What to Know About Ground Leases

A ground lease is a very niche topic in the world of residential rental properties. While not commonly found, they still have use today.

Knowing what they are and how they work can help you to attract potential tenants to your property. The better you can help and work with tenants, the better the chance of a tenant signing the contract.

What is a Ground Lease?

A ground lease is a type of lease in which the land is not owned by the resident but the buildings on the land are. The tenant pays rent on the land that the building is on to the landlord and for the building itself. 

The tenant on the land typically builds the house themselves or remodels the existing building. Typically, leases are very long ranging on average from 50-99 years. Usually, this is great for landlords as they do not have to take care of any expenses surrounding the property. This can range from insurance to maintenance to utilities. 

They are called ground leases because no building is being initially provided. The tenant constructs the building on the land and once the lease is up everything goes back to the landlord. For more information on the legal proceedings of ground leases visit Realized.

They are usually not used for residential properties and instead mostly fall to commercial tenants looking to construct things like office buildings that can be easily moved out of or sold. 

Ground Lease vs Land Lease

Ground Lease and land lease mean the same thing. Both refer to a lease that a tenant signs with a landlord on undeveloped land, renting that land out, but not owning the property on it until said lease expires. 

What is the Difference Between a Fee Simple and a Ground Lease?

A fee simple is when the property owner owns both the land and all improvements made upon that land. Because of this, it takes investors forking over a large upfront sum of cash to improve the land and construct whatever they seek on said land. 

Fee simple is typically easier for all parties involved because it doesn’t need the transfer of ownership with the lease ending that a fee simple would. However, this does not necessarily mean that it is better though. Importantly, as a landlord, it is essential to assess your current situation and what each option would offer you. 

What are the Disadvantages of a Ground Lease?

Though ground leases provide a variety of benefits, there are disadvantages to these leases. Since the buildings themselves are not owned, the landlord cannot charge as much for rent as they would be able to in a typical fee simple.

Additionally, another issue is these leases can be so legally complicated. Landlords need to make sure that they are protected if a tenant attempts to take advantage of a subpar contract. Typically, this means more time and money spent on ensuring a proper contract when compared to a much less complicated contract in a fee simple. 


As with everything in life, using a ground lease isn’t a black-and-white investing strategy. There are advantages and disadvantages to utilizing one. You must analyze if you can take advantage of those benefits while minimizing the disadvantages.