Land Lease Option

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.

BREAKING DOWN '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. Option

    A financial derivative that represents a contract sold by one ...
  5. Premium

    1. The total cost of an option. 2. The difference between the ...
  6. Landlord

    A real estate owner who rents or leases land or a building to ...
Related Articles
  1. Real Estate

    Simple Ways to Invest in Real Estate

    Owning property isn't always easy, but there are plenty of perks. Here are some ways to invest in real estate.
  2. Retirement

    Should You Buy Property On Leased Land?

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

    Tips For The Prospective Landlord

    Investing in rental property can generate serious income, but there's more to it than collecting rent.
  4. 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.
  5. Bonds & Fixed Income

    Uncovering Hidden Debt

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

    The Difference Between a Long and Short Position

    Stocks are owned in a long position and owed in a short position.
  7. Options & Futures

    When Should I Sell A Put Option Vs A Call Option?

    Beginning traders often ask not when they should buy options, but rather, when they should sell them.
  8. Investing Basics

    Explaining Premiums

    Premium has a few different meanings in the financial world.
  9. Options & Futures

    How Do Options Work?

    An option is a contract that sets a price and time for the sale or purchase of a financial asset. It derives its value from the performance of an underlying security.
  10. Options & Futures

    What is a Hedge?

    A hedge investment offsets the risk of adverse price movements in another investment.
RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Answer >>
  2. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Answer >>
  3. How do hedge funds use equity options?

    Learn about two of the most common equity option strategies hedge fund managers use every day to generate above-average returns ... Read Answer >>
  4. Can mutual funds invest in options and futures? (RYMBX, GATEX)

    Learn how mutual funds invest in stock options and futures to benefit from commodities price swings and hedge their portfolio ... Read Answer >>
  5. How does a forward contract differ from a call option? (AAPL)

    Find out more about forward contracts, call options, the mechanics of these financial instruments and the difference between ... Read Answer >>
  6. How can an investor profit from a fall in the utilities sector?

    Learn how an investor can profit from a fall in the utilities sector by employing speculation methods such as short selling ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center