Open your CLT’s ground lease to Article 10. That is where the resale formula, the heir-transfer clause, and the CLT’s purchase option live. If you are a board member, a homeowner, or an organizer who has been handed a 49-page document and told it is “standard,” start there, then work backward to the definitions page. The order matters because every number in Article 10 depends on how the lease defines Base Price and Purchase Option Price, and every exit right depends on how Article 12 defines Event of Default.
This is a reading guide to the 2011 CLT Network Model Ground Lease, published by Grounded Solutions Network as Chapter 11-A of the Community Land Trust Technical Manual. It is not legal advice, and it is not a substitute for your own counsel. It is a map of the document so your board can ask the right questions before a homeowner signs, not after a death or a foreclosure.
The model lease is a menu, not a template
The single most important thing to understand about the 2011 model lease is that Article 10 — Transfer of the Home — is presented in four alternative versions. They differ on three variables, stated in the document itself:
- Whether the homeowner has an absolute right to select an income-qualified buyer, or may only recommend one;
- The type of resale formula used — improvements-only appraisal-based, compound appraisal-based, fixed-rate, or indexed;
- Whether the original Base Price is, or may be, greater than the original appraised value of the home.
The model does not pick one for you. It says plainly that “no one of these versions is offered as THE model” and that “every CLT must make important decisions before adopting one of these versions.” That sentence is the governance layer. The choice among versions is a board decision with long-term consequences for who can buy into the trust, how much equity a seller can walk away with, and whether a lender will touch the mortgage.
Make that decision first. Before you negotiate the lease fee, before you draft the occupancy clause, before you argue about the repair reserve. The version you adopt cascades into the purchase option price, the foreclosure-proceeds clause, and the lender’s review. Choosing it late means rewriting the document.
Read the definitions page first
Four defined terms carry the weight of the whole lease. Find them before you read anything else.
Base Price is “the total price that is paid for the Home by the Homeowner (including the amount provided by a first mortgage loan but not including subsidy in the form of deferred loans to the Homeowner).” That parenthetical matters. If your subsidy structure includes a deferred loan, it does not inflate the Base Price, and therefore does not inflate the formula price later. If your board has been treating a deferred loan as part of the purchase price, the lease says otherwise.
Purchase Option Price is “the maximum price the Homeowner is allowed to receive for the sale of the Home and the Homeowner’s right to possess, occupy and use the Leased Land, as defined in Article 10.” Read that twice. It is a ceiling, not a promise. The homeowner does not receive the appraised value; the homeowner receives the lower of two numbers. More on that below.
Lease Fee is the monthly payment for the land, plus any additional amounts the lease permits the CLT to charge. Event of Default is any uncured violation of the lease after written notice. Both terms reappear in Articles 5 and 12, and both are places where a board can accidentally commit itself to a policy it has not adopted.
Resale formula: find section 10.10 and identify the family
In Versions 1, 2, and 3, the formula calculation is section 10.10. In Version 4, it is also 10.10, but the section before it — 10.9 — defines how the value of the homeowner’s ownership interest is determined. Read both sections together. The formula section alone will not tell you what the formula is applied to.
The model groups formulas into four families:
- Improvements-only appraisal-based (Versions 1 and 2): the homeowner captures the value of improvements they made, not market appreciation of the land.
- Compound appraisal-based (Version 3): a more complex appraisal method, used where the original Base Price may exceed the original appraised value.
- Fixed-rate (Version 4): a set annual percentage increase.
- Indexed (Version 4): tied to a published index; the model presents three versions of section 10.10 for three different indexed formulas.
Your lease will use one of these. Find the section number, read the actual arithmetic, and then do the thing most boards skip: run a hypothetical. Pick a Base Price, pick a holding period, pick two market conditions — flat and rising — and calculate what the homeowner would receive under your formula in each. Label it clearly as a hypothetical. Do not present it to homeowners as a projection. The point is to see which ceiling binds.
