Ground Lease
A long-term lease of land where the tenant owns the building but not the ground beneath it.
A ground lease is a long-term lease, often 50 to 99 years, in which a tenant leases land and owns or builds improvements on it. The landowner keeps title to the ground, while the tenant controls the building for the lease term. At expiration, the improvements usually revert to the landowner unless the lease is renewed.
Financing a ground-leased property means lending against the leasehold interest rather than a fee-simple estate. Lenders look closely at the remaining lease term, since a loan must fully amortize or mature well before the lease ends. A short remaining term can make financing difficult or impossible.
Ground leases are common in dense urban markets and on institutional land holdings. They lower the upfront cost of controlling a site, but the tenant does not build equity in the land and faces rent escalations and eventual reversion, all of which shape both value and financing.
Formula
Ground lease means the land is leased long-term and the tenant owns the improvements
Worked Example
A developer signs a 75-year ground lease and builds a retail center on the land. A lender finances the leasehold, requiring the 25-year loan to mature with decades of lease term still remaining.
Why It Matters
A ground lease changes what you own and how you finance it. The remaining lease term drives both loan availability and value, so it is one of the first things a lender checks on a leasehold deal.
Related Terms
Related Programs and Tools
Frequently Asked Questions
Can you get a loan on a ground-leased property?
Yes, lenders finance the leasehold interest, but they require enough remaining lease term. The loan must mature or fully amortize well before the ground lease ends.
What happens when a ground lease expires?
Unless it is renewed, ownership of the improvements typically reverts to the landowner. That reversion risk is why remaining term drives value and financing.