Understanding Land Leases for Condos in Huntington Beach: What Buyers Need to Know

When looking to purchase a condominium in Huntington Beach, one of California’s most sought-after coastal communities, you may come across a less common but critical term in the property description: land lease. While many condos are sold with full ownership of the land beneath them, some properties in Huntington Beach are part of land lease agreements, meaning the homeowner owns the condo but leases the land from a third party.

Understanding how land leases work — and their implications — is essential before making a purchase. In this blog, we’ll explore the legal and financial components of land leases, the pros and cons for buyers, and what makes them particularly relevant in the Huntington Beach real estate market.

What Is a Land Lease?

A land lease, also known as a ground lease, is a legal agreement where the homeowner owns the structure (in this case, the condo) but does not own the land it sits on. Instead, the homeowner pays rent to the landowner — usually on a monthly or annual basis — for the right to use the land.

These leases are typically long-term, ranging from 30 to 99 years, but the exact terms can vary significantly. Once the lease expires, the land — along with any structures on it — can potentially revert to the landowner unless renewed or renegotiated.

Why Are There Land Leases in Huntington Beach?

Huntington Beach has several communities with land lease arrangements, especially near the coastline. These leases often trace back to large institutional landowners — such as private trusts, religious institutions, or municipal bodies — that have held valuable land for decades and opted to lease rather than sell it outright.

Notable Huntington Beach condo communities with land leases include:

• Pierhouse Condos

• Harbour Vista

• The Gables

In many cases, these properties offer prime locations near the beach or downtown, making them attractive despite the unique ownership structure.

Key Legal Components of Land Leases

If you're considering a land lease condo in Huntington Beach, here are the legal elements to understand:

1. Lease Term

The lease’s expiration date is critical. If the lease expires in the near future (e.g., 10-15 years), it can dramatically impact property value and financing options. Always ask:

• When does the lease expire?

• Are there options to renew?

• What are the terms for lease renegotiation?

2. Ground Rent

This is the rent paid for the land, separate from HOA fees. It may be fixed or increase periodically. Ensure you understand:

• Current monthly or yearly cost

• Escalation clauses (e.g., annual percentage increases)

• Penalties for late payment

3. Ownership Rights

You own the condo unit, but not the land. That limits what you can do with the property. Certain renovations or expansions may require approval from both the HOA and the landowner.

4. Reversion Clause

Some land leases include a reversion clause, meaning that once the lease expires, ownership of the condo could revert to the landowner, with no compensation to the condo owner. This clause is rare but critical to identify.

5. HOA Involvement

In some communities, the Homeowners Association negotiates or manages the lease on behalf of all owners. In others, it’s a direct relationship between you and the landowner. Knowing this distinction helps clarify who manages lease terms and payments.

Financing and Insurance Challenges

1. Loan Approval

Getting a mortgage for a land lease condo can be more complicated. Many lenders are hesitant to approve loans for properties with:

• Short lease terms (under 30 years left)

• High ground rent

• Unfavorable renewal clauses

You’ll likely need to work with a local lender familiar with Huntington Beach land leases, or pay a higher down payment and interest rate.

2. FHA and VA Loans

Most FHA and VA loans will not back land lease condos unless specific requirements are met. This limits financing options for many buyers.

3. Insurance Requirements

Some insurers charge higher premiums for leasehold properties. Also, if the landowner requires certain coverage types, you’ll need to factor that into your budget.

Pros and Cons of Buying a Land Lease Condo

✅ Pros

• Lower Purchase Price: Land lease condos in Huntington Beach often cost significantly less than fee-simple (land-owned) condos, especially those near the beach.

• Prime Locations: Many leasehold condos are in high-demand areas, offering beach access, ocean views, and close proximity to downtown.

• Potential Rental Income: If allowed by the lease and HOA, these properties can generate solid rental income due to their location.

❌ Cons

• Ongoing Ground Rent: This is an additional monthly cost on top of mortgage, insurance, and HOA fees.

• Appreciation Limits: Properties with short leases or uncertain renewal terms may appreciate more slowly or lose value.

• Financing Difficulties: Harder to finance, especially with government-backed loans.

• Uncertainty at Lease End: If the lease isn’t renewed or extended, ownership rights may be affected.

What to Ask Before Buying a Land Lease Condo in Huntington Beach

Before making a purchase, here are key questions to ask your real estate agent, lender, or attorney:

• What is the remaining term of the land lease?

• Is there an option to renew the lease?

• What is the current ground rent, and how is it calculated?

• Are there any upcoming increases in rent?

• Does the lease include a reversion clause?

• What are the HOA rules around leasing, renovations, or selling?

• How does the land lease impact financing or resale value?

How to Protect Yourself Legally

• Review the Lease Agreement: Work with a real estate attorney to thoroughly review the lease terms, especially the expiration date, renewal conditions, and rent escalation clauses.

• Get a Title Report: Ensure that the lease is properly recorded and free of disputes.

• Understand HOA Dynamics: Inquire about the HOA’s role in managing or negotiating the lease, and check if they’ve had any issues with the landowner in the past.

• Estimate Long-Term Costs: Calculate your total monthly obligations, including ground rent, HOA dues, taxes, insurance, and mortgage. Make sure it aligns with your financial plan.

Is a Land Lease Condo Right for You?

A land lease condo in Huntington Beach can be a smart move if:

• You’re seeking an affordable property near the beach.

• You’re aware of and comfortable with the legal and financial nuances.

• You’re planning to own for a shorter time horizon, before lease complications arise.

• You work with professionals (agent, lender, attorney) who specialize in leasehold properties.

However, it may not be ideal if you’re:

• Hoping to use traditional FHA or VA loans

• Concerned about long-term property appreciation

• Uncomfortable with legal complexities or lease uncertainty

Final Thoughts

Land leases are a unique and often misunderstood part of the Huntington Beach real estate market. While they come with added complexity and financial considerations, they can offer an incredible value proposition, especially for buyers who want to enjoy ocean-close living at a lower upfront cost. Sail Properties is a real estate expert. Please let us know if you have any questions. 

Before you purchase, make sure to do your due diligence, work with knowledgeable professionals, and carefully review all documentation. With the right preparation, a land lease condo could be the perfect opportunity to own a slice of coastal paradise in Huntington Beach.