What is Lease Land?
In the United States, most property purchases fall under "fee simple" ownership, meaning you own both the land and the structure on it. However, in select regions, including the Coachella Valley, properties can be purchased under a different type of ownership known as "lease land." This concept is common worldwide and has been part of U.S. property history since the 1800s. In the Coachella Valley, Indian lease land is particularly prevalent, while corporate lease land exists but is less common. This article focuses on Indian lease land and its impact on homeowners and buyers.
Does Indian Lease Land Affect Property Value?
Historically, properties on Indian lease land have appreciated and depreciated at similar rates to those on fee simple land. To understand why, let's explore the history of Indian lease land and its implications for contemporary real estate transactions.
A Brief History of Coachella Valley Indian Lease Land
In 1876, during the expansion of the Pacific Railroad between Los Angeles, CA, and Yuma, AZ, the U.S. government took control of vast land parcels. It granted alternating square-mile parcels (checkerboard pattern) to the Pacific Railroad, while the remaining parcels were deeded to the Agua Caliente Band of Cahuilla Indians. This resulted in the tribe owning approximately 52,000 acres in the Coachella Valley, with 6,700 acres located within Palm Springs. This checkerboard land pattern remains today, shaping real estate ownership in the region.
Today’s Lease Land Landscape
Some of Palm Springs’ most desirable neighborhoods are located on Agua Caliente lease land. Over 23,000 residential properties in the Coachella Valley sit on leased land, granting homeowners rights to the land for the duration of the lease. Each lease is unique, with varying start dates, terms, and expiration timelines. Many leases are long-term and frequently renewed well in advance of their expiration.
Key Factors to Consider When Buying a Home on Lease Land:
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Lease Owner and Administrator: Most leases are administered by the Bureau of Indian Affairs (BIA) or a property management company rather than individual tribal members.
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Lease Duration and Terms: The remaining lease term and renewal options impact long-term homeownership viability.
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Land Rent Payment: Homeowners pay an annual or monthly fee for land use, as stipulated in the lease agreement.
For more information, contact the Bureau of Indian Affairs, Palm Springs Branch at (760) 416-3289 or visit their website.
Why Buy a Home on Lease Land Instead of Fee Simple Land?
Financial Benefits
One of the most significant advantages of Indian lease land is affordability. Homes on leased land typically cost 15%–30% less than comparable properties on fee simple land. This is because buyers are purchasing only the structure, not the land beneath it. As a result, homeowners can acquire a larger or more luxurious home with a smaller initial capital investment.
Lower Property Taxes
Since homeowners on leased land do not own the land itself, property taxes are generally assessed only on the home’s structure rather than the land. This can lead to substantial tax savings. For precise tax estimates, contact the Riverside County Tax Assessor’s Office.
Appreciation and Resale Value
Market data indicates that homes on leased land appreciate at the same rate as those on fee simple land. Property condition, location, and market trends influence resale value far more than land ownership type.
Ease of Transferability
Homes on leased land can be sold, transferred, or bequeathed just like homes on fee simple land. Buyers should ensure the lease term aligns with their long-term homeownership goals.
Mortgages on Lease Land
It is possible to obtain a mortgage for homes on leased land, and interest rates are generally comparable to those for fee simple properties. However, the loan process can be more complex due to unique lease requirements. Some leases require larger down payments or include specific conditions lenders must evaluate.
Recommendation: Work with a local lender experienced in lease land transactions to navigate these complexities efficiently.
For assistance in securing a lease land mortgage, contact Desert Cities Home for lender recommendations.
Work with a Knowledgeable Desert Cities Home Agent
Navigating lease land transactions requires expertise in the local market and lease agreements. A knowledgeable Desert Cities Home agent can guide you through every step, ensuring you understand the lease terms, financial implications, and resale potential. Working with an experienced agent gives you access to expert insights, trusted lenders, and the best properties available on lease land.
To learn more and get personalized assistance, contact a Desert Cities Home agent today!
Important Disclosure
This information is provided for general purposes only and should not be relied upon as legal or tax advice. Lease agreements vary, and all relevant documents should be carefully reviewed before proceeding with a transaction. Consult with a financial advisor, tax professional, and legal counsel before purchasing lease land or fee simple property.
Direct information from the Bureau of Indian Affairs is available here.
Please note: this information is provided for informational purposes only and cannot be relied upon as legal or tax advice. All real estate transactions are unique and you should consult with your tax advisor, financial advisor and legal counsel before entering into any real estate transaction. Additionally, we recommend using a LOCAL LENDER, who is already familiar with the particularities of securing a mortgage for a property on leased land or fee simple land in the Coachella Valley.
