What is a Ground Lease?

A ground lease is a term that is used to describe a long term lease of land. In this agreement, the tenant is permitted not only to rent and occupy the land but also to make developments and improvements such as construction of buildings. However, when the term of agreement expires, typically after 10 years or more, the land including all the structures and improvements are to be given back to the land owner.

Terms and Conditions

The agreement on ground lease allows construction of buildings but it should be carried out under the owner's terms and conditions. These terms and conditions also indicate the conditions of the building upon expiration. Although the expenses for the building's construction are to be shouldered by the tenant, after the expiration, it becomes a legal property of the landowner. Moreover, the landowner also does not incur expenses during the lease period, as taxes are to be paid for by the tenant. There are some rare instances that the owner agrees to give back to the tenant partial or full cost of the building upon the expiration of the least agreement. All the stipulations under this document will be agreed upon by the landowner and tenant.

Termination

Also under the terms and conditions, the lease agreement may be terminated for a variety of reasons. Some of them include expiration of lease period and landowner does not permit renewal of the lease, early surrender of the tenant with advanced notice and payment of termination charges, and breach of terms and conditions either by the tenant or by landowner. The landowner can also terminate the agreement if the tenant uses the land for illegal purposes, destroys the property willfully, and/or fails to pay taxes or rent.

Advantages

Obviously, the side who will gain more advantage to this agreement is the landowner. The owner's land will be developed without him having to make an expense except wait for 10 years or more to retrieve his land back. Upon lease agreement expiration, the owner has the freedom to sell the land for a much higher value. As for the tenant, his only advantage in this kind of agreement, is that he does need to purchase a land, instead he can use his money to develop and improve it for profit-making purposes.

Getting Legal Help

When getting into this kind of agreement, it is a must to thoroughly study about it to ensure that all the terms and conditions are clear. If you experience any major trouble with your ground lease, consult a lawyer immediately.