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A Land Lease Agreement is a legal document to rent a parcel of land. It binds the owner of the land and the tenant who will rent the land. Tenants can rent the land for the following purposes:
- Agricultural and farming use
- Commercial or land development use
Contracts for land leases must be in writing to be enforceable.
What is a Land Lease Agreement?
A land lease agreement is a contract between a landlord and a tenant permitting the tenant to use land owned by the landlord in exchange for rental payments.
The difference between a regular lease agreement and a land lease agreement is that the latter is a lease for a vacant piece of land, whereas the former is a lease for a property.
Tenants can use the land for the following purposes:
- Agriculture and farming: This includes land used for farming crops or raising animals like cattle.
- Commercial or land development: This includes installing structures like a billboard or other advertisements on the land, or opening a gas station, highway restaurant, or motel.
Why Do You Need a Land Lease Agreement?
A land lease agreement is needed because it is a legally binding document between the landlord and the tenant that establishes the rights and duties of the landlord-tenant relationship.
For example, a land lease agreement will identify which party pays taxes on the land or which party is responsible for maintaining insurance.
Thus, the land lease agreement is the governing authority to settle an issue should any dispute or confusion arise.
When Do You Use a Land Lease Agreement?
A land lease agreement is a binding document you can use to rent land to a tenant. Sometimes it is more cost-effective to rent land for a given purpose than to purchase it.
Thus, if you have unused land, you may benefit financially by renting it to an individual or a business.
A land lease agreement also describes the rights and duties of both parties in the contract so there is no confusion later. Do note that most jurisdictions require the contract of land in writing to be valid.
What to Include in a Land Lease Agreement?
The general contents of a land lease agreement include the following:
- Names of the landlord and the tenant
- Location of the land (this includes metes and bounds, photos, and a legal, detailed description)
- Term of the lease
- Rental price
- Purpose and use of the land
- Amount of security deposit (if any)
- List prohibited uses of the land (if any)
- Duties and rights of the landlord
- Responsibilities and rights of the tenant
Other clauses to consider putting in your land lease agreement include the following:
- Who pays the utilities
- Who is responsible for the maintenance of the land
- Who is responsible for insurance
How to Write a Land Lease Agreement
Follow the steps below to write a land lease agreement.
Step 1 – Enter Landlord and Tenant Details
Provide the landlord and tenant names, including any company or entity names.
Step 2 – Fill In the Lease Details
Write the legal description of the leased land.
Step 3 – Note the Purpose
Document the purpose and intended use of the site.
Step 4 – Describe Term
Specify the start and end dates for the lease term.
Step 5 – Enter Rent Amount
State the rent payment, monthly installments, annual installments, and pro-rated rent amounts
Step 6 – Choose Security Deposit Option
Fill In details for the security deposit amount, method of return, and interest earned.
Step 7 – Select Tax Option
Note whether the landlord or tenant is responsible for taxes and assessments.
Step 8 – Check the Utilities Option
Specify whether the landlord or tenant is responsible for paying utilities, such as gas and electricity.
Step 9 – Enter Conditions Precedent Information
State the county Land Registry Office where the landlord shall register the agreement.
Step 10 – Fill In Holdover Tenancy Rate
Note the percentage of the rent each month the tenant must pay during a holdover period.
Step 11 – Choose the Improvements and Alterations Option
Specify whether the tenant can improve the site and erect a sign.
Step 12 – State Leasehold Mortgage Option
Provide whether the tenant can mortgage its leasehold interest as loan security and if the landlord agrees to a mortgage placed on interest in the site.
Step 13 – Enter Insurance Details
Specify whether or not the tenant must provide and maintain any insurance.
Step 14 – Write Default Details
Note what happens in the event of a default.
Step 15 – Fill In Termination by Landlord Days
State the number of days after the tenant receives a notice of default that the landlord has to terminate the agreement.
Step 16 – Note Termination by Tenant Days
Fill in the number of days after a landlord breaches a contract that the landlord has to terminate the agreement.
Step 17 – Specify Surrender of Site Information
Document the number of days after the end of the agreement the tenant has to remove all property, and the landlord can consider such property abandoned.
Step 18 – Enter Governing State Law
Note the state’s law that will govern this agreement.
Step 19 – Write Dispute Details
Enter what will happen in the case of a dispute related to this agreement.
Step 20 – Fill In Miscellaneous Information
Provide any other provisions not already mentioned in this agreement.