The purchase option price is a ceiling, not a promise
Here is the clause that confuses almost everyone. In Versions 1, 2, and 3, section 10.9 (or 10.10 in some printings) states that the purchase option price equals the lesser of the appraised value or the formula price. In Versions 3 and 4, the appraisal side is phrased as the appraised value of the homeowner’s ownership interest, not the home.
That distinction is not cosmetic. In a rising market, the formula price is usually the binding ceiling — the homeowner gets the formula, not the market. In a flat or declining market, the appraised value can be the binding ceiling — the homeowner gets less than the formula would produce. A board that tells homeowners “you get the formula” is telling them half the truth. The lease says lesser of. Say the same thing.
This is also where the lender interface lives. Fannie Mae’s shared equity guidance describes CLT ground leases as typically requiring that the home can only be purchased by a low- to moderate-income family when resold. That resale restriction is what makes the mortgage financeable under the Selling Guide’s shared equity requirements. A formula that a lender will not underwrite is not a usable formula, no matter how well it preserves affordability on paper. Grounded Solutions states that using the 2011 Model Ground Lease as the foundation helps ensure homebuyers may access mortgages originated and sold to Fannie Mae or Freddie Mac. That is an intent statement, not a guarantee — your counsel still has to check your state’s law and your lender’s overlays — but it tells you why the model is drafted the way it is.
Inheritance: the clause most families read too late
All four versions of Article 10 include a section titled “THE HOME MAY BE TRANSFERRED TO CERTAIN HEIRS OF HOMEOWNER” — section 10.3 in each version. Read it now, while everyone is alive and the board is not grieving.
The clause permits transfer to certain heirs, but it does not override your state’s probate code. It sits on top of it. Whether an heir can actually take the home, what they must do to qualify, and what happens if the estate is intestate are questions for a lawyer licensed in your state, reading the lease against your state’s intestacy statute and probate timeline. The model lease cannot answer them, and neither can this article.
What a board can do is walk through the clause with counsel and a sample probate timeline before adoption. Ask: if a homeowner dies without a will, who inherits under state law, and does that person meet the lease’s heir-transfer conditions? If not, what does the CLT do with the home? The lease’s answer will be somewhere in Article 10 and Article 12. Find it before a family has to.
Organizing around shared equity is emotionally heavy work. You are asking neighbors to accept a ceiling on the largest asset they will ever own, and you are asking their children to accept it too. Acknowledge that in the room. Then get back to the document, because the document is what protects the next family.
Exit rights: the purchase option, the notice sequence, and the power of attorney
The CLT’s exit machinery is spread across Article 10 and Article 14. Read it as a sequence, not a list.
- Notice of intent to sell (section 10.4 in Versions 1–3; 10.4 in Version 4). The homeowner must notify the CLT before selling.
- Appraisal (section 10.5 in Versions 1–3). After notice, the CLT commissions an appraisal.
- Purchase option (section 10.6 in Versions 1 and 3; 10.6 in Version 2 is the homeowner’s right to designate a buyer; 10.5 in Version 4). The CLT has an option to purchase the home at the purchase option price.
- Sale on certain terms if the option expires (section 10.7 in Versions 1 and 3; 10.8 in Version 2; 10.6 in Version 4). If the CLT does not exercise, the homeowner may sell — but only to a qualified purchaser, and only on the lease’s terms.
- Power of attorney after one year (section 10.8 in Versions 1 and 3; 10.9 in Version 2; 10.7 in Version 4). If the home has not sold after a year, the CLT gets power of attorney to conduct the sale.
- Right of first refusal in lieu of option (section 14.5). The general provisions allow the CLT to use a right of first refusal instead of a purchase option. If your lease uses 14.5, the sequence above changes. Check which mechanism your document actually adopts.
Two more exit-adjacent clauses belong in this reading. Section 8.7 states that in the event of foreclosure, any proceeds in excess of the purchase option price go to the CLT. And section 3.1 sets the term at 99 years, with section 3.2 allowing the homeowner to renew for one additional 99-year period, subject to conditions including written notice within 60 days of the Expiration Notice. The Expiration Notice itself must be given not more than 365 nor less than 180 days before the end of the first term. Put those dates on a calendar. A missed renewal window is a governance failure, not a homeowner failure.
