1. Welcome to AppraisersForum.com, the premiere online community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Arm's Length or Not

Discussion in 'Commercial/Industrial Appraisals' started by bmazerolle, Oct 1, 2011.

Thread Status:
Not open for further replies.
  1. bmazerolle

    bmazerolle New Member

    0
    Aug 15, 2007
    Professional Status:
    Licensed Appraiser
    State:
    Arizona
    Husband and wife co-own biz which leases bld also co-owned by same. After divorce, husband keeps biz, wife keeps bld, so now husband leases from ex-wife. With nothing further known, would you consider this an arm's length lease?
     
  2. Howard Klahr

    Howard Klahr Senior Member

    44
    Oct 4, 2004
    Professional Status:
    Certified General Appraiser
    State:
    Florida
  3. leelansford

    leelansford Elite Member

    24
    Mar 29, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
  4. PL1957

    PL1957 Senior Member

    6
    Jul 19, 2004
    Professional Status:
    Certified General Appraiser
    State:
    Illinois
    It may not have started as arm's length, but I think it is a valid encumbrance on the property through it's term. I don't think you can blow it off because it sounds like it would survive the sale of the building.
     
  5. jimmyfrank

    jimmyfrank Senior Member

    0
    Nov 18, 2009
    Professional Status:
    Certified General Appraiser
    State:
    Alabama
    I bet the rent increased to above market rent, I would not trust it as being arms length.
     
  6. MAIorBust

    MAIorBust Junior Member

    0
    Feb 25, 2007
    Professional Status:
    Certified General Appraiser
    State:
    Texas
    Are the parties unrelated? Not really, they have known each other for years. If the rent was in line with my other rent comps I might use it for support and disclaim the relationship in the comp write up.
     
  7. Michael S

    Michael S Senior Member

    7
    Mar 18, 2009
    Professional Status:
    Certified General Appraiser
    State:
    New Mexico
    Perhaps if the lease was renegotiated after the divorce. If not, it's definitely not arm's length. I've seen plenty of pocket-to-pocket leases like this with owner-user properties, they are rarely at market rent and we usually do nothing more than acknowledge a lease exists but give it no value because the landlord and tenant are related entities.
     
Thread Status:
Not open for further replies.

Share This Page