Land and development: the deal where the risk comes before the asset does

Everything else in this section deals with an asset that already produces income. Raw land doesn’t. The core problem here isn’t a clause in an existing lease, it’s structuring a purchase around a risk that hasn’t resolved yet: whether the land can actually be entitled to build what the developer wants.

Options, not outright purchases, for exactly this reason

Entitlement can fail completely. Zoning gets denied, environmental review stalls the project, community opposition blocks it outright, after real money and years have already gone in.

Buying land outright before entitlement is secured means the buyer bears all of that risk from day one. An option agreement shifts it properly: the developer pays a smaller deposit for the right to buy, contingent on actually securing entitlements, and only closes at full price once that risk has resolved.

A seller who insists on an outright sale is asking the buyer to underwrite a risk the seller isn’t willing to share. That’s a legitimate ask, priced correctly, but it should be priced, not assumed.

Option agreements need real structure of their own: specific due diligence periods, extension rights tied to actual entitlement milestones, and often an escalating non-refundable deposit the longer the option sits open. A seller wants certainty this won’t drag indefinitely; a developer wants enough runway for a process that can genuinely take years.

Development agreements with a municipality, sometimes called vested rights agreements, can lock in zoning terms for a defined period. Worth knowing this tool exists specifically to protect a project against a change in local political administration mid-entitlement.

Ground leases: the SNDA fight, at much higher stakes

A ground lease has a developer building real improvements on land they don’t own, typically for 50 to 99 years. The landowner keeps title. The developer’s building sits on borrowed ground.

This creates the same tension the real estate core covers with an ordinary SNDA, scaled up dramatically. A leasehold lender financing the building needs real protection: recognition from the ground lessor, a genuine cure period if the developer defaults on the ground lease, and a right to a new lease if the existing one terminates.

Without that protection, improvements typically revert to the landowner the moment the ground lease terminates. A lender’s entire collateral, potentially a building worth hundreds of millions, can evaporate over a ground lease default that has nothing to do with the loan itself.

Any leasehold financing needs the ground lease’s own default, cure, and new-lease provisions reviewed with real care before the loan closes, not assumed to be standard.

Operating Agreement Specifics: Milestone-Triggered Capital Calls

Capital call timing should be tied to entitlement milestones, not a fixed schedule. The big commitments, land purchase, construction start, should only trigger once entitlements are actually secured.

A calendar that assumes success before it’s real is exactly how members end up funding a project that was never going to get approved.

Operating Agreement Specifics: Entitlement Trade-Off Approval

Entitlement negotiations often involve real trade-offs with the municipality, density concessions, community benefit commitments, that permanently shape the project’s economics.

The operating agreement should require member approval for these specific decisions. Negotiations with a city move fast, and a manager operating alone under time pressure can trade away value nobody else agreed to give up.

Operating Agreement Specifics: Ground Lease Review Before Refinancing

Where the entity itself is a ground lessee, any refinancing decision rides entirely on the ground lease’s own default, cure, and new-lease terms surviving into the loan.

The operating agreement should require real member review of those specific terms before committing to major capital on the improvements, not an assumption that the ground lease is fine because nothing’s gone wrong yet.

Where this hands off

The full lease-clause treatment for income-producing property lives on the real estate core. The entity mechanics live in The Blueprint. This page’s job was narrower: the deal structure that manages risk before there’s an asset to lease at all, and the ground lease terms that decide whether a building survives its own landowner’s troubles.