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What is a land lease?

On Behalf of | Sep 20, 2022 | Commercial Real Estate

In most real estate transactions, individuals purchase a plot of land as well as the building or buildings on it. However, there are circumstances where a Massachusetts real estate transaction does not include the land itself. These deals are referred to as land leases. A land lease is most commonly used in the case of a commercial property. However, an increasing number of residential properties are also using this format.  

Often, buyers are more interested in purchasing real estate that includes the land. However, there are a few reasons a buyer may pursue a land lease. These reasons include: 

  • Cost: Land leases are typically less expensive than traditional real estate transactions since they do not include land ownership. Even more, savings can sometimes be negotiated for owners who intend to make improvements to the land, which can be a win-win for sellers and buyers alike. 
  • Amenities: In some cases, a buyer may find a land lease community. These communities may include amenities like a recreation center or pool. 
  • Lifestyle: Land lease agreements are more commonplace for certain types of homes, such as mobile homes or vacation getaways. Individuals who are looking for these types of housing may find a land lease to be a welcome option. 

While these benefits do exist for certain people, there are also many cons that apply to the land lease route for housing. To start, it can be harder to get a mortgage for a land lease. It can also be challenging to determine issues such as environmental problems or zoning violations when one is not the owner of the land. 

The risk of losing access to the property after the lease is up is another consideration. Although this is not a traditional real estate purchase, it is clear that there are many considerations and questions which should be explored prior to signing a land lease. A Massachusetts real estate lawyer can help individuals work through the legalities of such decisions.