You might have thought about leasing land, but what does it exactly mean? Essentially, leasing land refers to the legal agreement wherein a person or organization pays money to another individual or organization for the use of some part of land for a specific amount of time (30-99 years).
If you lease property to someone, they can use it to build something on, or use it anyway they want, for a previously agreed upon period of time. There are many advantages to leasing land, as well as adverse effects which we will examine below.
|Advantages of Land Leasing||Disadvantages of Land Leasing|
|A contract ensures that no one can take away the land from you at any given time||Not profitable in the long run|
|You can use the land however you see fit||You may not get an extension|
|Leased land costs less than land that has been purchased||Control over property|
|Leasing land allows you a secure stay for your lifetime||You run the risk of giving up your equity when your lease is over|
|You can extend your ownership over the leased land|
|The landlord takes care of all costs|
|A lease will provide you with mobility|
|Get tax benefits with land leases|
Advantages of Leasing Land:
- A contract ensures that no one can take away the land from you at any given time:
When you create an agreement to lease land, you have to sign a contract. One of the terms of the contract states a specific period of time in which the land that has been leased to you. During this period, no one can take away the land from you for any reason.
- You can use the land however you see fit:
Leased land can be used by the person to whom it has been leased to, however they may want. If you want to build structures, create a living community, or build attractions, you can do it. Use the leased land however you see fit.
- Leased land costs less than land that has been purchased:
purchasing a home on leased land is actually cheaper than a house that is sold with land space. This is because leased land has already been bought, so you do not have to pay for the land on which your home is situated. This is an attractive offer for people who are looking for cheaper homes to inhabit.
- Leasing land allows you a secure stay for your lifetime:
The person or organization who has leased the land has been guaranteed a stay on that land, and cannot be asked to move while the agreement is in place. If you have bought the land and your place of stay, you can be asked to move to make way for newer developments.
- You can extend your ownership over the leased land:
Once the time period of your stay is over, you can renew your agreement, and extend your stay for another duration. You can extend your duration by continuing in the steps of the previous time period, or take an extension. You can lease a land from anywhere between thirty to ninety nine years.
- The landlord takes care of all costs:
It is the duty of the owner to maintain the land that he has leased. Therefore, all maintenance charges are to be attributed to the owner of the land. He also has to take it upon himself to pay the costs of purchasing the land.
- A lease will provide you with mobility:
Suppose you want to lease land in the hopes of establishing a business. However, you are not sure whether you want to stay on in this place if you want to expand your business. You can lease the land at a lower cost, entrust the overseer with all costs and maintenance charges, and give up the land once the contract is over.
- Get tax benefits with land leases:
Land cannot be depreciated. However, if you make any changes or renovations on the land, they can be depreciated In this case, you will be entitled to some deduction from the depreciation, even though the land belongs to the person or organisation who purchased it.
Disadvantages of Leasing Land:
- Not profitable in the long run:
While the landowner will be in charge of maintenance costs, in the long run, it is going to be more expensive than buying land. The landowner will try to make a profit off of you, and this will hurt you financially in the long run.
- You may not get an extension:
While you can ask for an extension after your lease is up, it is not always a guarantee that you will succeed. The landowner may not want to extend your lease for various reasons, like developing the land or leasing it to the highest bidder. So after your lease is up, you cannot be guaranteed a place to stay.
- Control over your property:
If you opted to lease land, you may not always be allowed to make renovations or changes to it. The control over the land belongs to the person or organisation who purchased it, and they may not allow you to make changes on the land you have leased.
- You run the risk of giving up your equity when your lease is over:
If you have leased land, it is difficult to sell off your property as opposed to land that has been purchased. As the expiration date of your lease draws closer, the property loses value with each passing term.
When deciding between whether to purchase or lease land, make sure you understand what you are getting into. Weigh the pros and cons of each option, and choose the one that will benefit your needs the best. Decide whether you can make a big investment at the moment, and if you can’t, leasing the land would seem like the better option. However, there are other things to consider, so go with what is best for you.
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