Who gets the structure at the end of a ground lease if a tenant decides they do not wish to renew it?

Who gets the building at the end of a ground lease if the tenant no longer desires to renew their lease? Or what happens if the tenant can no longer afford to pay rent or stay in business?
In Buying Property - Asked by liliana b. - Jul 6, 2013
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Answer(s)

henry r.
Owner/Investor
Sterling, VA

If they owe you money, you may sell it and sue for the balance.
If they do not owe you money, you may continue to charge rent and sue them for the rent. At some point you may dispose of the property and must discontinue to charge rent, but may sue for costs associated with disposal of removal.

Jul 7, 2013
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Patrick S.
Owner/Investor
San Antonio, TX

Depends on the lease. Usually owner gets to keep it. In some cases the lease may obligate the tenant to demolish or remove the structure (since a 40 year old jack in the box bldg typically isnt usually worth much).

Jul 8, 2013
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Michael C.
Broker/Agent
San Leandro, CA

It depends on what the ground lease terms are. Each lease is created specifically for a particular property and situation between landlord and tenant. Usually they will specify what happens if the tenant installs or builds something - may be called " tenant improvements" in the lease. Example: tenant either removes the improvements and puts the property back to its original condition or any improvements not removed, become the property of the owner.
If it benefits the owner to leave the improvements, the owner may wish to allow the improvements to remain or some variation like remove any partition walls, remove all debris, etc.
Some tenant improvements are specific only for a particular tenant and would not be of any use for another tenant. In that case the landlord would most likely want the improvement to be removed or be financially compensated if the landlord has to remove it.
The other part of the question, if tenant can no longer pay: Here again, the terms of the lease usually called "in case of tenant breach" should specify how this is handled.
Depending on the circumstances, the landlord may enforce the terms of the lease or the landlord and tenant may decide to come to some new written arrangement that supersedes (replaces) the original lease terms.
Always consider consulting with appropriate professionals for advice on a understanding a lease.

Jul 8, 2013
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Lee T.
Broker/Agent
Marina Del Rey, CA

Often, a ground lease is employed in the first place because the
landowner is unwilling to sell the property. The site is usually highly
desirable in a favorable market so that the developer is anxious to
proceed with the project. In a rush to tie up the land and start
development, the tenant can make serious mistakes in the ground
lease. The developer may promise the landowner a specific project and
a generous rent. The landowner may require periodic rent adjustments
over the term as well as some project participation, and may want to
restrict transfer by the original tenant whom she has specifically
chosen to develop her property. As a result, the lease may create a
point where the ground rent is reset by indexing to inflation, or by
appraisal to reflect some higher and better use of the land than that
represented by the original project, and which reset rent the existing
project cannot then afford to pay, while the tenant is restricted by
economics or the terms of the lease from adopting any other use.
Restrictions on use or sale by the tenant or potentially uneconomic
rent adjustments, as well as defects in the financing provisions of the
lease, may threaten the initial project financing, both debt and equity,
and later refinancing.

Jul 11, 2013
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