What is a Ground Lease? Subordinated vs. Unsubordinated What Is a Ground Lease? How It Works, Advantages, and Example Investopedia/ Tara Anand A ground lease is an arrangement in which a tenant is permitted to develop a piece of residential or commercial property throughout the lease duration, after which the land and all improvements are turned over to the residential or commercial property owner. - A ground lease is an arrangement in which a tenant can establish residential or commercial property during the lease period, after which it is committed the residential or commercial property owner. - Ground leases are commonly made by industrial landlords, who normally lease land for 50 to 99 years to tenants who build buildings on the residential or commercial property. - Tenants who otherwise can't manage to purchase land can build residential or commercial property with a ground lease, while proprietors get a constant earnings and maintain control over the use and development of their residential or commercial property. How a Ground Lease Works A ground lease shows that improvements will be owned by the residential or commercial property owner unless an exception is produced and states that all appropriate taxes incurred throughout the lease period will be paid by the tenant. Because a ground lease permits the property owner to assume all enhancements once the lease term ends, the property manager might sell the residential or commercial property at a greater rate. Ground leases are likewise frequently called land leases, as property managers rent out the land only. Although they are used mainly in industrial area, ground leases vary significantly from other kinds of business leases, like those found in mall and workplace structures. These other leases generally don't appoint the lessee to handle obligation for the unit.