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Land rent is when a person owns a structure but pays for the use of the land it sits on, commonly used in the UK and former British Commonwealth. The lease is typically 99 years and originated in the feudal system. Landlords may keep the land for income, and hotels and office buildings are common structures. In the US, Maryland has a land lease system, and mobile home parks use a similar term for lot rental.
In real estate, land rent is a term applied when a person owns a structure themselves, but pays for the use of the land on which the structure sits. Its most common use is in the United Kingdom and in countries that were once considered part of the British Commonwealth. The term applies to land that is typically leased at 99-year intervals. In the United States, the term can sometimes be used interchangeably with lot rental, on things like mobile home pitches.
The land rent system has some terms that are unique to the situation. A freeholder is an individual who owns title to land. A rental landlord is a person who owns the building, but has to pay rent for the land.
The concept of land rent originated in England during the period of the feudal system, which dates back to the medieval period. While making an expensive improvement on land owned by someone else may seem like a risky undertaking, renewing the lease on the same terms at the end of the 99-year period is usually up to the leaseholder. That individual may also have the option to purchase the land.
The most common use of the land rent system today is in urbanized areas. There, landlords may want to keep the lands they own simply because there is the potential for income. Rather than selling or trying to improve the land yourself, this offers another option. Hotels and office buildings are two common types of structures built in land rent situations.
In the United States, Maryland is one of the few locations where a true land lease system is in use. There, some individuals may own homes, but not own the land the home sits on. This was a system put in place in the 1700s as a way to make it more affordable for some to own a home and improve the land. Maryland law allows a leaseholder to buy back the land lease, if the lease was created after April 8, 1884.
In some cases, land lease might be a term used to refer to the rental of lots in mobile home parks. The terms are not fully interchangeable because there is usually no permanent structure on the land in question. Additionally, the parties generally agree to a lease annually, and the terms of the lease can be changed by the landowner.
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