What Is An Estate For Years
An estate for years is just a type of leasehold estate. Do not confuse this with any sort of physical ownership! An Estate For Years only means that the person is leasing the property for a predetermined length of time.
The “Estate For Years” lease has a specific beginning date and an end date. As the name suggests, it normally lasts for many years. The lease also covers in great detail the amount of rent the person leasing (tenant) must pay the owner (landlord). Once this lease is over, the person leasing the property must leave.
On a special note, One interesting thing about an estate for years is that a tenant can build on the property he leases. The lease can be for such a long period of time that the tenant may be able to make an income from buildings that he erects on the property. This is one thing that makes such a long-term lease attractive.
Examples of Estates for Years
Below are real world examples I have collected over my years in real estate of an Estate For Years.
- My friend Jonathan Blackburn (named changed for this article) inherited land on a major highway in Decatur, Alabama. This land is in a great location with tons of traffic and the best visibility in the city. His family had received over 50 offers to buy the land and would never sell it. In 1995, they were approached by a home improvement store by the name of Lowes Home Improvement (yes, that Lowes) to sell them the land. Once again, my friends family said “no”. However, Lowes proposed a long term lease (Estate For Years) for 50 years! This long lease gives Lowes sufficient time to get an ROI on building on the property and allows my friends family to keep ownership rights. When the lease is over in 50 years, my friends family will get to keep the building and/or lease it back to Lowes! It’s a great deal for everyone involved.
- Marcus McGee owns a company in Kentucky that constructs billboards on interstates in the Southeast and then rents that billboard space to other companies in the area. As you can imagine, installing a billboard is EXPENSIVE and land on the interstate is always sky high! In order to keep his initial investment as low as possible, he prefers to rent a small portion of the land from the land owner (normally just a few square feet are needed). His leases are for 100 years in most cases! Just as the example with Lowes, this is also sufficient time for him to get a return on his investment as he is spending a lot of money to construct the billboards.
What Do I Need To Know About Estate For Years On My Real Estate Exam?
There will not be many real estate exam questions about Estate For Years on your real estate exam. The last time we conducted a survey of our prior students, most only reported 2 questions at the most with many people reporting no questions at all. If you remember the real world examples provided here you will get any question about Estate For Years correct they throw at you. Just keep in mind, this is a lease and not anything to do with physical ownership.