Benefits of Ground Leases for Lessors

Dean Britton, a real estate investor, oversees AIA in New York City. In his role as a principal, Dean Britton specializes in finding ground lease opportunities.

The ground lease presents lessors (landlords) with several advantages. A ground lease is a contract that allows an investor to lease land for a certain term, traditionally 99 years. The person leasing the land typically constructs a building (residential condos/apartments or commercial space) on the land.

The sale of a property culminates in the seller paying capital gains taxes. However, lessors are only liable for income taxes generated from rental income, not capital gains taxes. Therefore, one of the benefits of a ground lease for the landlord is avoiding capital gains taxes.

Another benefit for landlords is a steady stream of income. If the renter is reliable, the landlord may earn income for decades. The landlord also has the power to approve or veto changes to the land.

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Understanding Credit Enhancement

Based in New York, Dean Britton has a bachelor’s degree in biomedical ethics from Brown University. Dean Britton is the lead partner at AIA, where he is responsible for sourcing and structuring new ground lease opportunities. When he isn’t working, he enjoys traveling to places like Ireland to play golf.

Some of the top links courses in the world can be found in Ireland, but there are also several stunning inland courses to be discovered. Golfers from the United Kingdom, the United States, and worldwide flock to the country because of the wonderful courses that can be found all around the country.

An example of one of these impressive Irish golf courses is the Waterville golf course. This golf course is the place to go if you want to play a world-class links course. Founded in 1889, the course is steeped in rich Irish history.

Renowned golf course architect Eddie Hackett designed the layout of this course, which has many of his signature design elements. For example, Hackett designed different obstacles for players at every hole, culminating in an epic finale. Perhaps the most well-known on the course is the seventeenth hole, which is a par three.

Another impressive Irish course is the Ballybunion Golf Course. The club had only opened its doors when it ran into financial difficulties, having been founded in 1893. However, in 1906, Colonel Bartholomew’s funding rescued the club, and nine extra holes were quickly constructed. The 18-hole layout was completed in 1927.

Ballybunion’s status as one of the best links courses on the planet increased over time. However, many big championship tournaments have passed over it due to its secluded location on the southwest coast of Ireland. Even so, a handful of the planet’s greatest golfers have made their way to the renowned course.

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How Ground Leases Help Landlords Mitigate Tax Liability

A successful real estate entrepreneur with an extensive background in all aspects of real estate finance and underwriting, Dean Britton serves as the principal of AIA, a leading commercial real estate financing company headquartered in New York. Dean Britton’s responsibilities include sourcing and structuring new ground lease opportunities.

Leasing land can serve as an effective way for land owners to mitigate tax liabilities due to capital gains. A landowner or landlord leases their land to a tenant (a commercial entity) in a ground lease contract. The commercial entity uses the land to develop an office building, a facility, or a warehouse for commercial business operations under the proviso that it will pay an annual rent fee on the land to the landlord, settle all tax liabilities related to property use and improvement, and return the property (including every construction on it) to the landlord when the contract expires.

Rather than selling their land, a landowner can use a ground lease contract to earn reasonable annual returns on their land for decades and maintain ownership of that land. Although the annual rents paid by tenants in ground lease contracts are low, landlords are only taxed according to the annual rents received. If a landowner sells their property outright, on the other hand, they will have to pay an overwhelmingly larger amount of tax on the capital gain.

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