What is a land lease?
A land lease is an agreement that allows a tenant to use land owned by landlords. Tenants must pay the landlord in order to use the land. Tenants can use the leased land to build temporary structures or permanent ones depending on the leasing terms.
For example, there are people who use leased land for gardening, farmland, billboards, building tiny houses or permanent sheds such as parking garages. Tenants must pay for all expenses related to the construction of these structures.
How does land lease works?
Real estate comes in many forms and sizes. Usually, homebuyers pay for the house and get the land that comes with it. However, there some sellers who sell their houses and lease the land separately.
To attract many buyers and tenants, some sellers sell their houses and land separately. There are also those who choose to sell the house and keep the land.
If a person who bought the house or a tenant who is renting it wants to use the land, he/she must have a land lease agreement before using the land.
There are many scenarios to consider when it comes to land lease. For example, if I own land but don’t want to build anything on it; I can lease it to someone who can build a movable home, for example. This way the person will make money from those homes while I keep the ownership of the land and earn a monthly income.
Benefits of a land lease
- Buyers pay less money because they do not pay for the land
- Tenants can get a discount or have a priority when it comes to renting the land
- You could benefit from HOA services (if the property is part of HOA)
- Houses are sold much faster in some cases
Disadvantages of land leasing
- You will pay more expenses on top of your lease
- It may be difficult to find land a leasable land especially in city settlements
- Some buyers do not like buying houses without the land
