Land Lease Option

AAA

DEFINITION of 'Land Lease Option'

An option within a lease contract that grants the lessee the right to extend the period of the lease beyond the original length of time. Usually, the lessee is required to pay a premium for the option, such as a small amount of money in each year of the original lease.

INVESTOPEDIA EXPLAINS 'Land Lease Option'

Like all options contracts, the land lease option allows its holder to act on favorable future market conditions. The lessee may want an option for many reasons. If the future market value of the land is uncertain, an option will allow the lessee to extend a relatively cheap lease in a rising price environment. For corporations, lease options allow them to reevaluate operations based on leased land in the future, before locking themselves into very long-term contracts.

RELATED TERMS
  1. Recapture Clause

    A provision usually found in percentage leases, especially in ...
  2. Land Flip

    A fraudulent practice in the real estate business of selling ...
  3. Land Trust

    A legal agreement where a trustee is appointed to maintain ownership ...
  4. Lease

    A legal document outlining the terms under which one party agrees ...
  5. Embedded Option

    A provision in a security that is an inseparable part of the ...
  6. Lessee

    The person who rents land or property from a lessor. The lessee ...
RELATED FAQS
  1. What risks should I consider taking a short put position?

    The risks to consider before taking a short put position are the odds of sustained weakness in the asset price and a spike ... Read Full Answer >>
  2. What happens if a software glitch fails to execute the strike price I set?

    If you've ever suffered the frustrating experience of having an order not filled or had a strike price fail to execute because ... Read Full Answer >>
  3. In what market situations might a short put be a profitable trade?

    Short puts would be a profitable trade in low-volatility bull markets or range-bound markets. Selling puts is a strategy ... Read Full Answer >>
  4. What is the relationship between implied volatility and the volatility skew?

    The volatility skew refers to the shape of implied volatilities for options graphed across the range of strike prices for ... Read Full Answer >>
  5. How is a short call used in a collar option strategy?

    An investor uses a short call sold above the current market price to collect a premium in a collar option strategy. The core ... Read Full Answer >>
  6. Why should investors consider the fully diluted share amount?

    Investors should consider a company's fully diluted share amount before purchasing the company's stock, because it could ... Read Full Answer >>
Related Articles
  1. Retirement

    Should You Buy Property On Leased Land?

    Find out what to consider before investing in a leased-land property.
  2. Home & Auto

    Tips For The Prospective Landlord

    Investing in rental property can generate serious income, but there's more to it than collecting rent.
  3. Home & Auto

    New Wheels: Lease Or Buy?

    These two major ways to obtain a car have very different advantages and drawbacks. Find out which is best for you.
  4. Home & Auto

    Simple Ways To Invest In Real Estate

    Owning property isn't always easy, but there are plenty of perks. Find out how to buy in.
  5. Bonds & Fixed Income

    Uncovering Hidden Debt

    Understand how financing through operating leases, synthetic leases, and securitizations affects companies' image of performance.
  6. Investing Basics

    What is a Greenshoe Option?

    A greenshoe option is a provision in an underwriting agreement that allows the underwriter to buy up to 15% of the shares in an IPO at the offer price.
  7. Investing Basics

    What Does a Clearing House Do?

    A clearing house is a third-party agency or separate entity that acts as a go-between for buyers and sellers in financial markets.
  8. Options & Futures

    How The New NYSE Binary Options Work

    The New York Stock Exchange has launched its own version of binary options called Binary Return Derivatives Options or ByRDs.
  9. Mutual Funds & ETFs

    4 Ways You Can Invest In Gold Without Holding It

    Owning gold can be a store of value and a hedge against unexpected inflation. Holding physical gold, however, can be cumbersome and costly. Fortunately, there are several ways to own gold without ...
  10. Active Trading Fundamentals

    How To Short Amazon Stock

    With the stock reaching all-time highs and the company gambling on several new business lines, many investors may feel it's a good time to short sell Amazon.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!