Ground Leases: Key Negotiated Provisions, Financing Issues, Monetary vs. Non-Monetary Breaches, Additional Rents and the Valuation of Improvements

Recording of a 90-minute premium CLE video webinar with Q&A


Conducted on Tuesday, June 22, 2021

Recorded event now available

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Course Materials

This CLE course will explore the inner-workings of ground leases. The panel will discuss various issues related to key negotiated provisions, financing, monetary vs. non-monetary breaches, how additional rents are determined, and how and when a valuation of leasehold improvements (often, a building) is determined.

Description

Ground Landlords and Tenants typically negotiate several key provisions: the rights and responsibilities of the parties, due diligence, assignment rights, the use provision, the rent structure, events that can lead to additional tenant payments, condemnation and insurance issues.

Of significant importance are the provisions related to financing: the Ground Tenant needs to make sure that nothing in the lease prevents or limits its ability to arrange for financing, particularly construction financing. The Ground Landlord is concerned about its rights to take back the property or be made whole in the event of the tenant default under the lease or the leasehold mortgage. The Lender must be certain that its interest in the property and its investment is protected.

Monetary and non-monetary defaults of a ground lease can create unique challenges depending on the defaulting party, potentially leaving the property unproductive for years, while litigation progresses. The parties can ameliorate some of these concerns by negotiating certain protections for themselves in the lease.

Finally, considering the long term aspect of a ground lease and the significant investment into the building placed upon the land, practitioners must understand how to structure the rent and address the potential for capital events, as well as the valuation of the improvements.

Listen as our expert panel discusses these best practices to negotiating ground leases and how to manage the most common issues for all stakeholders when considering a ground lease.

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Outline

  1. Introduction to ground leases
  2. What are the key negotiated terms
    1. Term/extensions/early termination rights
    2. Due Diligence
    3. Assignment and subletting
    4. Use
  3. Rent and capital events
  4. Financing issues
  5. Ground lessor defaults
  6. Ground lessee defaults
  7. Improvement valuation

Benefits

The panel will review these and other important issues:

  • How can landlord's counsel secure a client's fee interest and ensure oversight of replacement tenants when a ground lessee defaults on its mortgage?
  • What protections should the tenant's counsel seek in the ground lease if the landlord/owner defaults?
  • How are monetary vs. non-monetary (failure to build improvements) handled in a ground lease?
  • How best can additional rent be determined in ground leases as it relates to defaults?
  • How is the valuation of improvements addressed in a defaulted ground lease?

Faculty

Bregman, Douglas
Douglas M. Bregman

Partner
Bregman Berbert Schwartz & Gilday

Mr. Bregman has maintained a general civil law practice for over 35 years focusing on transactional real estate and...  |  Read More

Zana, Lisa
Lisa M. Zana

Partner
Shipman & Goodwin

Ms. Zana’s commercial real estate clients are situated throughout the U.S. with a focus on New York’s...  |  Read More

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