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Ground leases are a kind of long-term lease arrangement in which a proprietor can rent their residential or commercial property to a tenant who will make enhancements to the land. Ground leases prevail among industrial leases due to the fact that they permit services to operate on costly real estate residential or commercial property that they can't afford to buy out right. In turn, landlords can benefit from improvements to the land and occupants can conserve money on realty costs.

A ground lease is a type of long-lasting lease arrangement that enables an occupant to build-and briefly own-improvements on the leased land. Ground leases prevail in business property and can typically last approximately 20-99 years. During the lease term, the occupant normally builds residential or commercial property for company usage. At the end of the term, they'll move ownership of the residential or commercial property to the property manager.

A big franchise may utilize a ground lease to expand its service into urban locations with high genuine estate expenses. This would allow them to construct a branch in a densely populated area without needing to acquire pricey land upfront.

Because the ground lease process often consists of development, occupants may require to get loans to cover construction and other related expenses.

Two main kinds of ground lease agreements account for the threats associated with loans:

Subordinated ground leases put the loan lender's claims to the residential or commercial property above the landlord's. This creates a higher risk of losing the land if the tenant defaults, however allows the property manager to work out higher lease payments with the tenant. In turn, the renter might have the ability to more easily protect a loan with much better interest rates.
Unsubordinated ground leases provide the property manager concern above the lender. This is a more steady and common option for proprietors, but it might make it harder for renters to secure a loan. As an incentive, property managers may use lower rent prices to renters who accept an unsubordinated ground lease.
FAQs

Who owns the building in a ground lease?

Generally, occupants in a ground lease just pay lease on the land itself and maintain ownership of any improvements they make, such as structures they build on the residential or commercial property. However, ownership of those enhancements transfers to the property manager 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 party defaults. In a subordinated ground lease, the property owner risks losing ownership of the land if a renter defaults on a loan. Conversely, the renter might potentially lose the building they built if the proprietor defaults on financial obligations.

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

While it depends upon the lease agreement, occupants are normally responsible for residential or commercial property taxes, insurance coverage, maintenance, and repair work.

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

Both ground and land leases lease land to an occupant. However, ground leases tend to allow renters to establish the land, while a land lease might not.

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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
- Business Owners 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 Capital.
- Operating Expenses.
- Overhead

P

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