A land lease refers to leasing a plot of land for a long-term period to a tenant who then builds on that property.\u00a0 There are two parties involved here: the owner of the land and the lessee. The two parties sign a land lease agreement that outlines all contractual obligations and rules. The lessee then pays rent to the landlord on a regular basis. If the lessee does not pay the rent, the landowner has the right to evict the lessee. After the lease period, the land and all improvements the tenant makes returns to the property owner.<\/p>\n
There are two types of ground leases in commercial real estate, subordinated and\u00a0unsubordinated<\/a>.<\/p>\n In a subordinated ground lease agreement, the land owner agrees to take a lower position in the claim hierarchy. <\/span>\u00a0If the developer were to default on their construction loan with the bank, this means that the lender has the right to foreclose on the property, sell it, and use the proceeds to repay the loan.\u00a0 Any funds left after the sale would be paid to the land owner.<\/p>\n Section 1 of the Land Use Act of 1978<\/a>, in Nigeria states that the law vests the ownership of all land in the country to the State Government and that power is held by the governor. Under the Act, the nature of interests in real property is leasehold for terms not exceeding 99 years. This means that \u201cbuyers\u201d can only lease land and are required to apply for a renewal after the lease expires.<\/p>\n A land lease should include the following important things:<\/p>\n A major key benefit of a land lease agreement for tenants is it enables tenants to access lands or occupy spaces in prime locations where it is impossible to purchase land outright or where they can not afford to buy property.<\/p>\n Another land lease advantage is that landlords have the security of a long-term tenant and future appreciation of the property because of development. Buildings and improvements completed by the tenants become the property of the landlord unless otherwise stated in the contract.<\/p>\n For the property owner, the major financial advantage is that a ground lease allows them to generate a\u00a0passive income stream<\/a>\u00a0from a vacant piece of commercial property without having to do much work.<\/p>\n A landlord can end up losing control of the property if the proper clauses and provisions are not included in the lease.<\/p>\n Instability<\/strong><\/p>\n Leases are renewed by the month or by the year. If a landowner decides not to renew the lease, the tenant would have to move. Also, even though you\u2019re not buying the land<\/a>, you still may have to pay an annual lease fee. This fee will rise over time at the rate of inflation or greater.<\/p>\n\n
Benefits of Land Lease<\/h5>\n
Location<\/strong><\/h5>\n
Security\u00a0<\/strong><\/h5>\n
Source of financing<\/strong><\/h5>\n
Disadvantages of Land Lease<\/h5>\n
Loss of Control<\/h5>\n
Higher Tax<\/h5>\n