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Mythbuster: Alabama Power Leased Lots – Lake Martin

Lake Martin Alabama power leased lotAlabama Power has leased waterfront lots on Lake Martin for decades.  Yet, so much rumor, speculation, and innuendo surrounds the topic it remains mysterious to many people, real estate agents included.

Allow me to try to bust the myth on this subject.

Why are there leased lots on Lake Martin?

Lake Martin dam alabama power real estateLake Martin was created in 1923 when the Southern Company (Alabama Power) built Martin Dam on the Tallapoosa River.  They bought up all of the eventual waterfront at the elevation of 490 feet above sea level.  Since old Mr. Ben Russell (founder of Russell Mills), already owned the damming rights to the Tallapoosa, the Power Company swapped him those rights for one half of the waterfront.  Pretty much every inch of the 700 miles of waterfront of Lake Martin at one time or another was owned by either Alabama Power or Old Mr. Ben.

When did Alabama Power begin to lease lots on Lake Martin?

Sometime around in the 1960s, Alabama Power allowed people to build homes on the waterfront, but they retained ownership of the land underneath the home.  The people own the sticks and bricks, the company owns the dirt.  The people paid a monthly lease to do so.  Over the years, depending on the opinions of officers at Alabama Power, the homeowners were given the chance to buy the dirt under their homes.  No rhyme or reason to it, some years they would decide to sell, other years they would institute leases.  That policy continues today.  Who knows, they may decide to start selling lots to leaseholders tomorrow.  They might not.

How does a lot lease work on Lake Martin?

These days, when Alabama Power leases a waterfront lot to homeowners, they have a written lease, just like you would for an apartment.  The lease specifies the monthly rate (currently around $400), the length of the lease (currently twenty years), and the yearly increase of the rate.  The key here is that every lot is different, so if you’re concerned, consult a lawyer.  Alabama Power assigns the lease amount when they offer new lots for lease.  They offer the lots in a bid system, meaning, the homeowners bid offers of cash to pay for the privilege of entering the lease.  If you are the top bidder, then you must pay the monthly lease rate on top of that.

What happens at the lease end?

Again, you must examine each lease to be sure of how it works.  But generally speaking, at the end of the lease, one of 4 things can happen:

1.  Alabama Power renews the lease
2.  Alabama Power sells you the lot
3.  Alabama Power buys the house from you
4.  You pick up the house and leave.

My family has been selling real estate in the Lake Martin area since 1953.  We have never heard of Alabama Power buying a house, or making someone move their house away.  Not that it is impossible, but it is, in my opinion, highly, highly, improbable.  Most of the time they either renew the lease or sell you the lot.  Once again, if in doubt, talk to a lawyer.

Can you sell a leased lot home?

One word answer – YES.  There are plenty of great leased lot homesLake Martin real estate for sale now (like this one) on Lake Martin and many that have sold in the past.  Generally speaking, you can get more house or view for your money on a leased lot house than you can on a deeded lot home, because of the existence of the lease. The transaction works just like a deeded lot sale, except you have the added step of transferring the lease to the new owner.  Alabama Power must approve this transfer, but usually it’s just a matter of paperwork.

Can you finance a leased lot home?

YES – easily.  I almost always recommend that Lake Martin buyers use lenders from around the lake.  Not because I am related to any many of them, but because lake financing is usually a bit different than your standard McHouse in McSuburbia.  Local lenders are especially handy when it comes to financing a leased lot home.  They are familiar with all of the documentation, so it’s a lot easier to work with them.

Do you own a leased lot home and have some advice to add?  Or maybe you have questions that I haven’t answered here.  If so, please comment on this post and I will do my best to answer anything else.

Related posts:

When Does The Water Level Go Down On Lake Martin?

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  1. Alabama Improper „¢ » Blog Archive » Alabama Bloggers Carnival, #6

    [...] Next we have Lake Martin Voice with a bit of history while busting a myth on this southern charming little neighborhood. I think I smell an Alabama Bloggers WEEKEND retreat! Man, that is a sweet little place. I am gonna have to get down there and check it out because it really does look like a great little weekend getaway. [...]

  2. Freddie Aguilar


    Nice Post! Its so very informative and knowledgeable for your readers.
    Thank You for sharing.. Keep up the good work..

