill
- Grantor
- Grantor Trust
- Gratuity
- Gray Divorce
- Gross Lease
- Gross Profit
- Gross Profit Margin
- Gross Profit Ratio
- Gross Sales and Net Sales
- Ground Lease

H

- Hold Harmless Agreement
- Holographic Will

I

- Incorporation
- Indemnification
- Independent Contractor
- Informed Delivery
- Intellectual Residential or commercial property
- Irrevocable Trust

J

- Joint Custody
- Joint Tax Payment
- Joint Tenancy

K

- K- 1

L

- LLC
- LLP
- Lady Bird Deed
- Landlord
- Lawyer
- Lease Agreement
- Ledgers
- Lessee
- Lessor
- Levy
- Liability
- Life Estate
- Living Trust
- Living Will

M

- MACRS
- Mailing Address
- Marginal Costs
- Medical Power of Attorney
- Meeting Minutes
- Miranda Rights

N

- NDA
- Net Asset Value (NAV).
- Net Assets.
- Net Income.
- Net Profit.
- Net Revenue.
- Net Sales.
- No-Fault Divorce.
- Noncompete

O

- Operating Agreement.
- Operating Cash Flow.
- Operating Expenses.
- Overhead

P

- P.O. Box.
- PLLC.
- PTIN.
- Pass-Through Taxation.
- Patent Attorney.
- Patent Troll.
- Per Stirpes.
- Pooled Trust.
- Postcode.
- Pour-Over Will.
- Power of Attorney.
- Prenup.
- Primary Beneficiary.
- Principal.
- Priority Mail.
- Probate Attorney.
- Court of probate.
- Profit.
- Profit & Loss.
- Promissory Note.
- Residential or commercial property Deed.
- Public Benefit Corporation.
Agreement.
- Order (PO)

Q

- Quid Pro Quo.
- Quitclaim Deed

R

- Registered Agent.
- Residential Address.
- Return on Equity (ROE)

S

- S Corp.
- SG&A.
- Secretary of State.
- Service Mark.
- Single-Member LLC.
- Slogan.
- Sole Proprietorship.
- Statute of Limitations.
- Statutory Agent.
- Straight-Line Depreciation.
- Sublease.
- Successor Trustee.
- Surety Bond.
- Sweat Equity

T

- TOD.
- Tenancy in Common.
- Testamentary Trust.
- Total Asset Turnover.
- Trade Name.
- Trade Secret.
- Trademark Search.
- Transactions.
- Triple Net Lease.
- Trustee

U

- Unilateral Contract.
- Unlawful Detainer.
- Utility Patent

V

- Vendors.
- Vicarious Liability.
- Virtual Mail.
- Virtual Office

W

- Warranty Deed.
- Wet Signature.
- What is gross profit?
- Will

X

- X-Inefficiency.
- XD

Y

- Yellow Dog Contract.
- Yield

Z

- Zoning Laws

Additional resources

- irs.gov.

• usa.gov