Freehold

Leasing & Property Management term

Ground Lease

A long-term lease of land alone, where the tenant typically owns any improvements built on it during the term.

Why Ground Lease matters on the exam

This term belongs to Leasing & Property Management. The questions below are real items from Freehold's bank that use it - each one cites its source.

Exam questions using Ground Lease

Every Freehold question shows why the right answer is right — and cites its source.

Which lease is most likely to be enforceable in most states even though it was made only orally?

  1. A standard five-year commercial lease
  2. A ten-year ground lease
  3. A ninety-nine year lease of farm land
  4. A month-to-month residential tenancy
Show answer & explanation

A month-to-month residential tenancy — Most states' statute of frauds exempts leases for a year or less from the writing requirement, so a month-to-month oral tenancy is typically enforceable, unlike long-term leases.

Source: PSI National Real Estate Exam Content Outline §7 Contracts

In a ground lease, the tenant leases vacant land, typically for a long term, and:

  1. Usually constructs a building on the land
  2. Must return the land at lease end without ever constructing improvements
  3. Automatically receives fee title to the land after five years
  4. Usually pays rent based on a percentage of the tenant's gross sales
Show answer & explanation

Usually constructs a building on the land — Ground leases typically run for long terms and allow the tenant to construct a building on the leased land; absent a contrary agreement, the improvements revert to the landowner when the lease ends.

Source: PSI National Real Estate Exam Content Outline §8 Leasing & Property Management

A lease that specifies scheduled rent increases at set future dates over the lease term is called a:

  1. Percentage lease on retail space
  2. Graduated (step-up) lease
  3. Gross lease
  4. Subordinated ground lease
Show answer & explanation

Graduated (step-up) lease — A graduated or step-up lease builds in predetermined rent increases at specified intervals, letting both parties plan for rising costs without renegotiating the lease every time.

Source: PSI National Real Estate Exam Content Outline §8 Leasing & Property Management

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