    More Power,
    Freddie Aguilar
    Investment Property

  3. KW

    We purchased a property a few years ago on an Alabama Power Company leased lot. The Fire Department burned the house and we have built a new home. We feel so very blessed to have been able to get a beautiful lot on Lake Martin, build a new home and pay approx. $400 a month for the land value. With property values reaching all time highs, leased lots are a great alternative if paying for the lot isn’t feasible. I’ve been involved in the real estate industry for approx. 30 years and have always believed that Alabama Power Company leases are very safe. We have actually named our home
    “Blessings” because we feel that strongly about our investment.

  4. shaun mclane

    John, you do great work with your blog. I went to school in Alabama, and love reading your local content.

  5. John

    Thanks Shaun – like your blog, too.

    KW – thanks for your perspective. It’s always nice to hear directly from lake owners – there’s no substitute for first hand evidence, especially from someone that has a lot of real estate experience.

    Are there any other leased lot homeowners out there with their own take?

  6. Henry

    John, we selected your blog as the best real estate blog in Alabama (most recent post). We created an award ribbon if you’d like, just drop me a line.


  7. johnsons

    good gracious!thanks for this informative information.keep it up,goahead.

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  13. Lou DuFresne

    Jackson Lake, Georgia Power lease lots were able to get 30 year mortgages in the past…15 yr lease renewable, thus giving the necessary 30 year. Since the secondary market dried up due to economic conditions, is Lake Martin having the same issues????…we are only able to obtain 20 year (and that from only one lender) , not 30 year and hence, mortgage payments are much higher than a fee simple offering.


    Lou DuFresne
    Jackson, Georgia

  14. John Coley

    Lou- thanks for the comment – you are right – currently AL Power policy results in many borrowers doing ARM financing, on a 30 year amo. I am openly lobbying the powers that be, to allow longer lease times so that the mort lenders would extend 30 year fixed rates. I will keep you posted on the latest.


  15. JStigall

    Lou- Thanks for the information. I am in line with John Coley and his comments. I am in the process of trying to obtain a mortgage that is not an ARM. It seems that since the mortgage crisis, the lease holders are taking back seat to the normal fixed rate mortgages. Lenders should be ashamed of their selves for not wanting to lend money at a fixed rate when the client has above excellent credit and has a proven track record of not fitting into the average american status of living on edge or above their means. I deserve the best rate on the market and can’t get it because I own a GA Power leased lot on a lake in Central Georgia. Either the power company needs to sell me my lot or contract with lenders so that loans are obtainable for those that have earned the right to borrow the money. Would love to hear your thoughts.

  16. direct lender loans

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    Mythbuster: Alabama Power Leased Lots – Lake Martin | Lake Martin Voice…

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  19. Rex Green

    We are on a leased lot. We have paid close to $70,000.00 rent over the years. The AL power co has just offered our lot for sale. $225,000.00. If we buy the lot, the payments will drain this retired couple, monthly. If we keep renting, we don’t trust the power co. to stay at a reasonable monthly rent. We started at $300.00 a month, and now it is almost $500.00. Who knows what it could go to! With the price of the lot and the price of the house, It would be so hard to sale. They have put us in a bad situation. We loved the lake, but lately we have felt very trapped. The power co has so much power and control over people who never dreamed they would come up with such prices, and the $70,000.00 dollars we have already invested will not count , not even a percentage of it!! Please give us some advice. P.S. I would NEVER recommend anyone leasing a power co. Lot again.

  20. johncoley

    Hey Rex, thanks for the comment. Obviously, I don’t know the specifics of your situation or lease, but every lease I have ever seen has an escalation clause for the lease amount, meaning, they can’t increase the lease at their whim, it is capped per year. For instance, in leases in your era, I think it was capped at Consumer Price Index – which for the past 100 years has been about 4%. Nowadays many leases I see are capped at the greater of CPI or 4%. Also another change that has happened since I first wrote this post in 2007 was that AL Power has in fact switched to a 35 year fixed term lease, which has allowed for 30 year financing. Now I stress, each lease is different, so I don’t generalize, especially since they are offering lots for sale as you have been offered. I do agree that it is important to remember that lease payments are just that – a lease. Not a paydown on equity of any sort. You get no ownership credit for it whatsoever. But another thing to consider is that because you don’t own the dirt, neither do you pay taxes on the dirt. AL Power does. You only pay taxes on the improvements (home, dock, etc.). Since the bulk of value in lake homes is the dirt itself, this adds up to considerable property tax savings. All I can say in advice is to get your own appraisal and counter offer at what you think is fair.