A Ground Lease is a lease of land for a long term, ranging from 50 to 99 years. If a Ground Lease is NNN property, then it is one of the safest ways of assigning or selling property rights. Generally, a NNN Ground Lease is of two types- Unsubordinated and Subordinated. In the former type, the owner has great advantage, and in the latter, the owner’s claim on use of the land gets limited.
In a NNN Ground Lease the tenant gets the chance to lease a piece of land in a prime location to suit business needs. Furthermore, the tenant is free to construct or develop any kind of building or business that adds value to the worth of the land. Thus, the tenant’s capital investment excludes the purchase price of land, however, the tenant will bear all taxes and maintenance expenses of the land and property during the lease term.
Further, although the land is leased to and utilized by a tenant, the landowner does not relinquish ownership rights. The landlord receives monthly rent and also owns all remnant property built on property, after the NNN is extinguished(tenant’s capital investment). This is because after the termination of the NNN Ground Lease, the land along with all added property gets transferred to the landlord, most typically (barring special clauses in the lease). Moreover, the landlord has the right to abandon the NNN Ground Lease and take full control of the land in case of tenant default.
