Ground Lease

Category: legal

A long-term lease of land where the tenant is permitted to develop the property, turning the improvements over to the landlord at the end of the term.

A ground lease is "renting the dirt." Fast food chains often do this. They rent the land for 50 years, build their restaurant, and operate. After 50 years, the land—and the restaurant built on it—reverts completely back to the original landowner.

Common Examples

• The university generated massive endowment revenue by executing a 99-year ground lease with a private student housing developer.
• Financing a building on a ground lease is difficult because the bank knows the developer’s asset will eventually evaporate at the end of the term.