A Land Lease Agreement allows a person who owns a piece of land to rent that land to another person or company. Depending on the terms of the agreement, the renter can use the land for reasons such as:
- Farming and agriculture
- Land development (building restaurants, hotels, etc.)
- Commercial reasons (like putting up an advertisement next to a freeway)
What Is a Land Lease Agreement?
A land lease is an agreement between the owner of vacant land or property (the “landlord” or “lessor”) and an individual or entity who wants to develop or improve the property (the “tenant” or “lessee”). It’s also known as a:
The lease is for the right to occupy real estate comprised of only dirt and soil so that the tenant could use the land for multiple uses ranging from agricultural to residential or commercial purposes.
Agricultural land leases – can include using land as a farm for crops and orchard trees, as a ranch for hunting wild game and forest animals on the premises, or as a pasture for grazing animals like cattle, goats, and sheep.
Commercial land leases – may vary from the right to install a billboard, build a telecommunications tower (i.e., used for wireless cell phone reception), open a fast-food chain restaurant, or develop a large multi-story hotel complex.
Residential land leases – can include a spot in a trailer park or the right to construct a small cabin in the woods.
No matter how the tenant will use the land, a land lease allows both parties to clarify and memorialize essential details to avoid future disputes or confusion.
Land Lease Agreement Example
The example land lease agreement below details an agreement between the landlord, ‘Gary E Chapell’ and the tenant, ‘Marjorie H Calhoun.’
Gary E Chapell agrees to lease the site to Marjorie H Calhoun to operate and manage a multi-family residential apartment complex.
What to Include in a Land Lease Agreement
A simple land lease should generally have at least the following:
- Who are the parties to the land lease (i.e., the landowner lessor and the tenant or lessee)?
- What is the amount of rent the tenant shall pay? (often depends on the length of the lease, amount of land/acres used, and intended use of the land)
- Where is the vacant land or real estate located, or which portion will the landlord lease? (use a legally recognized description for the property like metes-and-bounds, photographs, diagrams, or a detailed description in words)
- When will the lease end? (i.e., after a fixed set of years or if a condition or event occurs)
- Whether the landlord may keep any improvements or reimburse the tenant
- Why can the tenant use the land? (a description of the permitted uses of the land)
- How will the rent be paid? (usually either on a monthly rent, lump sum payment at the beginning of the lease, or based on the yield of crops, such as crop share rent or sharecropping)
What else should be in the agreement?
- Access: confirm whether the landlord will still retain the right to enter the land at certain times for particular reasons and detail possible gates or roads the tenant may use
- Amendment: state whether future changes to the agreement must be in writing
- Choice of Law: determine which state’s laws apply to resolve any legal disputes
- Disputes: describe if parties will handle disputes through mediation, arbitration, or court litigation
- Duration: specify the lease term, including any renewal options, possible extensions, or notice requirements. Be sure that leases lasting one year or more are in writing to satisfy the Statute of Frauds in most states
- Facilities: detail whether the tenant is allowed to use specific pre-existing amenities or structures on the property, such as a barn, shed, or camping area
- Gate Requirements: if the property contains livestock like cattle or sheep that graze on the pastures, the landowner may require the tenant to keep all gates closed at all times to reduce the possibility of livestock injury or death or a third party injury or death
- Government Regulations: clarify which party must ensure the use of the land does not violate zoning laws and who should obtain the necessary licenses or permits
- Improvements: state whether the tenant needs the landlord’s written permission to build improvements or make alterations to the land and whether the landlord can keep the improvements
- Insurance: detail what types of insurance the tenant must carry and maintain
- Liability: discuss whether the tenant must buy liability insurance for the property and whether the landlord will be responsible for any harm or damages that may occur on the property during the tenant’s lease
- Maintenance: address whether the property owner or the tenant is responsible for maintaining the land in a particular condition, including the tenant’s duties and obligation not to commit waste or engage in activities that would decrease the value of the land
- Mineral or Subsurface Rights: clarify whether (or at what price) the tenant has rights to access natural resources like precious minerals, natural gas, or oil located underneath the surface of the property
- Mortgages: Whether the tenant can mortgage its leasehold interest or the landlord’s interest in the property
- Permits: designate which party is responsible for obtaining necessary permits and approvals
- Subletting: state whether or not the tenant can sublet the land
- Utilities: whether the landlord or tenant is responsible for supplying electrical power, water, sewage, roads, or any other necessities needed to use the property
- Security Deposit: the landowner may ask for additional money as security for possible damages to the property incurred by the tenant during their occupancy
- Severability: state that if one section of the agreement is unenforceable, other parts of the lease will independently continue to be in effect
- Surrender: describe the condition the land must be in when the tenant leaves and how
- Taxes: determine who must pay for related local, state, or federal taxes for the proposed use of the land
- Termination: detail how and whether the landlord or tenant may end the agreement (usually because of a breach like failure to pay rent or maintain the land)
- Use of Motorized Vehicles: clarify whether or where the tenant is allowed to use certain vehicles like all-terrain vehicles (ATVs) (i.e., quad bikes, three-wheelers, or four-wheelers) on the property
As a reference, a land lease is known by various names depending on the intended use of the land or real estate:
- Land Agreement
- Ground Lease
- Ground Lease Agreement
- Billboard Land Lease Agreement
- Cash Farm Lease Agreement
- Crop Share Cash Farm Lease
- Farm Land Lease Agreement
- Hunting Lease Contract
- Land Contract
- Land Lease Agreement
- Pasture Lease Form
- Pasture Rental Arrangement
For sharecropping arrangements, consult Form FSA-1940-53 Cash Farm Lease provided by the U.S. Farm Service Agency.
