From the Ground Up

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.