There are two primary commercial leasing methods: ground lease and sale and leaseback.
A ground lease is a lease of . . . the ground. That is, the developer of the land is generally the tenant and anticipates being there for a long time as different businesses appear upon the ground. This can be done wither because the owner refuses to sell the land outright to the developer or because the developer seeks to use the lease to finance other projects.
What happens if the developer defaults and there are other tenants within the realm (where the developer was their landlord)? Many leases account for this issue by saying the lender of the property would automatically become the new landlord in the event of a default. These are call attornment agreements.
Most of the time the original landlord (between the developer as tenant) will set up a triple net lease, where the developer covers the normal cost of the land (property taxes, insurance, etc.).
A leaseback is where an owner may sell the property but has the option to lease the building back from the new owner. In other words, the old owner no longer has ownership of the property but still has a lease to use the property. Additionally, the old owner may have the right to buy back the property for a nominal amount.
Disclaimer
The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.