When Do I Need a Land Lease?
The following scenarios require a land lease agreement.
Individuals who purchase or inherit vacant land in an urban or rural setting may benefit from a land lease if they want to generate some passive income without personally investing the capital, labor, or time needed to build structures and start an independent business.
In rural communities, tenant farming is common for agricultural or hunting purposes.
In these situations, a tenant may have tools or livestock and enough funds to pay for the right to use the land but lack the capital to purchase his or her parcel of land.
Ground Lease to Hunt
In addition to raising crops or livestock, landowners with large properties in the countryside may profit from leasing their property to a hunter or association during hunting season.
In addition to earning a seasonal income, a ground Lease to hunt on uninhabited land may help prevent crop damage and disease in livestock by managing wildlife in the area, according to The National Agricultural Law Center.
In urban settings, large chain stores often use a land lease to take advantage of a prime location without paying large sums for the underlying real estate.
Corporate expansion plans may leverage land leases to strategically use equity or available cash to improve the land to generate income instead of purchasing a property.
And land owners can generate steady income every year and possibly inherit any structures or improvements built on the ground when the lease ends.
Why Use a Land Lease
Using a land lease agreement provides many benefits to a landlord, including:
- Documenting the agreement prevents outsiders from mistaking the land arrangement as a joint business venture instead of an independent landlord-tenant relationship
- A tenant often incurs debt when they take out a loan to make improvements on the loan. A land lease can include a “No Partnership” clause that protects the landlord from creditors who may try to come after the property owner for debts or financial obligations the tenant owes
- An agreement in writing protects future disputes between two parties who file a lawsuit to quiet title in a claim for adverse possession when there is confusion about who owns the land
Adverse possession allows a trespasser to essentially become the land owner if they treat the property like their own for a certain number of years, ranging from five to twenty, depending on the state.
For example, the landowner, Owen, may have allowed Tim, the tenant, to farm the land without an agreement. Fifteen years later, Tim claims he owns the land, while Owen argues that he is the actual property owner.
Instead, Owen should have confirmed in writing that Tim is a tenant with permission to occupy the land, thereby eliminating the “hostile” requirement for an adverse possession claim.
If you are the landlord, include helpful language that protects you from any financial woes the tenant may incur while using the land by clearly stating that the land lease does not create a partnership between the landlord and tenant.
Subordinated vs. Unsubordinated Land Leases
A land lease can be subordinated or unsubordinated, depending on the verbiage in the agreement.
- In a subordinated land lease, the property owner agrees to take a lower hierarchy in its claim of ownership and pledges its interest in the land as collateral for the tenant’s loan to build improvements. If the tenant defaults on the loan, the landlord would lose land ownership. Often banks do not want to lend tenant’s the large sums of money needed to construct improvements because they are not receiving a security interest underlying the land itself. Landlords usually agree to subordination in exchange for higher rent payments.
- In an unsubordinated land lease, however, the landlord refuses to take a lower hierarchy and prohibits the tenant from pledging its title to the land as collateral for any loans. If the tenant defaults, the landlord gets to keep their land ownership, while the tenant may lose its leasehold interest. Unsubordinated leases usually come with lower rent payments.
Consequences of Not Using a Ground Lease
Without a land lease reduced to writing, each party may not have protected rights if disagreement blossoms into a lawsuit.
Instead, a written agreement can help clarify subtle details like the following in advance:
- Who is supposed to pay real estate taxes?
- Who is responsible for an animal causing damage to neighboring property?
- Who needs to obtain the necessary agritourism or recreational land use permits?
- What should happen if someone unexpected discovers mineral rights on the land?
- Is there a late fee or penalty for not submitting rent on time?
- Will the landlord be able to keep any structures built on the ground after the lease ends?
- Can the tenant sublease the land to another farmer or developer?
How to Write a Land Lease Agreement
Follow the steps below to write your land lease agreement.
Step 1 – Fill in Landlord and Tenant Information
1. Landlord Name. Provide the landlord’s full name or company name, depending on whether the landlord is an individual or an entity.
