| What it is |
A ground lease is a long-term lease that a landowner grants to a developer or tenant who builds a building at their own expense. This arrangement differs from typical leases because the landowner still has full control over their property, even though the tenant builds what they want. |
Fee simple ownership is the highest and most complete form of real estate ownership — you own the land and everything on it, with full control and no expiration date. |
| How it works in NYC |
Large institutional landowners (Columbia University, Trinity Church, the Kaufman family, etc.) want to retain land long-term while still generating income. Common in co-ops and condos built on leased land, particularly on the Upper West Side and Midtown |
In NYC, fee simply means you hold title to both the land and the building as a single asset. |
| When it applies to an owner |
A ground lease applies to a property owner when they want to retain long-term ownership of their land while allowing a tenant to develop, build, and operate structures on it.In a standard ground lease loan, the lender finances the leasehold interest rather than the land itself, taking a mortgage on the borrower's right to occupy and use the land under the lease. The lender will require the lease to have enough remaining term to outlast the loan, mortgagee protection clauses that give the lender the right to receive default notices and cure any lease defaults before the landowner can terminate, and clear language around what happens to the lender's position if the leaseholder defaults. Because the lender's collateral is a leasehold rather than fee ownership, these loans typically come with more conservative loan-to-value ratios and slightly higher rates than a standard mortgage, and the lease document itself effectively functions as the underwriting criteria. |
You can sell, refinance, lease, or develop without needing anyone else's approval. |
| How it affects property value or owner decisions |
Ground lease owners prefer a ground lease over an outright sale because it provides a secure source of income. Another important factor to mention is the tax benefits: it avoids the capital gains that come with a sale. Owners may also want to pass that land down to their family for many years. There's only so much land in NYC, and every piece is valuable. That's why owners hold one of the city's most desired assets for generations. |
Fee simple ownership makes debt much easier and cheaper. Lenders will lend at higher LTVs with better rates. You can refinance freely without lessor consent. |
| Common misconception |
A big misconception many people have is that ground leases are owned by the tenant because they built the building. The landowner keeps ownership of the land while giving the tenant the authority to build on their property. |
A common misconception is that owning the building means you own the land. In a ground lease, the land and building can have two separate owners — so what you actually own matters. |
| Key question an owner should ask |
What can the tenant build, and do you have approval rights over construction? |
Are there any encumbrances, liens, or clouds on title that need to be resolved? |
