What is a land lease?
When Island Housing Trust sells a property, it typically uses the land lease model. A land lease is an agreement between Island Housing Trust and the purchasing homeowner, in which IHT retains ownership of the land and sells the improvements (e.g., house, well, septic, other buildings) with affordability covenants and a 99-year lease of the underlying land. Please contact Natalie Osborne at nosborne@islandhousingtrust.org with any questions.
FAQs
Q: Does a land lease mean I will not own the land on which my house is situated? Will I own the home?
A: Island Housing Trust remains the owner of the land, but the buyer owns the home and other “improvements”.
Q: How does this benefit me as the home buyer? Are there tax implications?
A: A land lease typically reduces the cost of property taxes. When the homeowner receives the property tax bill for the year, they will be taxed only on the improvements and not the land, therefore lowering the annual tax bill.
Q: How much is the lease fee? How do I pay for it? When is it due?
A: IHT charges a nominal fee for the land lease. In 2022 that fee is $240/year. Each year homeowners receive a Land Lease Invoice in January. Payment is due by the end of July. Payment can be made by check, with a credit/debit card, or at the office with cash.
Q: What are the implications for resale or re-financing?
A: Homeowners planning to sell or refinance their home must give IHT notice of their intent, for approval. IHT then calculates the current resale price of the home, based on the maximum resale formula. In the case of resale, IHT has the option to purchase the property (right of first refusal). If IHT does not purchase the property, the organization will work with the homeowner in their sale to a buyer meeting IHT’s eligibility criteria.
Q: Who is responsible for the maintenance of the land? Can I landscape?
A: The homeowner is responsible to maintain the land; for instance, if a tree has fallen on the property, the homeowner is responsible for proper removal. Landscaping is permitted. The 99-year land lease provides many of the benefits of land ownership, without the cost of paying property taxes on it.