Ground Lease Agreement Cost

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What does a ground lease agreement cost? This is a question often asked by property owners considering leasing their land. So let’s explore this question and review some general information about ground leases and how they benefit both parties.

How Much Does a Ground Lease Agreement Cost?

A ground lease, sometimes called a land lease contract, is a lease agreement between a property owner and a tenant who wishes to develop the property. Ground leases are long-term lease agreements and often have durations of 50 to 99 years.

The purpose of a land lease is to allow a tenant to develop the land for commercial use. At the same time, the landowner retains ownership of the property.

A property owner may be interested in a ground lease for the following benefits:

  • Avoiding capital gains that come with the sale of property
  • Generate a steady income
  • Retain property ownership rights

Tenants benefit from ground leases in these ways:

  • Ability to build on land in a prime location they wouldn’t have otherwise been able to buy
  • Requires no down payment like a property purchase
  • Ground lease expenses are tax deductible

Real estate lawyers can draft a rental lease agreement that protects a landlord and their property and abides by all applicable laws to hold up in court.

Ground leases are most often found in the commercial sphere, so if a property owner wishes to hire an attorney to draft their lease agreement, they will need a real estate lawyer familiar with commercial property leases.

An experienced lawyer will know what terms and conditions need to be included in a ground lease to protect the landlord from liability and ensure they are getting the most out of their land.

Based on ContractsCounsel’s marketplace data, the average cost of a ground lease agreement project is $921.67.

What’s Included in a Ground Lease Agreement?

The most important information that needs to be covered in a ground lease is:

  • Which party owns the land
  • Which party owns the building that the tenant is planning to construct
  • Who is responsible for improvements to the property

In addition to these important clauses, many ground leases will also cover the following issues:

  • Party information
  • Monthly rent payments
  • Default conditions
  • Financing conditions
  • Landlord rights and obligations
  • Tenant rights and obligations
  • Lease terms and conditions
  • Title insurance
  • Use provisions

Consult with your attorney if you are unsure what needs to be included in your ground lease. Your lawyer will ensure the ground lease covers all pertinent lease agreement topics and adheres to state laws.

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Types of Ground Lease Agreements

There are two main types of ground lease agreements: subordinated and unsubordinated.

  1. Subordinated ground lease. In a subordinated ground lease, the landlord agrees to allow the property deed to be collateral for loans for construction and improvements. Subordinated leases typically have a higher monthly rent because the landlord is taking on additional risk. However, property owners understand that construction often increases land value, so the risk is worth the reward of more valuable property.
  2. Unsubordinated ground lease. An unsubordinated lease provides the highest protection for the property owner. For example, if the tenant takes out a loan for a building that defaults, the lender cannot foreclose on the land. They can only go after the tenant’s assets.

Examples of Ground Lease Agreement Projects

Ground Lease Agreement Drafting Services

Many property owners hire commercial real estate lawyers to draft their ground lease agreement. Unfortunately, these lease agreements can be complex documents. The landowner may be left vulnerable to liability or tax issues if any terms are missing.

A licensed attorney familiar with ground leases will meet with the property owner to learn about their land and goals for the lease.

The lawyer will learn about the terms the landowner wishes to include in their contract and the type of contract they are looking to execute. Once the lawyer has all pertinent information, they can begin drafting a customized ground lease.

Rental Lease Agreement Review Services

When tenants sign a ground lease, they make a very important business decision. Ground leases can sometimes have a duration of 99 years, so the tenant needs to be aware of the commitment they are making.

Before signing a ground lease, many tenants hire an attorney to review the lease to ensure it is drafted correctly and is fair.

Lease agreements often favor the drafter – in this case, the landlord. However, a tenant’s attorney will review the lease with the tenant’s best interests in mind to ensure the deal is fair and the tenant is protected under the contract.

Ground Lease Agreement Drafting Cost

Ground lease agreement costs can vary based on the document’s length, complexity, and how many custom terms need to be included in the contract.

ContractsCounsel’s marketplace data shows the average ground lease agreement drafting costs are $957.50 across all states and industries.

Ground Lease Agreement Review Cost

Suppose a tenant decides to hire a lawyer to review a ground lease. In that case, they will be responsible for the legal fees incurred. In addition, the lawyer will charge for their time and legal knowledge reviewing the contract and meeting with the client.

ContractsCounsel’s marketplace data shows the average ground lease agreement review costs are $850.00 across all states and industries.

How Do Lawyers Charge for Ground Lease Agreements?

Hourly Rates for Ground Lease Agreements

Hourly rate fee structures are a common way that lawyers bill their clients. Under this fee agreement, the attorney provides their client with their hourly rate.

If the client agrees, the lawyer will begin working on the project while keeping track of the time spent on the job. Once the task is complete, the lawyer will bill the client for the number of hours spent working on the case.

The marketplace data for ContractsCounsel shows that the average hourly rate for a commercial real estate lawyer ranges from $250 - $400 per hour.

Flat Fee Rates for Ground Lease Agreements

When a client hires an attorney for a specific task, like drafting a ground lease agreement, instead of charging an hourly fee, the attorney may choose to use a flat fee rate fee.

To determine the project's total cost, an attorney will estimate the time it should take to complete the task and then apply their hourly rate.

Clients tend to prefer a flat rate because they know the cost of their legal fees upfront. Lawyers, however, run the risk of underestimating the time a project may take and undercharging for their work.

ContractsCounsel's marketplace data shows the average flat fee rate for a ground lease agreement is $921.67.

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