Ground Lease vs. Tenant Lease

In commercial real estate, a ground lease and a tenant lease define who owns what — and for how long. Understanding the difference helps investors and tenants make smart decisions.

What Is a Ground Lease?
A ground lease gives the tenant the right to use and build on land owned by someone else. The tenant typically constructs and owns the building during the lease term but not the land itself.

Pros of a Ground Lease

• Lower upfront land costs
• Long-term control (often 30–99 years)
• Ownership of improvements during lease

Cons of a Ground Lease

• No land ownership after expiration
• Limited financing options
• Rent escalations over time

What Is a Tenant Lease?
A tenant lease covers the use of an existing building, typically for 3 to 10 years. The landlord owns the structure and land, while the tenant pays rent to operate their business.

Choosing Between the Two
Ground leases suit developers or large tenants seeking custom facilities without buying land. Tenant leases are ideal for companies needing immediate, ready-to-use space.

Bottom Line
Ground leases are long-term control without ownership. Tenant leases are shorter commitments for using existing properties. Each fits a different business strategy.