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What is a ground lease?
A ground lease permits a developer to avoid paying both principle and interest under a loan to secure the acquisition of the land. However, this is not to say that the amount paid in rent during the life of the lease would not exceed that which the developer would have paid in both principal and interest to finance the purchase of the property.

What is an unsubordinated ground lease?
In an unsubordinated ground lease, no lien is placed against the fee simple title to the land. Instead, the leasehold estate is the primary security for the loan. It is not typical in current arms length transactions for the owner to subordinate its fee interest, but there may be instances in which an owner is willing to do so.

What happens if a tenant defaults on a ground lease?
An unsubordinated ground lease is ideal for a landlord. Should the tenant default on its loan, the lender will have the ability to foreclose on the tenant’s interest in the ground lease, but such a foreclosure will not affect the landlord’s interest in the land.

Does a ground lease have an anti-merger provision?
The lender will often require that the ground lease contain an “anti-merger” provision. Such a provision will ensure that the leasehold interest under the ground lease will not merge into the fee interest of the leased premises upon the termination of the ground lease. 5. Amendment Consent

[PDF File]FEBRUARY 10, 2021 Ground Leases and Leasehold Interests in ...
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The typical ground lease results in two distinct legal estates: the ground lessor’s fee interest in the underlying land and the ground lessee’s leasehold interest in the improvements. These two estates, subject to the terms of the ground lease, can then be separately owned and financed.

[PDF File]GROUND LEASES: BASICS AND IMPORTANT ISSUES IN TODAY'S MARKET
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negotiating a ground lease in today’s market. This paper is in no way intended to be an exhaustive guide to all concepts that may be encountered during a ground lease negotiation. Further, the concepts discussed herein are predicated on the model scenario that includes a tract of raw land to be developed by a tenant during the term of

An Argument for the More Widespread Use of Ground Leases in ...
The use of ground leases is topical as of late 2022 for two reasons: (i) high interest rates elative to recent decades(r ) and limited capital are stressing increasing capitalization rates and decreasing transactional activity; and (ii) public

[PDF File]Investing In Ground-Leased Or Net-Leased Real Estate
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In addition, the binary nature of a ground lease — insofar as it comprises two distinct ownership interests in a single piece of real estate: (i) the tenant’s leasehold interest, together with the income the tenant may derive from the leased property, and (ii) the landlord’s post-lease-term residual fee interest, together with the expected strea...

[PDF File]4465.1 CHG CHAPTER 3. GROUND LEASES
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The interest of the lessee (user or tenant) under a ground lease for a term of years is called a leasehold estate. When the term of the lease expires, all rights to possession and use revert back to the lessor/fee simple owner and the leasehold estate terminates. The Leased Fee.

[PDF File]ground leases basic legal issues - University of Texas System
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There are a myriad of legal issues involved in any ground lease transaction. This paper focuses on some of the key legal issues in the context of the basic terms of a ground lease. The intent of the paper is not to cover these legal issues in depth, but rather to provide an overview of the issues.

Ground lease interest