Beware the Land Lease

By
Real Estate Agent with Utah Homes 9334967-SA00

"What's a land lease?"

That's the question an investor asked me after she purchased a home at auction.

"It depends" was my initial answer.

A look at her paperwork revealed that she owned the home but not the land, which was owned by the golf community trust.

There were a number of paragraphs which explained the land usage renewals and transfer clauses. 

As it turned out, her investment was still a good one.

There were plenty of people looking to live in the subdivision.

Upon listing the home she provided documentation in which she disclosed all encumbrances.

Although I titled this "beware" I don't mean to scare anyone off.

It's possible that purchasing a home that has such encumbrances could be good or could be bad.

The determination of that varies according to the desires of the potential owner.

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Chuck Willman is an agent who works with those who wish to buy or sell properties- either as an investor or as a consumer. He serves people in Utah and Arizona.

Comments (12)

Troy Erickson AZ Realtor (602) 295-6807
Good Company Real Estate - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

Chuck - I think the most important thing is for buyers to be aware of what they are buying. These "land leases" are very common in Hawaii from what I have seen.

Feb 02, 2016 01:25 PM
James Dray
Fathom Realty - Bentonville, AR
Exceptional Agents, Outstanding Results

Good morning Chuck.  Knowledge is power, knowing what you are buying and feeling good with it is invaluable.  

Feb 02, 2016 07:38 PM
Sandy Padula and Norm Padula, JD, GRI
HomeSmart Realty West & Lend Smart Mortgage, Llc. - Carlsbad, CA
Presence, Persistence & Perseverance

Chuck Willman UtahHomes.me Great post and one additional reason why buyers need to perform their due diligence before making bids for properties at auction.

Feb 02, 2016 09:59 PM
Tamara Elliott-Deering
Central Metro Realty - Austin, TX

Chuck, when I lived in Washington State, there were many land leases on tribal lands, they could be a good deal because you could get a home with a stunning view for far less than you would pay if you bought the land. But you are correct to warn/inform buyers because many don't understand.

Feb 03, 2016 12:16 AM
Kathryn J.
Rentec Direct - Grants Pass, OR
Rentec Direct

This is excellent buyers beware info.  Something buyers need to be educated about.  Thank you for sharing

Feb 03, 2016 01:41 AM
Chuck Willman UtahHomes.me
Utah Homes - Alpine, UT
Utah Homes

Troy Erickson It's also common near the reservations- quite a few of these near the North Scottsdale area.

Feb 03, 2016 09:10 AM
Chuck Willman UtahHomes.me
Utah Homes - Alpine, UT
Utah Homes

James Dray A good real estate agent should spot one of these with basic research. The average consumer will find this to be a surprise.

Feb 03, 2016 09:11 AM
Chuck Willman UtahHomes.me
Utah Homes - Alpine, UT
Utah Homes

Sandy Padula and Norm Padula, JD, GRI I used to work foreclosure auctions. The case I described here was from a person who purchased on her own. She was, at first, alarmed but then relieved to find out that although this was not ideal, she still had a large margin for such areas. Not everyone is that fortunate. For anyone using a bidding service- this is something that the such services should provide in title information.

Feb 03, 2016 09:15 AM
Chuck Willman UtahHomes.me
Utah Homes - Alpine, UT
Utah Homes

Tamara Elliott-Deering This was precisely the case. As long as the consumer is aware of this nuanced brand of ownership there may still be adequate motivation to accept the encumbrance.

Feb 03, 2016 09:16 AM
Chuck Willman UtahHomes.me
Utah Homes - Alpine, UT
Utah Homes

Kathryn Jones In all my experience I've only run across a half dozen land lease type properties that captured my buyer's interest. In every instance they decided against buying. The one seller did not, however, find much trouble in selling the property as the new owner was delighted to have a golf course lot with a land lease that wouldn't expire for decades and had a palatable renewal option.

Feb 03, 2016 09:19 AM
Brent Swensen
Swensen Homes - Lehi, UT
REALTOR serving the Wasatch Front

We just went through one of these in ND. A client bought a Home on Leased BLM land. The lease rates now tripled less than a year later. Again even at this rate it is affordable to the current owner but trying to a cash buyer in the future may be tough, we found it very difficult to find a bank that would loan on leased land and those that would the buyer needed cash and great credit.  Great Reminder and info. Thanks Chuck!

Mar 09, 2016 01:49 AM
Makeda Phillander
guerilla/realty - Baltimore, MD
For an exceptional real estate experience

very good info Chuck. Thanls for sharing.

Apr 18, 2016 02:45 AM