What is the primary characteristic of a ground lease?

The primary characteristic of a ground lease is that the tenant only leases the land and retains the right to build on it. This arrangement allows the tenant to develop or construct improvements on the land while the ownership of the land itself remains with the landlord or property owner. Ground leases are commonly used in commercial real estate, enabling businesses to establish operations without the upfront cost of purchasing the land.

In this structure, the tenant often invests significant resources into building on the property. After the lease ends, ownership of these improvements typically reverts to the landowner. This dynamic can create advantages for both parties: the landowner benefits from a steady income stream without having to manage property development, while the tenant benefits from control of the land for their business activities. The focus on the tenant leasing only the land distinguishes ground leases from other lease types where the tenant would lease both the land and any existing buildings.