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Purchase of Commercial and Investment Property
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Purchase of Commercial and Investment Property
1. Ground Lease
A ground lease can be defined as a pact through which the tenant becomes entitled to establish property throughout the leasing tenure. Afterward, the property is subject to be turned over to the real owner of the property (Schmidt, 2018).
2. Impact of Ground Lease on Property Ownership
According to the ground lease, it is precisely defined that who owns the building and who owns the land. In due course, the developmental initiatives on the property are also determined. The ground lease does not transfer property ownership, and therefore the property or should say ground remains in the ownership of real owner (Chen, 2019).
3. Practices Regarding Ground Lease Rent and Other Expenses
The ground lease implies that tenants assume the burden of all the expenditures, including the cost of construction, improvements, renovations or repairs, as well as insurances and taxes and any other amount that is due in propertys association.
4. End of the Ground Lease Term
Usually, throughout the ground leasing tenure, the overall cost of the construction exceeds the actual value of the property because the ground lease generally stays active for a certain period of 50 to 99 years. The implied tenure of the contract allows tenants to recover the invested cost. However, at the end of the tenancy, the property rights, along with property, return to the owner (Streams, 2019).
5. Renewal of the Ground Lease
In some cases, a tenant could seek renewal options, and in this context, a few exercises can be practiced at the time of the closing of loan regarding the maturity date of the lease. However, the owner understands that if tenant depicts a poor sense of management, then the tenancy will be ended in default, and therefore leases seldom take place on longer terms. Longer-term of the ground lease is also an option that can be observed as an alternative to renewal. In such cases, the landowners are allowed to seek impositions on renewal instances to evade the perils of defaults (Mayne, 2002).
6. Characteristics of Other Commercial Lease Types That May Provide Greater Rental Income by Charging Common Area Maintenance Costs (CAM) To the Tenants
Commercial real estate leases can be divided into seven major types, which include a gross lease, modified gross lease, triple net lease, double net lease, net lease, and absolute lease. The gross commercial leases bound tenants to pay a considerable amount as rent so that the owner could offset the amount with other expenditures. On the other hand, the net leases make tenants pay all the interconnected expenses of the property along with rent.
7. Maximizing Retail Rental Revenues
The absolute lease is one of the long term commercial leases that credit the tenants. Tenants pay rental bills along with all building expenses, including maintenance, insurance, and taxes, and structures and roof repairs.
8. Differences between a Sublet and an Assignment Lease Provision
An agreement of lease assignment is a formal pact that transfers the obligations and rights of a former tenant to another tenant. Contrarily, agreement of subletting lease proffers flexibility and allows lessee utilizing the support of additional tenant to use the leased area. Such subletting lease agreements are comprised of a relatively short span of time. From an investors standpoint, the assignment agreements are more effective because in subletting agreements are prone to experience hazards of co-tenants conflicts.
9. Termination of the Lease
The ground leases pursue similar termination practices as all other leases. In cases where inheritors, tenants, and owners mutually consented to quit the agreement, the contract will be considered terminated. On the other hand, any instance of default and breach of pre-decided terms and conditions can evoke the chances of premature lease termination (Guerra, 2019).
10. Remedies Available In Case Of a Breach in the Lease Terms
According to the Uniform Owner-Resident Relations Act, the owner of the property can claim tenant to fulfill the avoided obligation. In due course, the landlord can issue a three and seven days notice to the tenant. And after that, the owner is allowed to appeal a petition in the court for a writ of restitution to obtain the possession of the property again.
11. Ways To Hold Title In The Investment
Several ways allow investors to hold the title of investments, such methods include
Sole proprietrship
Joint Tenancy
Tenancy in common
Partnership
Corpoation
In businesses, it is recommended to share the profits and loss among investment partners according to their participation and capital investment.
Reference
Chen, J. (2019). What Is a Ground Lease. https//www.investopedia.com/terms/g/ground-lease.asp
Guerra, T. (2019). Does the Death of the Lessor End a Ground Lease.https//homeguides.sfgate.com/death-lessor-end-ground-lease-65167.html
Mayne, F. (2002). Ground Leases Basic Legal Issues. https//www.utsystem.edu/sites/default/files/documents/Ground20Leases/ground- leasesbasic-legal-issues.pdf
Schmidt, R. (2019). Ground Lease Fundamentals in Commercial Real Estate. https//propertymetrics.com/blog/ground-lease/
Streams, R. (2019). Landowner Rights at End of Ground Lease. https//pocketsense.com/landowner-rights-end-ground-lease-10120.html
Purchase of Commercial and Investment Property
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