Example
A developer leases a lot for 75 years at $120,000 a year, rising 10% every five years, and builds a 40-unit apartment building on it. The developer collects the apartment rents and pays the ground rent, which becomes $132,000 a year in year six. Cities, universities and families who do not want to sell land often use ground leases.
In a lease it looks like…
Tenant shall pay annual ground rent of $120,000, increasing by ten percent at the start of the sixth lease year and every five years after that. When the term ends, all improvements on the land become the property of Landlord without payment.
Good to know
Financing gets harder as the term runs down, so ground leases usually run long enough to outlast a building’s mortgage by decades. For the building owner, ground rent is an operating expense like property tax.
Plain English, not legal advice. Last reviewed September 29, 2026.