Illinois Real Estate Practice Exam

A developer builds a complex of buildings. If she desires to separate the ownership of the buildings from the land, she should sell the buildings but require the land be used under which of the following leases:

1. Ground Lease

2. Tenant Lease

3. Net Lease

4. Fixed Lease

The correct answer is: Ground Lease

The most suitable approach for the developer to separate the ownership of the buildings from the land is through a ground lease. A ground lease allows the developer to lease the land to a tenant while the tenant holds ownership of the buildings on that land. This type of lease typically is long-term, often extending several decades, which supports the investment the tenant makes in building structures. When structured effectively, a ground lease allows the landowner to retain ownership of the land while receiving a steady income from the lease, and at the end of the lease term, the landowner typically gains ownership of any improvements made by the tenant. In contrast, options like tenant leases, net leases, or fixed leases do not focus specifically on the separation of land and building ownership, and they tend to apply more to situations involving residential or commercial spaces where ownership is not notably divided. This makes the ground lease the correct choice for achieving the developer's intent.