What is a ground lease?

A ground lease is characterized as a long-term lease agreement that allows a tenant to make improvements to the land, such as constructing buildings or other developments. At the conclusion of the lease term, ownership of the improvements typically reverts back to the landowner. This type of lease arrangement is beneficial for both parties: the landowner gains value from the improvements without having to invest in construction, while the tenant can use the land for productive purposes without the immediate financial burden of purchasing the property.

Ground leases are often executed for extended periods—commonly ranging from 30 to 99 years—providing the tenant with ample time to develop the property substantially. Projects such as retail centers, hotels, and office buildings frequently arise from ground leasing arrangements, showcasing their significance in real estate development. This dynamic relationship fosters development while ensuring that the land continues to be productive within the original owner's portfolio over time.