If you are considering a good deal for the purchase or sale of your NNN property, then the ground Lease can turn out be an interesting investing tool. In this kind of lease, generally, the land is rented to a tenant for a long term of about 50 to 99 years, during which the tenant has the right to improve the property, make necessary changes, as well as construct a building for the business purpose.
It is also the contractual obligation of the tenant to pay all the relevant costs of maintenance and repair expenses, taxes, financing and insurance costs. However, when the lease term ends, then the property along with the establishments on it will go to the property owner. This indicates that even after the lease of the land, the owner will be able to retain the ownership.
More about the lease
These net lease properties can be ground leased in two forms- the unsubordinated ground lease and the subordinated ground lease. The latter option proves to be risky for the property owner, as a default from the tenant’s side might lead to the seizure of both the property and the constructions on it. However, in the former case, the property will remain unaffected.
Why go for ground lease?
If the tenant wants to enhance his business without really paying for the acquisition of property, then this ground lease offers him that freedom. The improvement of the business on the net lease property directly or indirectly adds to the benefit of the property owner, thus it helps both!