2. Tenant Name. Provide the tenant’s full name or company name, depending on whether the tenant is an individual or an entity. If there is more than one tenant, enter the name of each additional tenant.
Step 2 – Enter Agreement to Lease Details
3. Legal Description. Provide a legal description of the land being leased, which will be referred to as the “Site” for the rest of the agreement. A legal description is a unique description that identifies the land.
Step 3 – Write Purpose
4. Use of Site. Provide the purpose and the intended use of the Site.
Step 4 – Describe Term
5. Start and End Dates. Provide the start date and the end date for the lease term. The term is the length of time the tenant will rent the Site.
Step 5 – State Rent Amount
6. Rent Payment. Specify the dollar amount of each rent payment and how often the rent will be paid (i.e., on the effective date, monthly, or annually).
7. Monthly Installments. If monthly installments, specify the day of the month the rent is due (e.g., the 1st of the month). Select whether the landlord will assess a fee for late rent. If yes, specify the day of the month the rent will be considered late and if there is a grace period. Specify if the late fee will be calculated as a percentage or a set dollar amount.
8. Annual Installments. If annual installments, specify the day and the month the rent is due (e.g., 1st day of January). Select whether the landlord will assess a fee for late rent. If yes, specify the day and the month the rent will be considered late and if there is a grace period. Specify if the late fee will be calculated as a percentage or a set dollar amount.
9. Pro Rata Rent. If the rent is to be paid in annual installments, select whether the rent for any portion less than one year will be calculated on a pro-rata basis.
Step 6 – Check Security Deposit Option
10. Security Deposit Amount. Specify whether the tenant is required to pay a security deposit. If yes, provide the total dollar amount of the security deposit to be paid by the tenant to the landlord.
11. Security Deposit Return. Provide the number of days after the end of this agreement that the landlord will return the security deposit (less any amounts under this section) to the tenant.
12. Interest Bearing Security Deposit. Specify whether the security deposit will be held in an interest-bearing account.
Step 7 – Select Taxes Option
13. Tax Payments. Provide whether the landlord or the tenant is responsible for paying taxes and assessments.
Step 8 – Mark Utilities Option
14. Utility Services. Provide whether the landlord or the tenant is responsible for payment of utility services such as electricity and gas.
Step 9 – Fill In Conditions Precedent Information
15. County of Registry. Provide the county where this agreement will be registered with the relevant Land Registry Office. Also, provide the applicable state whose laws will govern this agreement.
Step 10 – Fill in Holdover Tenancy Rate
16. Holdover Tenancy. If there is a holdover (tenant stays on the Site past the end of the lease term), specify the percentage of the rent per month the tenant must pay during the holdover period.
Step 11 – Check Improvements and Alternations Option
17. Improvements. Provide whether the tenant is permitted to make improvements or changes to the Site without the landlord’s approval.
18. Signs. Specify whether the tenant is permitted to erect signs on the Site related to its business.
Step 12 – Note Leasehold Mortgage Option
19. Leasehold Mortgage. Provide whether the tenant has the right to mortgage its leasehold interest as security for a loan.
20. Subordinated Lease. Provide whether the landlord agrees to permit a mortgage to be placed on its interest in the Site to secure payment of a loan made to the tenant.
Step 13 – Enter Insurance Information
21. Insurance. In addition to property insurance, specify whether the tenant is responsible for maintaining general liability insurance, worker’s compensation insurance, automobile liability insurance, or any other insurance. If yes, also provide the minimum coverage that must be maintained.
Step 14 – Write Default Details
22. Other Information. Provide for any other events of default by the tenant not already included.
Step 15 – Fill in Termination by Landlord Days
23. Number of Days. Specify the number of days after receipt of the landlord’s notice of default that the landlord has to terminate this agreement.
Step 16 – Note Termination by Tenant Days
24. Number of Days. Specify the number of days after receipt of the tenant’s notice of breach that the tenant has to terminate this agreement.
Step 17 – Write Surrender of the Site Information
25. Number of Days. Specify the number of days after the end of this agreement the tenant has to remove all equipment, materials, and other property from the Site.
26. Number of Days. Specify the number of days after the end of this agreement that any property left on the Site can be considered abandoned by the tenant and retained by the landlord.
Step 18 – Fill in Governing Law State
27. State. Choose the state’s laws that will govern this Land Lease Agreement.
Step 19 – Write Dispute Details
28. Dispute Resolution. If there is a dispute, specify whether the dispute will be resolved through court litigation, binding arbitration, mediation, or mediation then arbitration.
Step 20 – Note Miscellaneous Information
29. Other Provisions. Provide for any other provisions not already included in this agreement.
Land Lease Agreement Sample
Use the sample form below to create a land lease agreement or make a customized form with our document builder.