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Annual lease for water access?

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Tim Schneider

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Joined
Feb 8, 2007
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Certified Residential Appraiser
State
Wisconsin
Working on a refi assignment. Subject site is about 50 yards from a lake. The strip of land between the subject and the lake is owned by the utility company the owns the dam that makes the lake. HO states he has access to the lake though a 6' wide strip extending to the water line, and a dock/steps, and this access is allowed through an annual lease agreement between him and the utility. He also said that the utility has the option to not renew it, and he pays $100 per year. There is not a recorded easement or anything in the deed.

Has anyone encountered this before? How did you handle it? On one side, I know that this agreement could expire and to compare it to homes with frontage would not be right. But, like the HO said, he lives on the water without paying the high taxes. So who would't pay much more than $100 to have private lake access, which means this must have some value. The CR in my office has not seen this before and a search of MLS turned up nothing mentioning leased similar access. Oh, and the area is somewhat rural so sales are limited to being with.
 

Ray Miller

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Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
Working on a refi assignment. Subject site is about 50 yards from a lake. The strip of land between the subject and the lake is owned by the utility company the owns the dam that makes the lake. HO states he has access to the lake though a 6' wide strip extending to the water line, and a dock/steps, and this access is allowed through an annual lease agreement between him and the utility. He also said that the utility has the option to not renew it, and he pays $100 per year. There is not a recorded easement or anything in the deed.

Has anyone encountered this before? How did you handle it? On one side, I know that this agreement could expire and to compare it to homes with frontage would not be right. But, like the HO said, he lives on the water without paying the high taxes. So who would't pay much more than $100 to have private lake access, which means this must have some value. The CR in my office has not seen this before and a search of MLS turned up nothing mentioning leased similar access. Oh, and the area is somewhat rural so sales are limited to being with.


How long is the lease for? Is it renewed every year with a new lease?

If it is a 99 year lease with a payment of 100 clams per year then it has some value, I would think. I would contact the power company and see if there are similar leases in the area with this lake. What the terms are and I would request a copy of the lease for my work file.

If it is a year to year lease, I doubt it has any value to the property.

How near is the public boat ramp to the subject property?

This will be more then an MLS search. More clams in your pocket I would hope.:clapping:
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
I have on one recent occasion encountered something similar but it involved an easement.

The bottom line is that the lease is between the utility company and the HO. It is not attached to the real property. Therefore, in an appraisal of real property, since the lease is not between the utility company and the property, you cannot use it in the opinion of value.

In the situation we encountered, the easement was granted to the HO, was not directly connected to the land in any way and therefore could not be considered in the value of the property anymore than the HO's SUV and bass boat can be considered in the land value just because it is the HO who owns the vehicle.
 

Tim Schneider

Thread Starter
Member
Joined
Feb 8, 2007
Professional Status
Certified Residential Appraiser
State
Wisconsin
Ray- It is one year lease, renewed every year. Boat ramp less than 1 mile away.

Richard- Good point about being between the HO and the utility.

I should add that when he bought it, the prior owner also had this deal. The current HO was able to sign his own when he bought, and likely any new owner would. I am leaning towards mentioning the lease and saying what Richard said.
 

Ray Miller

Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
Ray- It is one year lease, renewed every year. Boat ramp less than 1 mile away.

Richard- Good point about being between the HO and the utility.

I should add that when he bought it, the prior owner also had this deal. The current HO was able to sign his own when he bought, and likely any new owner would. I am leaning towards mentioning the lease and saying what Richard said.


I would say no value.
 
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