What Is a Ground Lease?
A ground lease (also called a land lease) is a long-term commercial lease arrangement in which the tenant leases only the land, without any existing structures. The tenant builds improvements on the leased land at their own expense and owns those improvements for the duration of the lease. When the lease expires, ownership of the improvements typically reverts to the landowner.
Ground leases are common for fast-food restaurants, gas stations, retail developments, and large commercial projects where the land is in a prime location and the landowner does not want to sell.
Florida Ground Lease Structure
Ground leases in Florida typically include:
- Long term — Usually 30 to 99 years to allow the tenant to amortize the cost of construction and generate a return on investment.
- Rent structure — Often structured as a triple-net (NNN) lease where the tenant pays property taxes, insurance, and all maintenance costs in addition to base rent.
- Rent escalation — Base rent increases at predetermined intervals (every 5 or 10 years) based on CPI adjustments or fixed percentage increases.
- Improvement ownership — The tenant owns all improvements during the lease term. At expiration, improvements revert to the landowner unless the lease provides for removal or buyout.
- Financing — The tenant can mortgage their leasehold interest to finance construction, but lender consent provisions in the ground lease are critical.
- Memorandum of lease — A summary document recorded in the public records to provide notice of the ground lease without disclosing all financial terms.
Why Landowners and Tenants Use Ground Leases
- Landowner benefits — Retains ownership of appreciating land, receives steady rental income, and gains ownership of improvements at lease expiration.
- Tenant benefits — Avoids the capital cost of purchasing land, can build in prime locations, and may achieve higher returns by investing in improvements rather than land acquisition.
Related Terms
- Leasehold Estate — The tenant's interest in a ground lease
- Commercial Lease — Ground leases are a type of commercial lease
- Net Lease — Common rent structure in ground leases
- Memorandum of Lease — Recorded to provide public notice
Barnes Walker Ground Lease Services
Barnes Walker's commercial real estate attorneys negotiate and draft ground leases for landowners and developers throughout Southwest Florida. Request a legal inquiry for assistance.
Florida Law Reference
Fla. Stat. Ch. 83, Part II
The Florida Residential Landlord and Tenant Act governs lease agreements, security deposits, maintenance obligations, and the eviction process.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC