A landowner negotiating a lease with a developer who wants to build a mall should use which lease form?

• A. Gross lease
• B. Net lease
• C. Ground lease
• D. Percentage lease

Answer: (C)

When a landowner wants to monetize land while allowing a developer to finance and build a mall, a ground lease is the form that fits best. In a ground lease, the landowner leases only the land for a very long term, while the developer (the tenant) builds and occupies the mall on that land. The landowner keeps title to the land, and the lease often provides that the improvements belong to the tenant during the term and may revert to the landowner at the end (unless the contract gives options to extend or purchase). This setup lets the landowner maintain ownership of the underlying property while the developer sources financing and bears the costs of construction and operation, which is exactly what a mall project requires.

Gross leases and net leases shift various operating costs to tenants or spread them differently, but they don’t address the land ownership issue the way a ground lease does. A percentage lease ties rent to sales, which introduces revenue risk tied to a mall’s performance and isn’t the typical structure when the landowner wants long-term land control while a separate developer builds the project.