At Value Research Group, we provide appraisal reports for leased fee and leasehold estates. We strive to make sure we gather the most important information and make sure you understand the appraisal process as well.
Leased Fee Estate
A leased fee is the interest the landlord or lessor maintains in a property under a lease with the rights of use and occupancy being granted to a tenant. If you are the lessor, you have the right to receive rental income and possess the property at the end of the lease. The value of the rental payments and the remaining property value at the end of the lease period is the leased fee interest. This interest may be sold or mortgaged subject to the rights of the tenant.
In valuing the leased fee, our appraisers calculate the present value of the income received by you the lessor and then add the future interest value of the land, building or both at the end of the lease term. The future worth of the land is generally calculated to be the same as its present value.
Leasehold estates are classified as estates in personal property. Under a lease, the tenant possesses a leasehold. However when the lease terminates, the property reverts back to the landlord under his or her possession. The four major types of leasehold estates are the estate for years, estate from year to year, the tenancy at will and the tenancy at sufferance.
- Estate for years– runs for a specific period of time.
- Estate from year to year– runs for an indefinite number of time periods.
- Estate at will– runs for an indefinite time.
- Estate at sufferance– runs until the landlord takes action.
The valuation of a leasehold is equal to the present value of the difference between the current market rental rates and the contract rents established by the lease over the holding period. As a part of our leasehold appraisal report, we’ll analyze and compare the current market rental rate and lease terms to the contract rental rate and lease terms. In comparing properties, we’ll only compare leaseholds with other leaseholds and not fee simple properties for valuation purposes. We’ll also look at variations over time as market rents, tenant improvement costs, rental concessions and lease terms change based upon supply and demand factors.