HUD Ground Lease Requirements
The Tenant/Borrower must have a mortgageable interest in the property comprised of:
A leasehold interest in the land; or
A leasehold interest in the land and building/improvements; or
A leasehold interest in the air rights.
A leasehold interest in air rights and improvements.
For leaseholds of trust lands or Native American tribal land, HUD must ensure that the lease provisions, including the term of the lease and any waivers of Lease Addendum provisions, are acceptable to both HUD headquarters and the Bureau of Indian Affairs.
Note: In all cases the landlord must be the fee simple owner of the property and must grant the leasehold estate directly to the Tenant (i.e., the Borrower). This prohibition against insurance of mortgages on sub-leasehold estates is statutory for Sections 207/223(f) and 231 and cannot be waived for these programs.
The term of the lease must comply with the National Housing Act and cannot be waived. The lease must meet the following requirements:
Sections 221(d) and 220: the term of the lease must run at least ten (10) years beyond the maturity date of the mortgage or for a period of not less than 99 years which is renewable.
Sections 207/223(f) and 231: the term of the lease must run at least fifty (50) years beyond the date of mortgage execution or for a period of not less than 99 years which is renewable.
Section 223(a)(7): the term of the lease is subject to the requirements of the original mortgage program for the project being financed.
Section 241(a): the term of the lease (from the insured first mortgage) may remain the same except if the 241(a) loan is being extended beyond that of the insured first mortgage. The term of the lease must be extended by a corresponding number of years where the original lease term is other than 99 years and renewable.
