A ground lease refers to an agreement in which a tenant is permitted to develop a piece of property during the lease period, after which the land and all improvements are turned back over to the property owner. The lessee (tenant) pays the lessor (landowner) for the use of the land, typically on a long-term basis, for periods of 50 years to 99 years.
The lease contract allows the tenant to construct buildings or make significant improvements to the land. While the tenant is responsible for taxes, insurance, maintenance, and other associated costs, the landlord retains ownership of the land itself. At the end of the lease term, the land and all improvements made by the tenant revert back to the landowner.
Ground leases can be beneficial for tenants who want to avoid the upfront cost of purchasing land, and for landlords who want to retain ownership of their property while generating a steady income. Ground leases can also offer a unique way to leverage valuable real estate for development without needing to sell the property outright.