<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by Joan6o2:
Last night I dreamed I had a good relationship with a wealthy tenant. He built a nice storage shed on his (my) place -- when I saw it I told him I liked it and would pay for it. He said thanks, and that he had a few other things in mind. I said, "Go ahead, anything you want." When I got back three months later, he'd built a huge sunroom. Cost: $75K. Legally, would I owe him for it? Pls reply to [email protected] as well as here.<HR></BLOCKQUOTE>
My response:
California law - - -
Ownership of improvements: Because the tenant is building (and usually paying the cost of) the initial improvements, the tenant often requires certain ownership rights in the structures. Eventually, however, the improvements become the landlord's property (certainly, at the end of the lease term, unless the landlord requires their removal).
Therefore, the tenant often owns the structures during all (or a portion) of the term of the lease. This could provide the tenant with certain tax benefits (such as depreciation). The issue of who owns the improvements is particularly important in the context of damage/destruction and condemnation.
Repair and maintenance obligations: Because the tenant usually constructs (and, at least initially, owns) the improvements, the tenant typically has virtually all of the repair and maintenance obligations for the lease term.
A lessor does not recognize income or increase basis when the lessee constructs improvements, nor when the lease terminates and the landlord takes control of the improvements. [26 USCA §§ 109]
Who owns the improvements will impact a host of other issues, such as rights to insurance proceeds upon damage or destruction, rights to condemnation awards, and tax benefits. Ownership of the improvements may be held by the tenant during the entire ground lease term (or any portion of it).
IAAL
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