Looming on the horizon is an updated newly revised version of Ground Lease Practice; a practical handbook for lawyers dealing with the complexities of commercial ground lease situations.
Alan Insul, an expert Los Angeles business attorney, consulted on this latest version of Continuing Education of the Bar’s Ground Lease Practice in the complicated area of the rights between the parties in the event of a total or partial destruction of the improvements in situations such as a fire or earthquake. Continuing Education of the Bar is a joint enterprise of the University of California and the State Bar of California.
Commercial ground leases are when the owner of the land leases unimproved land to another party who will build and then own that commercial development. Leases for projects like this may run from 25 to 99 years. Unless the parties agree right up front in a ground lease agreement, the land owner winds up owning the improvements – a rather awkward state of affairs. “The transactions are very complex often involving the land owner, developer, lender and sometimes a large commercial user such as a major department store,” outlined Insul.
Drafting and negotiating solid, long-term ground leases may sound like a fairly straightforward issue. It is anything but straightforward and requires an expert attorney with a fine imagination and vision for the future. The future meaning the ability to balance the short-term goals of a client against a plethora of “what if” issues and conditions that may crop up in a real estate project 30 to 50 or more years down the pike.
It isn’t easy going in the beginning either when the attorney needs to be able to co-ordinate and keep track of the parties, title and interests involved; make sure there is a complete premises description; provide for term, termination and options to extend or buy and deal with issues pertaining to rent, security and other types of payments. “The issues are even more far reaching than that and will also include the not insubstantial matters of construction, maintenance, ownership of improvements, financing, subordination, encumbrances and problems relating to condemnation,” added Insul.
It’s interesting to note that there is the distinct possibility that a major project in Beverly Hills may possibly have more residual value at the end of a ground lease situation as compared to a project developed to provide commercial support for the re-development of a blighted community which may or may not succeed in the long-term.
“A project in Beverly Hills may be more likely to have residual value at the end of the ground lease rather than a project developed to provide commercial support for a redevelopment of a blighted community which may or may not succeed over the long-term,” said Insul.
The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.