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Fee Simple Land v Lease(d) Land:
be informed: the following information, as is any and all information on this page and on this website, is provided for informational purposes only; this information is neither legal advice nor tax advice. Due to the complexity of real estate, it is crucial to seek advice from a tax advisor, financial advisor, and legal counsel before proceeding, as well as using a local lender familiar with the particularities of securing a mortgage for fee simple land or for lease(d) land properties.
Fee Simple Land (full ownership):
when property is purchased in whole, meaning that you have absolute ownership and perpetual rights of the land and any structures on it.
Lease(d) Land (leasehold):
a property arrangement where the homeowner owns the structure (the home) but does not own the land it sits on. Instead, the homeowner leases the land from the actual landowner, (in Palm Springs & Coachella Valley, this is most likely the Agua Caliente Band of Cahuilla Indians), often for a long-term period (e.g. 20-99 years), meaning the homeowner pays a leased rent payment for the use of the land.
Benefits: lease(d) land can be more affordable than fee simple land, allowing the homeowner(s) to potentially afford a larger home for less, as well as not have the initial capital expense of the land itself.
Financial: buying the home for up to 10%-30% less than on fee simple land as only the home (structure) is purchased, not the land. Here, one may ascertain that once a structure is built, the land beneath it can be of no other use; therefore, by owning a property on leased land, the homeowner benefits from using the land without the capital expense of the land itself, instead, paying rent for the land (as determined by the lease agreement and paid through the lease administrator). Overall, lease land can be a great way for homeowners to afford a more luxurious home with a smaller initial capital investment.
Taxation: homeowners are typically only taxed on the market value of the structure, not the underlying land. Contact Riverside County tax assessor for tax information on a specific property @ https://www.rivcoacr.org/
Appreciation and Resale Value: Historical data indicates that homes on leased land appreciate at exactly the same rate as homes on fee simple land. The data shows that other factors, including the condition of the property, have far more influence on a property’s appreciation and resale value than the type of ownership.
Transferability: homes on lease(d) land can be sold or bequeathed just as easily as a home on fee simple land.
Risk: lease arrangements have expiration dates; lease payments could increase over time; mortgages become more complicated and may require specific conditions set by the lease agreement.
Lease(d) Land Mortgages:
obtaining a mortgage on lease(d) land requires specific conditions and can be more complex than financing a fee simple property. Lenders typically require that the remaining lease term significantly exceeds the mortgage term, often by at least 5-10 years. Additionally, the lease agreement itself needs to be reviewed by the lender (local lenders with knowledge of this type of mortgage recommended) to ensure it meets their specific requirements.
The history of Palm Springs Indian lease land involves the Agua Caliente Band of Cahuilla Indians owning a significant portion of land in the Coachella Valley, including Palm Springs. In the mid-20th century, the tribe leased portions of this land to developers for residential construction, with leases typically lasting 50-99 years and often including renewal options.
Over 23,000 homes in the Coachella Valley are built on lease(d) land.
1876:
The US government granted the Agua Caliente Band of Indians 52,000 acres in the Coachella Valley, 6,700 of which were in Palm Springs.
Late 1800s:
The Pacific Railroad began laying tracks, leading to the "checkerboard" pattern of land ownership where every other square mile was given to the railroad, and the remaining land to the Agua Caliente Band.
Early 1900s:
Leases of Indian lands were limited to short terms, hindering development.
Mid-20th Century:
The Agua Caliente Band began leasing land for residential development, leading to the widespread use of lease land in Palm Springs.
1950s:
The tribe secured longer-term leases (up to 99 years), enabling significant development and economic opportunities.
Present:
A significant portion of Palm Springs, including many of its desirable neighborhoods, is built on land leased from the Agua Caliente Band.
Short-Term Vacation Rental:
Effective February 2024, new applications for Vacation Rental Registration Certificates will be accepted though a new service with GovOS. This new service will allow you to:
Apply for a Vacation Rental Certificate online, as well as upload supporting documents and make payment once you are completed with the application.
Update and maintain account information.
Remit Transient Occupancy Tax monthly.
Submit the required Contract Summaries before each short term occupancy.
Please complete the following form - Vacation Rental Application Request Form - and staff will review and respond with your account code and activation code. This will allow access to the Vacation Rental Registration Certificate Application.
Important Links → Important Info:
Riverside County Assessor/Clerk-Recorder
FIRPTA (Foreign Investment in Real Property Tax Act):
Reporting and filing: Buyers generally must report FIRPTA withholding to the IRS using Form 8288 and 8288-A within 20 days of the sale. Foreign sellers also need to obtain a U.S. Individual Taxpayer Identification Number (ITIN) and file a U.S. tax return to report the sale and determine if they owe additional tax or are due a refund of the withheld amount.
Definitions of terms and procedures unique to FIRPTA
© Will.iam Halfhill - "Will on the Hill"