Key Components of the Ground Lease

Since Saint Joseph Community Land Trust (SJCLT) owns the land and the homeowner owns the home, SJCLT and the homeowner sign a lease together providing the homeowner secure long-term rights to the land. The ground lease is a legally-binding agreement that gives the lessee/homeowner the right to use the land. It describes in full the rights and responsibilities of the lessee/homeowner and SJCLT, as well as the restrictions that govern the relationship. The lease also addresses the resale of the home. The lease is designed to balance the interest of the lessee as a homeowner with the long-term interests of SJCLT and the community. There are a number of critical agreements that are defined by the ground lease, including:

99 Year Term The lease gives the homeowner use of the land for 99 years. The lease can be extended for one additional 99 year period and/or transferred to the homeowner’s heirs and ensures full rights of privacy.

Owner-Occupancy The homeowner (children, other immediate family members or dependents) must live in the home for at least 10 months out of the year.

Lease Fee The homeowner pays a modest monthly land lease fee of $50 directly to Saint Joseph Community Land Trust (SJCLT) in exchange for access to and use of the leased premises.

Taxes and Assessments The lessee is responsible for the payment of all real estate taxes on the land and on the Improvements.

Improvements The lessee owns all buildings, structures, fixtures and any other improvements on the land.

Insurance Lessee is responsible to maintain continuous liability insurance covering the leased premises and Improvements.

Construction and alteration The homeowner is allowed to make capital improvements or modifications to the land. Advanced written approval of SJCLT is needed for improvements or a modification which the retail cost of materials exceeds $5,000 (five thousand dollars).

Financing There is a provision in the ground lease that describes “permitted mortgages” which include those from federally regulated institutional lenders. These provisions deal specifically with foreclosure proceedings designed to protect the interest of the lender, the borrower, and the landowner.

Responsible Use The lessee/homeowner can only use the land for residential purposes as permitted by the building and land use codes and regulations. The lessee shall maintain the leased premises and improvements in good, safe, and habitable condition in all respects, except for normal wear and tear.

Resale of the Home

When a Land Trust homeowner wants to sell their home there are several options.

1.)   Sell the home back to the Land Trust which has the first option to purchase.

2.)   Sell to an income-qualified buyer

3.)   Or the home can be given to the homeowner’s children.

Resale Formula

Since Land Trust homes are not bought or sold on the open market, a formula is used to determine the sale price to the next buyer. This resale formula guarantees the homeowner all of their equity (the portion of the mortgage that has been paid off) and Improvements, plus the percentage change in the median household’s income as determined by Department of Housing and Urban Development (HUD).

Essentially, in exchange for buying a home at an affordable price, the homeowner must sell the home at an affordable price. This preserves the affordability for the next moderate income family who buys the home.

                       Land Trust vs. Conventional Homeownership

The SAME

The DIFFERENCE