The mortgage interface: sections 8.4 through 8.7
Article 8 governs financing, and it is where the lease meets the lender. Section 8.1 prohibits mortgaging the home without CLT permission. Section 8.2 grants permission for the original mortgage by signing the lease. Section 8.3 requires specific permission for refinancing or subsequent mortgages. Section 8.4 requires the CLT to permit a “standard permitted mortgage.” Sections 8.5 and 8.6 set out the permitted mortgagee’s obligations and rights. Section 8.7 is the foreclosure-proceeds clause.
Read 8.4 closely. The CLT is required to permit a standard permitted mortgage. That is a limit on the board’s discretion, and it exists so that buyers can get loans. If your board has been treating mortgage approval as a case-by-case favor, the lease says otherwise. If your board wants to change that, it is amending the lease, not exercising judgment under it.
A reading checklist for the board
Run this against any draft lease before adoption. Each item points to a section you can find in the model.
- Which Article 10 version are we adopting, and did we record that decision in the minutes? (Article 10, versions 1–4)
- What is our Base Price definition, and does it exclude deferred subsidy as the model does? (Definitions)
- Which formula family does section 10.10 use, and have we run a flat-market and rising-market hypothetical? (10.10)
- Does our purchase option price use “lesser of appraised value or formula price,” and do we explain that to buyers in plain language? (10.9 / 10.10)
- Have we read the heir-transfer clause with local counsel against our state’s intestacy and probate rules? (10.3)
- Are we using a purchase option or a right of first refusal in lieu of option, and does the notice sequence match? (10.4–10.8; 14.5)
- Is the renewal calendar set, with the 180-to-365-day Expiration Notice window flagged? (3.1–3.2)
- Does the board understand that section 8.4 requires permitting a standard permitted mortgage? (8.4)
- Does the foreclosure-proceeds clause direct excess proceeds to the CLT as the model does? (8.7)
- Has our own counsel checked every adopted clause against state landlord-tenant, foreclosure, and probate law? (all articles)
The model lease is a starting document, not a compliance certificate. It was drafted to be financeable and to preserve affordability across a succession of owners. It was not drafted for your state, your lenders, or your heirs. That work is yours, and it starts with reading Article 10 out loud at a board meeting.
FAQ
Does the model lease guarantee my buyers can get a Fannie Mae or Freddie Mac loan?
No. Grounded Solutions states that using the 2011 Model Ground Lease as the foundation helps ensure access to mortgages originated and sold to Fannie Mae or Freddie Mac. That is an intent statement. Loan eligibility depends on the lender, the program certification, and your state’s law. Check with your lender and counsel.
Can a homeowner leave the home to their children?
The lease permits transfer to certain heirs under section 10.3 in all four versions. Whether a specific heir qualifies, and what happens if the homeowner dies without a will, depends on your state’s probate and intestacy law. Read the clause with local counsel before adoption, not after a death.
What happens if the CLT does not exercise its purchase option?
The homeowner may sell on certain terms — typically to a qualified purchaser and at the purchase option price. If the home has not sold after one year, the CLT receives power of attorney to conduct the sale. The exact section numbers vary by version; check your document.
Is the purchase option price the same as the appraised value?
No. In the model, it is the lesser of the appraised value (or the appraised value of the homeowner’s ownership interest, in Versions 3 and 4) or the formula price. The formula is a ceiling, and the appraisal is a second ceiling. Which one binds depends on the market.
Where can I get the model lease and the commentary?
Grounded Solutions Network publishes the 2011 Model Ground Lease and Commentary and the full Community Land Trust Technical Manual, which includes Chapter 11-B (Ground Lease Commentary) and Chapter 12 (Resale Formula Design). Members may request a Word version from Grounded Solutions.