Legal Question in Securities Law in California

Re: ground lease

Civil Code section 718 limits many leases to 99 years, and a few types to shorter terms. That is one area of concern, and while I think your deal is OK for 99 years on a "rule against perpetuities" basis, the specifics would need to be checked, as not every 99-year lease is necessarily valid.

A good case to read on long-term leases is Shaver v. Clanton (1994) published at 26 Cal.App.4th 568. The court discusses several of the issues limiting long-term land leases.

A second issue is reassessment. I believe a lease of more than 35 years including all possible renewals is considered the same as a sale for purposes of Prop. 13 and ad valorem taxes.

The third and perhaps most significant issue is whether a lease is a subterfuge to avoid the parcel-splitting restrictions imposed by the Subdivision Map Act. Be VERY careful here. The Subdivision Map Act SEEMS to create an exception for leases of parcels or portions of parcels for the purpose of constructing certain types of buildings, provided the proposed development is subject to city or county planning an permitting review and approval. See Government Code section 66412.1(a). Before you rely upon this advice or upon your reading of the Code section(s), and get yourself involved in a deal rather than preliminary and abstract planning, you really have to consult with a lawyer you have retained for that purpose who can study your proposed deal at some length and then give you knowledgable and informed advice as to whether it falls within the 66412.1 exemption or not.

About all I can really tell you is that your concept has some theoretical merit and you should give it further consideration.