How does this work? Renting land and building on it

[alfa147x]

So a family friend of ours own's a gas station around the corner, but he doesn't own the land. How does this work? Does he rent the land and then say he's going to spend $1,000,000+ building the gas station on it? What happens at the end of the lease?


Wondering,
Alfa147x

 

[Leros]

When you rent an apartment or house, any modifications made become part part of the structure. In similar fashion, I would guess the building would belong to the land owner. But I have no idea what I'm talking about

 

[alfa147x]

I don't understand why someone would spend over a million dollars on land they dont even own!

 

[Leros]

I don't understand why someone would spend over a million dollars on land they dont even own!

Either they're idiots or they've made financial projections that they'll come out ahead in the end.

 

[JS80]

99 year lease of land to building owners is one of the greatest inventions ever made. I think many large commercial buildings are like this.

 

[Ticky]

I think many large commercial buildings are like this.

Depends on the country...

 

[JS80]

Depends on the country...

Always assume US unless otherwise stated

 

[alfa147x]

Yes US as stated by my location

 

[OverVolt]

oscar mike, united states over

 

[iGas]

There is nothing wrong with leasehold arrangement because location is extremely important for business/housing. Your friend wanted traffics therefore it is logical for him to lease the land for his business. It is possible that there are no freehold land available for purchase, or too expensive.

 

[Kanalua]

Here in Hawaii leasehold (where you don't own the land) is common...and the subject of a HUGE Supreme Court case that is the precedent to the City of New London case of a couple of years ago (Hawaii Housing Authority v. Midkiff).
Our apartment is leasehold owned. Our landlord pays $100 a month to some Catholic retreat to lease the land. The lease is up this year, so the lease amount will probably go up.

 

[a123456]

Yeah, it's pretty common to have leases on land. Typically, a company might enter into such an arrangement. It's not that big a deal. It's just another cost that gets built into the cost calculations when trying to figure out if it's worth it to be profitable. There's new construction all the time, so at some level, building new buildings is profitable.

The builder could use the newly constructed building or sell it off. With a land lease in place, the selling price might vary from a sale where the land is sold with the building.

When the lease ends, there are a few options. The company could renew the lease and keep going if they work that out. Otherwise, all the stuff on the land goes back to the owner. The company has the option to demolish the building and it may even be required to do that once the lease is up (kind of like how you're supposed to leave your apartment about the same way it was when you got there). So, the next guy has a clean slate and can build whatever on the land again. Alternatively, the owner of the land could buy the building from the company when the lease is nearing the end as another possibility to prevent the demolition.

 

[MikeyIs4Dcats]

it is beneficial to the leasee as they do not pay property tax.

 

[alfa147x]

Oh ok thanks guys cleared a lot up!

 

[richardycc]

it's called land lease. very common, most McDonald's are like that.

 

[Sho'Nuff]

Here in Hawaii leasehold (where you don't own the land) is common...and the subject of a HUGE Supreme Court case that is the precedent to the City of New London case of a couple of years ago (Hawaii Housing Authority v. Midkiff).
Our apartment is leasehold owned. Our landlord pays $100 a month to some Catholic retreat to lease the land. The lease is up this year, so the lease amount will probably go up.

If I recall, the issue in Hawaii that gave rise to the Midkiff case was that a small minority of the population owned the majority of the land, and was milking the hell out of the rest of the population. The state came in and tried to exercise eminent domain to divide ownership of the land amongst a greater percentage of the population.