Ground Lease

DEFINITION of 'Ground Lease'

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 over to the property owner. A ground lease indicates that the improvements will be owned by the property owner unless an exception is created, and stipulates that all relevant taxes incurred during the lease period will be paid for by the tenant. Ground leases are typically for 10 years or more.

BREAKING DOWN 'Ground Lease'

A ground lease is typically a long-term lease, as lease holders would be unwilling to build costly improvements if the benefit of such improvements could only be realized for a small number of years. For the landlord, a ground lease allows the assumption of all improvements once the lease term expires. This permits the landlord to sell the property at a higher rate. For the tenant, a ground lease keeps the tenant from having to purchase potentially expensive land in order to begin a development.

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