Ground leases: tenant leases land, builds improvements, and loses them at expiration. Learn 50-99 year terms, leasehold financing, and red flags.
A Ground Lease is a long-term lease of land only, where the tenant (ground lessee) finances and constructs improvements on the land they do not own. Ground leases typically run 50–99 years. The tenant owns the improvements during the lease term but the land (and often the improvements) revert to the landowner at expiration. Ground leases are common for retail pads, hotels, office buildings, and government-owned land.
Typical Industries
Typical Term Length
50–99 years
Pros
Cons
Pros
Cons
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During the lease term, the tenant (ground lessee) owns the improvements they construct on the land. The landowner owns the land itself. At lease expiration, ownership of the improvements typically reverts to the landowner, which is why long terms (50-99 years) are essential to allow the tenant to amortize their construction investment.
Yes, leasehold financing is possible but more complex than fee simple financing. Lenders require the ground lease term to extend well beyond the loan maturity - typically at least 20-30 years beyond the loan term. They also require protection against lease termination events that would eliminate their collateral. Subordinated ground leases (where the landowner subordinates their fee interest) provide the strongest lender protection.
Unless the ground lease contains an option to purchase the land or provides for lease renewal, the improvements revert to the landowner at lease expiration without compensation to the tenant. This is why ground lessees must negotiate meaningful renewal options and ensure the initial lease term is long enough to fully amortize their investment.
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