Buying on Lease Land
Learn how land leases work before you buy.
The following information is based on Billy Woomer’s experience representing clients buying or selling on lease land. This information is for informational purposes only and cannot be relied upon as legal or tax advice. Billy Woomer and RPAC Realty is not responsible for any inaccuracies that might be contained in the following information. Additionally, we highly recommend Buyers and Sellers consult with their accountant, attorney, and tax advisor prior to entering any real estate transaction.
Land Ownership
The Agua Caliente Indians own over 23,000 residential properties and some commercial properties throughout the Coachella Valley. The remaining land is considered “Fee” or “Fee Simple”. Either term means you “own the land”. Think of “Fee” as “Free”.
Most of the residential properties are owned individually by tribal members, and all leases are administered through the Bureau of Indian Affairs. There are a few tracts of land that have been purchased from the Indian owners and are now leased by their non-Indian owners.
Land Leases
Land leases carry an annual lease amount and have an expiration date. The maximum lease period is 65 years – with some new leases going for 99 years. Historically, leases are extended between the 30th and the 35th year remaining. Be sure to find out if a property you are considering buying is on lease land and what are the terms of that particular lease. The lease fee covers long term use of the land. Although you do not own the land, the lease gives you legal right to the use of the land for the duration of the current lease.
Cost of Land Leases
Leases generally run from $2,000 to $6,000 per year, depending on the property and the current lease. My experience tells us that homes on lease land generally sell for 15% to 30% less than a similar home built on fee simple land.
The lease fee covers long term use of the land. Although you do not own the land, the lease gives you legal right to the use of the land for the duration of the current lease.
Regarding increased costs periodically applied to Indian land leases, most contracts limit the increase to 15% over a five year period. Usually a lease is adjusted every five years in five year increments, but since the majority of leases are owned by individual members of the tribe, the specific tribal owner of any given piece of land may dictate the specific terms in the lease for his land. Thus every lease has to be evaluated individually.
*Any buyer or seller of property located on Indian lease land should carefully read the land lease documents and all supplements, attachments and Addendums related to the property of interest – which will become available during the Escrow period.
Financing Lease Land
If you are purchasing a home on Lease Land and require a mortgage loan, know that Lenders require 35 years remaining on a Land Lease for loan approval. If there are less than 35 years remaining on the lease, the term of the loan must be for less than 30 years…or the purchase must be All Cash. Also, it is imperative you obtain your loan locally with lenders familiar with the terms and conditions of Lease Land contracts. If you must work with lenders outside the desert area, be certain they fully understand your purchase is a Lease Land purchase. Dealing with a lender who does not have experience with Indian Lease Land transactions can cause significant delays and possible additional expenses during the escrow process.
Want to learn more about Indian lease land?
If you would like to learn more about Indian lease land, please contact the Bureau of Indian Affairs, TESA Branch in Palm Springs at 760-416 3289. None of the above statements can be guaranteed. Before you get into a transaction on Indian lease land, you should read and review all contracts, leases and information about the specific lease as all leases are unique. We recommend you consult with your accountant, attorney and tax advisor prior to making any purchases on Lease or Fee land.
