What is a ground lease?

A ground lease is an agreement in which a tenant is permitted to develop a piece of property during the lease period, after which the land and all improvements are turned over to the property owner. A ground lease is an agreement in which a tenant can develop property during the lease period, after which it is turned over to the property owner.

What is the difference between commercial ground lease and fee simple?

In commercial ground lease, a rent has to be paid to the lessor, whereas in case of fee simple, no rent is required. For ground lease, the ownership rests with the lessor, but in case of fee simple, the party to whom the property is transfers has the full right on it. This article has been a guide to what is Ground Lease.

What happens if you default on a ground lease?

For example, let's say that you sign a ground lease on a parcel of land, and then borrow $500,000 to build a restaurant on it. If you default on the loan while under a subordinated ground lease, your lender can go after the property (including the land) as collateral.

Should a landlord push for an unsubordinated ground lease?

Generally speaking, a landlord should push for an unsubordinated ground lease to better protect their land and property. However, it is easier for a developer to get financing with a subordinated ground lease. It is far easier to get the planning permission and necessary financing for a development with a subordinated ground lease.