Question 1

What is a long-term ground lease in Florida?

Accepted Answer

A long-term ground lease is a lease of bare land for an extended period, typically 50-99 years. The tenant (ground lessee) constructs buildings and improvements on the leased land and operates them during the lease term. At lease expiration, the improvements typically revert to the landowner unless the lease provides otherwise. In Florida, long-term ground leases are used for: commercial developments on government-owned land, hotel and resort developments on waterfront property, institutional land (universities, hospitals, churches), and situations where the landowner wants to retain ownership while monetizing the land.

Question 2

What are the key terms of a Florida long-term ground lease?

Accepted Answer

Key terms include: lease term (50-99 years, with renewal options possible), ground rent (fixed amount with periodic escalations, typically CPI-based or fixed percentage), improvement ownership (tenant owns during the lease; reversion at expiration), permitted uses and development rights, financing provisions (leasehold mortgage rights, lender protections), assignment and subletting rights, insurance and maintenance obligations, tax obligations (who pays property taxes), default and cure provisions, and purchase options (if any). The lease must be carefully drafted to protect both the landowner's reversion interest and the tenant's investment in improvements.

Question 3

How are long-term ground leases valued in Florida?

Accepted Answer

Ground lease valuation considers: the land value (what the land would sell for in fee simple), the ground rent rate (typically 6-10% of land value per year), the lease term remaining, the escalation provisions, the tenant's credit quality, the improvement value and condition, the reversion value of improvements at lease expiration, and comparable ground lease transactions. Appraisers use the income approach (capitalizing the ground rent stream), the sales comparison approach (comparing to similar ground lease transactions), and the land residual technique. For property tax purposes, the leasehold and fee interests are assessed separately.

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Long-Term Ground Leases in Florida

Key Terms

Valuation

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