Commercial ground leases are long term leases of land where the tenant pays for the property’s expenses (i.e., maintenance) and is permitted to build improvements. The leases typically range from fifty to ninety-nine years. The leased land is typically unimproved. Due to the length of the lease, the tenant is usually given latitude in deciding what to build.
Ground leases have incentives for both the landlord and the tenant. The tenant is incentivized to build and maintain the improvements because the tenant will enjoy the improvements for a long time. And, the lease makes sense for a tenant if the tenant’s business is not expected to last longer than the lease. The tenant can then put its extra financial resources elsewhere. Landlords like ground leases because the tenant maintains the property and the landlord owns the improvements once the lease ends.
It is important for both tenants and landlords to understand their rights and responsibilities with respect to ground leases before entering into them. If either a potential tenant or a landlord is considering entering into a ground lease, they should contact the attorneys at GED to understand their rights and legal liabilities.