Land Lease

There are three types of land leases.

Private Land Leases

A private land lease is a contract between the owner of a parcel of real property and a tenant who wishes to use it for his own profit. The owner of the real property retains ownership rights, and the tenant pays rent in exchange for the right to use it for a specified period of time. This type of lease is common between landlords and tenants in residential or commercial real estate.

Public Land Leases

A public land lease is one in which a government entity grants its authority over certain lands to another entity for development purposes. This type of lease is common in cases where states grant mineral rights to private companies so they can develop them into mines or oil wells; it also occurs when cities grant developers access to city-owned property so they can build shopping centers or other large projects on it.

Office/Retail Space Leases

An office/retail space lease is an agreement between two parties that grants one party access to another’s property in order to operate his business there. It is not the most common form of lease, but it is becoming increasingly common with retail projects. Developers can reduce their financial exposure by leasing the land instead of buying it. An example is a fast food franchise that is going to invest $100,000s of thousands if not millions in the buildout, plant and equipment. If the land is leased and the franchisee builds on the lease land, this arrangement can greatly reduce the equity investment needed. The landowner benefits from being able to repurpose their asset and not have to pay the capital gains that would be generated from a sale.

The Benefits of Land Leases

• May result in reduced equity required for a given project
• Renters may be given the option to turn their lease into an ownership agreement after a set period of time
• Leasing land can provide unique cash flow and tax benefits
• Might have Tax Advantages