Ground Leases to Retain Family Ownership Interests


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Leases are necessary to ensure that a person owns a parcel of land for the period of the lease agreement which is a legal binding contract. In certain leases, the tenant must build his or her property assets, and then at the end of the lease term, all rights of ownership then transfer to the landlord unless it is a ground lease which keeps the possession of assets in the family.

With the possibility of losing everything once a lease term is over, the tenant may ensure that ground lease is part of the agreement before signing the real estate contract. While many do not want the hassle of buying the land and facing accompanying taxes afterwards, the individual may also need to ensure that buildings constructed on the parcel remain in his or her ownership after the lease expires or ends. When the owner dies, the buildings are not subject to tax, and this is another beneficial condition of a ground lease. However, it is important to hire a real estate lawyer before initiating a ground lease with a landlord.

Ground Leases Explained

There are ways around the ending of a lease where the landlord retains the property on the land. These conditions could include lease terms of up to 500 years or more. This would permit the residents to remain on the land and reside in buildings erected by the family. Family interest in the assets retained in this manner by paying all rent up front. Then, the only expenses included may involve power, water, trash and similar items. Some complications in buying the land affect the family when the parcel is tied up in subdivisions or connected to farming. However, during the life of the lease, the family may at some point purchase the portion of land and then there are no other conditions affecting the family interest.

Sometimes, the land may not undergo purchase due to fear or trepidation about various issues. Other instances of these problems occur because government agencies or landowners want to ensure that the development and construction are both controllable by the landlord. There are certain restrictions that may apply to what is done on the land. While a ground lease or other benefits may provide an attraction to the parcel, the landowner may also include various contractual conditions that are mutually helpful. The ground lease itself often entices many to lease the land and then construct homes or commercial property for various business ventures.

Rent in the Lease

When a ground lease is through a prolonged period, the rent terms may include most beneficial clauses in the real estate lease agreement. Some ground leases are in place or will require decades or longer. This supplies the landlord with the possibility of a lower rent with guaranteed assurance that payments will continue or provide him or her with a lumpsum for the entire rental period. The amount in rent is usually at fair market value and then adjusted based on inflation. However, all other expenses are through the resident entirely. He or she pays utilities, construction costs and any other bill on the property.

Terms of Renewal

While rent may have various modes and forms to include a fixed rate, the renewal terms may incur various changes to the original conditions. The ground lease usually reflects the entire life of an economics project. Before renewal is necessary, the minimum amount of time to finance and complete construction is usually available to the tenant. Possible options for renewal usually require negotiation. If the individual will supply the landlord with a finished building as part of the rental payment, this could end the lease agreement. However, both parties may continue through the mutually beneficial arrangement with different payment options going forward.

Losing Ownership Interest

If the conditions of the lease supply the landlord with the ownership of the construction, he or she will inherit the building or other holding after the lease ends. It is when the erection of a structure provides advantages that the landlord will attempt to acquire or retain possession. However, if the ground lease explains that the tenant retains ownership, this is usually not possible.

Legal Help in Family Ownership

When complications arise, it is time to hire a lawyer for assistance. Legal representation may ensure that conditions in a ground lease are upheld. If the landlord attempts to keep construction on the land, a lawyer may assist in negotiating the best possible outcome.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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