This afternoon I met with some clients who had purchased a land lease waterfront home from me in 2003 - they wanted to know its value now, to determine whether they should sell it and move back up north (medical, personal reasons). I have already sold this home 3 times over the years, so this would be #4.
I'm able to explain to agents and prospective buyers that a land lease is where you buy the house and are assigned the land lease (it's for 100 years, with about 30 years gone and 70 years to go) for which they pay $250 per month to the land owner, adjusted annually by the CPI. The house owner pays the property taxes and insurance on both house and land.
Why would someone want to buy this?
1) because it's the only way they can afford to live in a waterfront home in this community - if they can buy this home at $450,000 instead of $650,000 and pay $250/month vs $1,200/mo it can make the difference for some people. Yes, banks will lend on land leases as long as the remaining term of the land lease is more than the term of the mortgage.
2) because they feel they can still enjoy the house, but can better invest their $950/mo savings somewhere else.
Over the last years, I've sold several different land lease properties. There was one developer in St. Petersburg who would keep a few lots in each subdivision he developed as land lease homes - an excellent retirement he's now enjoying. Some he has sold back to the property owner so that they became fee simple properties. Several he still owns.
My concern is the appraisal a lender will require. When I was selling these 5-15 years ago, there were always half a dozen comps that could be used. Now lenders want comps no more than 90 days old - and the last land lease in the county sold in early 2005. How can this be appraised?
Hi, Michele!
Thanks for commenting. It's not surprising that your agent isn't too familiar with land leases - we have so few of them here. You'd have to look at the land lease relating to the property you're interested in, which your agent appears to be doing, since the terms vary with each lease, but "in general":
1) yes, it can, and yes, it will. Most of the ones I've seen adjust annually by the CPI or Consumer Price Index.
2) All depends on who owns the land lease - one person who owns many land leases will sell one or two a year (doesn't want to deal with taxes on more than that); another is not at all interested in selling it; another would sell it, but at a ridiculously high price.
3) Yes, you can put in a pool, as long as it meets the zoning and setback requirements - the same "restrictions" as a fee simple owner would have.
4) The sales I negotiated to purchase the "land lease" to make the property fee simple have been more in the $200,000+ range than the $50,000 range, and that was a few years ago. Do understand that while a land lease may make sense for you, it will definitely restrict the market of interested potential buyers when you go to sell.
If you're flying to Florida to see only the land lease, get your answers before you come. If that's only one of several properties you want to see, go ahead any spend the time and money to come down.
Best of luck in your property search. If you want to have your agent call me with any questions, I'd be happy to talk with her/him.
We (our co-op) have a 99 yr lease re-appraised every 15 yrs with rent increases between apprasials each year based on cpi . Some board members think that rent increases in the years between apprasials is not legal .
I think they are wrong and maybe confusing the Florida Statues they are basing their opinions on. As a mobile home park were we to lease out our lots to residents then basing rent increases solely on cpi we would or could be doing something illegal .
As we are not leasing out our lots,we are not increasing rent directly to residents based on cpi. All our maintenance fees are based on real costs with money for repair and capital improvements. It just happens that one of our costs is our land lease which as above has a cpi component .
Am I all wet on this
If I am in wrong place here forgive
not sure of this soorry
James - I'm not an attorney, and I haven't dealt with mobile home parks - but, I would think that as long as the 99 year lease says that increases are based on the cpi, then that's what it is. Your situation may be similar to condominiums whose monthly condo fees include a portion for land-lease payments on certain amenities. Thank you for your comments. You're not in the wrong place, but I can't give you any legal advice. Sorry.
Hi Sharon, back on Jan 21, 2008, I contacted you via this thread about a "land lease" and buying it. I thought I'd give you an update to that inquiry. You might be interested to know that the listing agent never got back to me (although she said she would). Anyway, March 2008 we flew down on vacation to St Pete Beach, which is where the property is situated. We weren't even going to look at homes while we were down, but the weather turned windy-rainy and we didn't really have much else to do, so I called on 3 other properties and mentioned to the 3rd realtor that my husband was really interested in buying a property in the Vina Del Mar sub-division of St Pete Beach. Turns out the realtor lives in Vina Del Mar and he set up to meet with us the next day to look at properties over there.
We'd told him about the house we had an interest in with the "land lease" and it turned out that the realty office he worked out of was the realtor the owners were listed with. But, the husband was a very sick man and they weren't showing the house. So, we looked at all the other "Vina" properties available but "didn't fall in love" with them. The other thing was that already knew that they were having problems selling due to the land lease situation. The Friday before we were due to leave we got a call from our "vina" realtor and he said the daughter of the widow of the original developer/land-lease owner was willing to sell the land-lease portion at the time of the sale of the house and the home owner would be willing to show us the house Sat AM. We decided to buy without seeing the actual inside of the house (one of the few times my husband has ever bought anything without mulling it over unceasingly). The land lease portion ended up costing us about $70,000. The house was VERY nice inside....the owners really cared a lot about the upkeep. We purchased it in April 2008.
We plan on eventually retiring there....I do have a question, non-related to the "land-lease".....my husband was down in September and had to have some roof work done to the "florida room" which, over the years, has been integrated into the living part of the house. My husband was telling the roofer we plan to put a pool in when we move down, and the roofer pointed out electrical lines coming in from the front of the house, along the side, and across the back portion exactly where there would be room for a pool, and told my husband we wouldn't be able to put a pool there because over the over-hang of the electrical lines. This is a corner property and the house is set back leaving a smaller portion of a back yard area for either a garden (which is there now) or a pool, and of couse the long florida room has taken up the rest of the yard with palm trees and a stone walk running along the back of it. Can we petition the electric company to move the wires (unless there's some kind of safety covering that can be put on), or are we sunk?
I'd appreciate your input..... Michele Steele (still in Pennsylvania)