Housing on leased land with a purchase option

As a shareholder in a limited liability housing company, you can either pay the housing company a property lease fee or purchase your share of the leased land for the housing company.

The purchase price is not fixed, and it may be impossible to estimate how it will change. Take this into account if you are planning to purchase the land share in the future. Lease payments on the land do not reduce the purchase price.

A purchase option means that the shareholder of the housing company can choose whether to purchase their share of the land or keep paying a monthly lease fee to the housing company.

After purchasing the land share, the shareholder no longer needs to pay the land lease fee. However, the shareholder of the housing company does not become landowner; the purchased share of the land is transferred to the housing company.

The land may be owned by a private fund or some other entity that has made a lease agreement with the housing company. The lease agreement states how the shareholders can redeem their share of the land, when the redemption can be made and on what basis the redemption price will develop. The terms and conditions vary by property. In some properties, the housing company can own or lease only a part of the land.

The lease agreement may include clauses on rental increases which will make the purchase price higher than the original quote. It may therefore be impossible to predict upcoming change in the redemption price of the land share. Take this into account if you plan to purchase the land share in the future. In some cases, the land share can be purchased in conjunction with the original transaction. If you decide not to purchase the land share, the option remains available for any subsequent owner of the dwelling.

The terms and conditions of the lease agreement determine what happens when the lease expires and part of the land has not been redeemed.

At the end of the land lease agreement

  • the lease may be extended, or
  • the housing company has the option to buy the remaining land shares, or
  • each shareholder will be required to purchase their share of the land.