Ground Lease

GL

Ground leases: tenant leases land, builds improvements, and loses them at expiration. Learn 50-99 year terms, leasehold financing, and red flags.

By Angel Campa, Founder · Updated March 2026

Overview

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.

Expense Breakdown

Tenant Pays

  • •Ground rent (land-only rent to landowner)
  • •Property taxes on improvements and sometimes on the land
  • •Construction and development costs for all improvements
  • •Building insurance
  • •All operating expenses for the improvements
  • •Maintenance of the entire property
  • •Leasehold financing costs

Landlord Pays

  • •Little to no ongoing obligations once lease is executed
  • •May retain responsibility for title defects or environmental conditions predating lease

Typical Profile

Typical Industries

Retail PadsHotelsOffice BuildingsGovernment-Owned LandUniversity / Institutional

Typical Term Length

50–99 years

Pros & Cons

For Tenant

Pros

  • +Ability to develop and control real estate without purchasing land
  • +Leasehold interest is financeable — can pledge improvements as collateral
  • +Long lease terms provide generational operational security
  • +Land cost is spread over lease payments rather than paid upfront

Cons

  • −Improvements revert to landowner at expiration — massive at-risk investment
  • −Leasehold financing is more complex and expensive than fee simple financing
  • −Subordinated ground lease creates lender risk for construction financing
  • −Very long terms make renegotiation or exit extremely difficult

For Landlord

Pros

  • +Retains ownership of land (appreciating asset) while receiving income
  • +Improvements revert to landowner at lease expiration — significant wealth creation
  • +Minimal management obligations once lease is in place
  • +Ground rent is bondable and highly creditworthy if tenant is investment-grade

Cons

  • −Locked into long lease term — cannot sell or redevelop land for decades
  • −Ground rent may not keep pace with land value appreciation
  • −Periodic rent resets (if any) are often contested
  • −Difficult to reposition property if tenant defaults mid-term

Critical Fields to Abstract

These are the highest-priority fields Lextract extracts from GL leases. Click any field to learn what it means and why it matters.

Base RentRent Commencement DateLease Expiration DateRenewal OptionsAssignment RightsPermitted UseTermination OptionsSubletting RightsInsurance RequirementsProperty Taxes

Common Red Flags

Lextract automatically detects these red flags in GL leases. Click any flag to learn the impact and what to do.

No Renewal OptionMissing Audit RightsRecapture Right PresentNo Termination OptionMissing Restoration Clarity

Compare With

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Frequently Asked Questions

Who owns the building in a ground lease?

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.

Can you get financing on a ground lease property?

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.

What happens to the building at the end of a ground lease?

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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