Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What type of lease is characterized by leasing only the land without any improvements?

1. Ground lease

2. Commercial lease

3. Residential lease

4. Operating lease

The correct answer is: Ground lease

A ground lease is a specific type of lease agreement where only the land is leased to a tenant, who has the right to build on it or make improvements. The key characteristic of a ground lease is that the landowner retains ownership of the land itself while allowing the lessee to utilize it for a designated period, often several decades. The lessee is usually responsible for constructing buildings or making other improvements on the property. In a ground lease scenario, at the end of the lease term, any improvements made by the lessee typically revert to the landowner, making this arrangement unique among leasing types. This is particularly common in commercial real estate, where a business may lease land to build a facility while not owning the land itself. In contrast, the other types of leases mentioned involve more than just the land or have different purposes. A commercial lease usually encompasses both land and buildings for businesses, a residential lease pertains to rental agreements for living spaces, and an operating lease typically refers to leasing equipment rather than real estate. Understanding these distinctions helps in recognizing why a ground lease specifically pertains to leasing land without improvements.