Ground Leases: Key Provisions, Monetary vs. Non-Monetary Breaches, Additional Rents, Lease Assignment and Transfer, and Default Issues

Ground landlords and tenants typically negotiate several key provisions: the rights and responsibilities of the parties, due diligence, assignment rights, the use provision, the rent structure, events that can lead to additional tenant payments, condemnation, insurance issues, and default.

Of significant importance are the provisions related to financing. The ground tenant needs to make sure that nothing in the lease limits its ability to arrange for financing, including construction financing if applicable. The ground landlord is concerned about its rights to take back the property or be made whole in the event the tenant defaults under the lease or any mortgage financing. The lender has its own concerns.

Monetary and non-monetary defaults of a ground lease can create unique challenges depending on the defaulting party, potentially leaving the property unproductive for years, while litigation progresses. The parties can ameliorate some of these concerns by negotiating certain protections for themselves in the lease.

Finally, considering the long-term aspect of a ground lease and the significant investment into the building placed upon the land, practitioners must understand how to structure the rent and address the potential for capital events.

Listen as our expert panel discusses best practices for negotiating ground leases and how to manage the most common issues for all stakeholders when considering a ground lease.

1. Introduction to ground leases
2. What are the key negotiated terms
   • Term/extensions/early termination rights
   • Due diligence
   • Assignment and subletting
   • Use
3. Rent and capital events
4. Financing issues
5. Ground lessor defaults
6. Ground lessee defaults

The panel will review these and other important issues:

• How can landlord's counsel secure a client's fee interest and ensure oversight of replacement tenants when a ground lessee defaults on its mortgage?
• What protections should the tenant's counsel seek in the ground lease if the landlord/owner defaults?
• How are monetary vs. non-monetary (failure to build improvements) handled in a ground lease?
• How best can additional rent be determined in ground leases as it relates to defaults?