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Badfish740 12-17-2007 11:18 AM

Owning a home (not a mobile home) on leased land?
My fiancee and I are looking at a home which is part of a community that is collectively contained on a 32 acre plot. Each home has a 2 acre property which is leased from the community for 99 years. The reason this is done is so that the taxes can be paid on one 32 acre property rather than 16 two acre properties. This results in a substantial savings on property taxes. The home is a modest two story two bedroom (this is a stick built home, not a manufactured home) on a secluded two acre lot. We like the home, and the realtor assures us that there is no "Homeowner's Association" (no rules, just the zoning laws of the township) just a collective which pays their taxes together each year. That being said, what could be potential drawbacks/pitfalls to owning a home on leased land?

redline 12-17-2007 12:13 PM

You would have to look at all the paperwork regarding this siutation.

Can you be forced to move- house and all if the owner wants to sell the entire property?

Are there any written restrictions placed on the land or the property?

Can you eventually buy your share of the land?

How much will it cost you to "rent" the land as compared to buying the land?

Will it create any problems if you decide to sell the home and the land is not owned by you?

If another home owner fails to pay their share of the taxes then will all other home "owners" lose the land or the right to use the land?

Bondo 12-17-2007 12:23 PM

You Really need a realestate Attorney to answer those questions,......
If for no other reason than Every Contract is Different.......

In a similar but different situation,.....
My Dad leased a Camp Lot many years ago, mainly because land couldn't be Bought in that area,.....
After 30 years or so, Well after both Mom,+ Dad were gone,.... The Land Owners sent us(sisters,+ I) a notice that All the lots were up for Sale,.....
We had 30 Days to buy the property at their price, or Vacate the lot in 90 days,.... Anything left would be forfeited.... Buildings included.....
Needless to say, We scrambled,+ paid the rediculous price,......
Now we Own the Lodge,+ the land under it......

At this point in life,.....
If the Only patch of ground left in the World, that could be Bought, was a Swamp,...........
I'd Buy it,+ live There,......

Rather than Leasing the finest lot in the most Beautiful spot Anywhere........

Badfish740 12-17-2007 12:52 PM

Thanks for the warning, but I just want to give a little more information. There is no "owner" or landlord, so that may change the situation a bit. The "club" as its called, is an LLC which holds the deed to the land. It was formed in the 1930s by the original inhabitants in order to skirt the rising property taxes in the area. No one person controls the entire 32 acres, nor may they sell it, etc... I'm still learning about the governance of the LLC, but basically, it is taxed on the 32 acres by the township, and the tax is divided among the 16 households. I'm going to investigate and hopefully I'll know more soon.

jbfan 12-17-2007 01:49 PM

I don't have an answer. but it happens all the time around large lakes.
The lakes are owned by the power companies, timber companies and such, but sign 99 rear leases for homebuilders. I see these house's for sale all the time, so it happens. Not sure what happens after 99 years though.

Badfish740 12-17-2007 01:52 PM


Originally Posted by jbfan (Post 81316)
I don't have an answer. but it happens all the time around large lakes.
The lakes are owned by the power companies, timber companies and such, but sign 99 rear leases for homebuilders. I see these house's for sale all the time, so it happens. Not sure what happens after 99 years though.

LOL-unless I live to be 125 I don't really need to know :wink:

Bondo 12-17-2007 02:07 PM


It was formed in the 1930s
Actually,....... It may not be That far away.............

Btw,....... The Lease on the Lodge above was only an Annual lease.......

You Really need to talk to a Lawyer,......
Advise on a forum is Just That,+ Nothing More.......
Anonymous Advise could cost you Alot of Money........

Badfish740 12-17-2007 02:17 PM

Advise heeded. I work with attorneys so they can help me with navigating leases, contracts, etc... It was my understanding that one signs a new lease when one buys a home within the community they sign a new 99 year lease. We'll see.

jogr 12-17-2007 05:02 PM

Make sure you understand who really controls the LLC and what they can do with the property. When you buy the house is the owner selling you his ownership interest in the LLC? How is that value determined?

My personal opinion is that a house is worth too much to put on leased ground. If the lease ends for whatever reason the house becomes essentially worthless because it costs so much to move one.

AllanJ 01-23-2008 10:02 PM

If the land is owned by an LLC or other corporation, you can find out whether the corporation in turn is owned by the various homeowners.

Condominium ownership is a quite safe way for a tract of land to be owned collectively even though the buildings are not part of the condominium.

In any collective ownership, if one or some owners fall upon hard times and cannot make their share of the payments, the others have to make up the difference.

>>> what happens after 99 years?

In Hawaii a large percentage of homes are on outright leased land. There are some situations coming up where the lease is expiring and the value of the home has dropped drastically given that the future is uncertain. We're talking of homes that, 20 years ago, sold in the six figures now up for sale in the low to mid five figures.

Mike Swearingen 01-23-2008 10:33 PM

I've been a NC real estate broker for more than 21 years, and have only seen such long-term ground leases like this on commercial property (shopping centers, etc.).
Personally, I wouldn't buy into this deal.
Where is this property located and how much actual property tax difference is there between owning a home with no lot in this project and a comparable home there where you also own the land. In the first place, all local property taxes are tax deductible, so also factor that in when calculating whether this is worth it.
If this is in such a desireable location, isn't land there appreciating? Why wouldn't you want to own the land under your house? We paid $10,000 in 1977 for our vacant Albemarle Sound waterfront half-acre, and I just listed a comparable vacant waterfront lot for $325,000 that I sold to that owner only four years ago for $105,000. Get the idea?
Also, many lenders might charge a higher interest rate for this kind of mortgage.
I would have so many questions about this deal going in, that I can't see how anyone could possibly convince me that it was in my best interest in the long run.
Check this all out thoroughly before jumping into it.
Good luck!

Hurricane 03-30-2008 09:34 AM

Bad idea.

Think about this way.

When you own land it gets passed to future genration of your family, whne you lease, even for 99 years it starts to get complicated.

What would happen after both of your deaths?
The house you paid for would be subject to seizure by the property owner(s) unless your grandkids or whatever paid even more for the land.

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