In a land lease arrangement, a land owner will rent, or lease, their land to another person – who, in most cases, then builds a home or other type of building on the rented land. Land leases create a unique circumstance in which a building and the plot of land it is on are owned by two separate people or businesses.
Like other types of rental agreements, the land lease agreement outlines the terms of the rental relationship between the land owner and land renter, including what changes can be made to the land. In this instance, since most land leasers wish to build on the land, the land lease agreement would outline what types of buildings can be built on the land. In some cases, land leases include buildings already that the tenant may use or, per the agreement, change. As with other rental agreements, the land lord has a lot of flexibility to determine how they wish their property to be treated.