Buying a property on a leased land?

Buying a property on a leased land?




The most traditional form of home ownership is to own both a house and the land upon which it is built. Those who can't afford houses, OR who do not want to be bothered with outside maintenance and upkeep, may purchase condos or townhouses. However, there is another home ownership option: buying only the home and leasing the land it occupies.  




So what exactly do we mean by a Leased Land ?



- A land lease is a type of financial arrangement in which the ground under a structure is leased, rather than sold to the builder, meaning that the land and the structure are owned independently. There are several reasons to enter a land lease contract, but it occurs most commonly when a real estate investor wishes to retain a piece of land, but not necessarily put energy into developing it. In this instance, the investor might work with a developer to create a land lease contract, allowing the developer to build a structure and rent or sell it, with the understanding that the land is leased and does not come with the building. This type of arrangement is more common in urban areas, and is often associated with cooperatives or tenant-owned buildings.


Generally, the contract for a land lease runs for at least 50 years. If the land lease is near termination, the land owner is usually willing to renew it, providing that the building has been profitable and well maintained, although the amount of rent will likely increase, as the property value will have increased as well. The terms of a land lease usually require that the property be developed in some way, and that rents for the land are paid monthly or quarterly into the accounts of the landlord.




Points to consider:


If you are thinking to buy a property on a leased land, you may consider below points:





- How much time is remaining on the lease?


- What are the terms of the surrender clause?


- How much is the monthly land lease payment, how often does it adjust, and by how much?


- Am I better off renting?


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