Land Lease Option
Categories: Real Estate, Derivatives
You lease a piece of land to stage outdoor modern dance recitals. The original lease is for one year, but it includes a land lease option. This stipulation allows you to extend the lease, if you want. You have the right to re-up for additional years, but you don't have to. If the dance thing turns out to be a bust, you'd probably just want to pass. It's up to you.
As it turns out, people love the dance recitals. It might be the free wine bar you provide, but whatever. You get a good crowd and decide that you want to run it again next year. So you exercise your option and extend the lease an additional year.