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Rights question

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Even a year's lease would have to be well below market to accrue any value whatsoever to the leasehold, therefore the leased fee will always equal the fee simple.

If you have a 10 year lease, then start talking
 
Terrel L. Shields said:
That's not what the deed says...'Fee Simple" there there in the deed
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Do you really think that a deed that says FS voids all existing leases? According to your line of thinking there is no such thing as a leased fee. I think the legal profession would disagree.

Of course the deed will say Fee Simple. Otherwise the buyer would never have any interest other than Leased Fee, or whatever other interest is indicated or conveyed by the deed. The buyer would never have the reversion of the property at the end of the lease(s) at which time he would normally get the FS. He would only have the LF estate and associated rights that were conveyed.

From what you suggest, anyone that receives a deed to a property that says Fee Simple doesn't have to be concerned about mineral rights that were previously leased to a drilling company? Or water rights? He gets FS, the deed says so, the leases don't matter anymore because the deed said Fee Simple.

All anyone needs to do is read the definition of leased fee/leasehold rights. Its really not that difficult to understand and it shouldn't be ambiguous to anyone in the real estate business. Why some appraisers are afraid to use correct terminology confounds me but apparently the facts aren't going get in the way of some ingrained confusion.

READ THE DEFINITIONS IN ANY APPRAISAL TEXTBOOK!!!!!

Have fun, I'm done here.
 
This is an excellent read about real property ownership especially and the differences between Fee Simple and leasehold.

One good comparison is SFR & Condominium. Since most Residential Appraisal assignments involve lending it important to understand how lenders assess the risk for different ownership.


"

Does fee simple matter to lenders?​

Yes, fee simple matters to lenders quite a bit. When underwriters assess a potential loan, they rank single-family homes with fee simple ownership as "highest and best." Fee simple townhouses are ranked just below. Condos and planned developments with leasehold rights are the most risky, and the least likely to secure a loan. This is for a few reasons, starting out with the fact that Fannie Mae has to approve all condo and planned developments of this type through the Project Eligibility Review Service before the federal institutions will buy the loan.
 
Mark K said:
Do you really think that a deed that says FS voids all existing leases? According to your line of thinking there is no such thing as a leased fee. I think the legal profession would disagree.

Of course the deed will say Fee Simple. Otherwise the buyer would never have any interest other than Leased Fee, or whatever other interest is indicated or conveyed by the deed. The buyer would never have the reversion of the property at the end of the lease(s) at which time he would normally get the FS. He would only have the LF estate and associated rights that were conveyed.

From what you suggest, anyone that receives a deed to a property that says Fee Simple doesn't have to be concerned about mineral rights that were previously leased to a drilling company? Or water rights? He gets FS, the deed says so, the leases don't matter anymore because the deed said Fee Simple.

All anyone needs to do is read the definition of leased fee/leasehold rights. Its really not that difficult to understand and it shouldn't be ambiguous to anyone in the real estate business. Why some appraisers are afraid to use correct terminology confounds me but apparently the facts aren't going get in the way of some ingrained confusion.

READ THE DEFINITIONS IN ANY APPRAISAL TEXTBOOK!!!!!

Have fun, I'm done here.
Click to expand...
In a previous life I used to review title reports. Typically if any rights have been sold, it should be in the title report. A separate line item. Date, what rights and who sold to. The title report should reflect all ownerships of the property. If it says fee simple, but then shows rights being sold, you need to find out why.
 
Mark K said:
According to your line of thinking there is no such thing as a leased fee. I think the legal profession would disagree.
Click to expand...
The question is what is fee simple. It is all the rights to a property, including the right to rent. That does not transfer the fee simple to the leasehold. What are you being asked to value? Most likely the fee simple, not the rental rights. There is no accrued value to the leasehold nor loss to the leased fee for short term leases. If it was a 99 year ground lease, then that's one thing. If it is a NNN 15 year to a Pizza Hut franchise, that's a definable value. If you rent your back pasture for $100 a year to pasture a horse...there is no leasehold estate. It applies only to long term leases.

Carnivore said:
fee simple matters to lenders
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"Leasehold ownership in residential real estate is one of the most confusing terms, because it applies to long-term renting--and is a common way to structure a long-term commercial lease -- but also applies to condo ownership."​
 
My experience is that lenders don't get to wound up over tenants of a SFR or even a Condo. This most likely is because the Leases are short term. It is problematic for lenders in my state because we have a judge that will enforce a short term residential lease whereas the Lender took possession via Foreclosure. In NC the longest enforceable residential lease is three years. Commercial is much different in NC. The Courts will indeed enforce an existing lease. I have some friends who leased a commercial property(old house in business zoning) for a Club House. I had advised them not to do that, but they did it anyway. Long Story short the property was too expensive for them and they subsequently broke the lease. The Landlord took them to court for the remaining term rents and won.

Those young guys pay attention to me now when I give them advice on Real Estate.
 
The leased fee interest, which is typically used in the industry, is equivalent to the fee simple interest of a property that is leased to others. ... A lease contract does not remove any rights from the bundle of rights of the fee simple estate, but rather it is an addition to the fee simple estate.

Excellent Read below

Fee simple vs leased fee in valuation - by Steve Hurlbut

Steve Hurlbut Liberty Bank Recently, I had a question from a regulator as to why we appraised the leased fee interest in a multi-family property when th...
nerej.com nerej.com
 
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