Ground Lease

Burns St Commons home with changing fall leavesEvery homeowner wants to be firmly tied to the land under their home. Most often this is done by buying the land under the structure as well as the building itself. However, because land is so expensive, this results in a larger purchase price, which in turn makes homeownership difficult if not impossible for many of today’s households to afford.

There is another choice that offers a household greater security in the occupancy and use of the land under their home—it is the perpetual (meaning lasting forever, as explained below) leasing of the land. Perpetual leasing of land is not a new idea. It has been used in some New England farming communities for many decades. Long-term land leases are also common on railroad lands and State lands, where individuals own structures on leased land. Under a perpetual lease arrangement, the person who actually owns the land gives the person who occupies the land the perpetual use of the land in exchange for a fee. To the outside observer, it appears that the lessee is the land owner. The lessee’s right to use the land cannot be ended unless he fails to pay the fee or uses the land in a harmful way. The lessee’s right to act like the day-to-day owner of the land is his to control.

The LSP lease attaches a homeowner to the land in a similar way.

The lease contains three main points which you and LSP must agree on:

First:   Through the LSP housing land trust you have found an opportunity for you and your family to own a home—an opportunity that would otherwise be nonexistent—and you intend to live in that home well into the future.

Second:   There should always be an adequate number of safe and decent homes that families of low and moderate income can afford.

Third:   In exchange for the opportunity to own a home that you otherwise would not have had, you agree that, if in the future you decide to sell, your home should be sold in a way calculated to easily and quickly place it in the hands of other low or moderate income families.

 The Land Stewardship Program hopes that you will decide to become this special kind of homeowner. But before you can sign a lease with LSP, we will require that you get detailed advice from an attorney. This document is meant only to be a summary of our lease and other important legal papers, all of which you (and your children who are old enough) will need to understand.

What’s the Deal?

By signing the lease agreement, you are agreeing with LSP that long term occupancy is your goal. Therefore, the lease gives you the opportunity to stay on the land forever—the lease is effective for seventy-five (75) years, and may be renewed for one additional 75-year period. LSP will offer to renew the lease and/or you will have the legal right to obtain the renewal simply by notifying the LSP that you want to renew. You can agree to renegotiate the terms of the lease at that time, but you are not obligated to do so—you can renew the lease on the same terms. You can will the house to your children or your heirs, and LSP will automatically sign a new lease with them.

In the lease, LSP promises to let you occupy and use the land as though it were your own forever, provided you make certain promises to LSP. Most of the promises are basic because they are rooted in common sense; others are more special in nature because they enable LSP and you to accomplish the shared goals that are reflected in the main points of the Lease Agreement. As long as you hold up your end of the bargain, you will be able to live on the land without interference.

Basic Promises

Let’s look first at some of the basic promises that you make by signing the lease. A review of this list shows that you probably would do these things if your home were located on land which you own:

  • You, or your children, other family members or dependents, will live in the house most of the time.
  • You will use the land in a reasonable way—this includes not damaging the land, or creating disturbances for your neighbors—and you’ll use the land primarily for residential uses.
  • You will cover taxes on the house, and other assessments.
  • You will keep the property insured as specified in the lease.
  • You will maintain the property so it is at all times a safe and decent place to live as defined by local building and health laws.

 Special Promises

The special promises you make by signing the LSP lease mean that you and LSP have reached agreement on the main points (page 1, above) that are repeated often in the language of the lease. Your attorney will fully explain them to you, but you will have to decide whether they are fair. By making the promises outlined below, you are saying that you and your children share a common purpose with the Land Stewardship Program, and that you will do your part to ensure that your home will forever be affordable to families of low and moderate income. By making these promises, you will ensure that the unique opportunity you have received can be passed on to future generations:

  • The Board of Directors of the North-Missoula Community Development Corporation has reserved four seats for land trust homeowners. It could be you, if you’re interested—we highly encourage you to serve on NMCDC’s Board of Directors. In this way, you will be represented by voting members of the corporation that owns the land.
  • You will notify and provide information to LSP regarding any improvements you will make to your home but only in the case of construction outside the walls of the home or construction that adds living space (for example, adding a new bedroom, finishing the attic, or building a carport, as opposed to remodeling the kitchen).
  • Related to this, no loan for any work done (either exterior or interior) can be tied to (secured by) the land under your home because you do not own the land.
  • You will agree to work out any disputes that may arise between you and LSP through a process known as arbitration, which involves impartial mediators instead of lawyers and judges.
And finally…

If you ever decide to sell your home, you will work with LSP to ensure that your home will remain affordable by giving LSP the first option to purchase the home for a price that future low and moderate income families can afford.

This last promise is also the most important because it is the agreement whereby you and LSP can guarantee that your home will actually end up in the hands of a future low- or moderate-income family just as you were when you purchased it.

DOWNLOAD GROUND LEASE HERE

Have questions? Don’t hesitate to call 829-8414.