Florida Broker Practice Exam

What is the primary characteristic of a ground lease?

1. The tenant leases only the land

2. The tenant pays higher rent based on sales

3. The lease is for an indefinite term

4. The tenant must pay property taxes

The correct answer is: The tenant leases only the land

The primary characteristic of a ground lease is that the tenant leases only the land. In this arrangement, the tenant typically has the right to use the land for a specified period, during which they may either develop the land or use it for various purposes, depending on the terms of the lease. The tenant does not own the land but can build structures or make improvements on it. At the end of the lease term, the land and any structures built on it usually revert back to the landlord. The focus on leasing the land itself is what distinguishes ground leases from other types of leases where buildings or improvements may also be included. This structure allows businesses to develop properties without having to purchase the land outright, thus potentially lowering their initial capital investment. Other aspects such as paying higher rent based on sales, the term of the lease, or property tax obligations may be relevant in particular circumstances but are not essential characteristics that define a ground lease. The defining feature remains the separation of ownership of the land and the interests of the tenant who utilizes it.