Couple of Questions Regarding Land Leases


  1. What happens if I sign up a lease with a current landowner and the landowner decides to sell the property before the lease expires?

  2. Are most land leases 10 years with a 10 year option or 15 years with a 15 year option (I’ve seen both in my reading material)?

  3. Is the ground rent at a fixed amount for the duration of the lease? From my experience in real estate, it seems that rent should increase a little every year but I haven’t seen anything that in Frank’s book that regarding increases in ground rent during the lease tenure.

Thanks for all the help.

If the lease provides a termination upon construction or sale, then they can terminate. I’ve never allowed a termination in the event of sale, but I’ve often allowed a construction “out”, but with certain teeth in it that require the removal of the sign only in the event a building goes there (and I’ve deliberately engineered the sign to be in a spot that you cannot build on due to setbacks). Normally, if you give yourself the option of cancelling the lease, the landowner is going to want the same right, so you can avoid the issue (but be careful not to commit to a lease that you cannot terminate unless it is a 100% winner).

15 year with 15 year option is best, but there are a lot of 10 year with 10 year option leases out there. The key is to make it as long as possible – at least double the length of the note you use in building the sign.

I normally don’t put an inflation adjustment in the lease, but will add it if the landowner demands it. With current inflation rates, it’s not a big annual jump. I will also give the landowner a percentage versus a fixed minimum in some cases, just to get the deal closed.

Remember that all leases are negotiable (there is no Federal Law on billboard leases, as far as I’m aware). So every paragraph of that lease can be changed by you – be sure to think through each paragraph and modify as you see fit.