the real estate which is the subject of a lease (a written rental agreement for
an extended period of time). The term is commonly used to describe improvements
on real property when the improvements are built on land owned by one party which
is leased for a long term (such as 99 years) to the owner of the building. For example,
the Pacific Land Company owns a lot and leases it for 99 years to the Highrise Development
Corporation, which builds a 20-story apartment building and sells each apartment
to individual owners as condominiums. At the end of the 99 years the building has
to be moved (impossible), torn down, sold to Pacific (which need not pay much since
the building is old and Highrise has no choice), or a new lease negotiated. Obviously,
toward the end of the 99 years the individual condominiums will go down in value,
partly from fear of lessened resale potential. This is generally theoretical (except
to lending companies because the security does not include the land) since there
are few buildings with less than 50 or 60 years to go on the leases or their expected
lifetimes, although there are some commercial buildings which are within 20 years
of termination of such leases. In most cases the buildings are obsolete by the end
of the leasehold.
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