Ground lease appraisal

[Gobears81]

That is assuming that they are not the tenant's obligation


Rents as a percentage of leasehold rents are often used in a lease when the land owner is attempting to participate in the business operation but would rather outsource the property operating functions. I've mostly seen this with some type of government entity as the land owner.

Does the lease have a provision requiring the tenant to maintain the property to certain standards? If so, would the lack of this not be a way to terminate the lease? What is the landlords desire to terminate the lease? What type of businesses are the leasehold tenants in? Would there be a reason for them to retain the lease to prevent competitors from utilizing the location? i.e. closed gas stations, branch banks, etc

I was starting to think that this arrangement almost never happened!

I just re-read the lease, and yes, there is a provision regarding tenant's responsibility to repair damages. It did not say what the repercussions would be if the tenant does not do that-perhaps lease termination? Also, the initial use was a gas station, which is no longer there, which might be consistent with what you mentioned regarding participation in the business operations.

I have not talked to the lessors at all. I believe that the reason for me conducting this appraisal (which isn't entirely synonymous with the intended use of the appraisal in this case) is related to dissolution of the lessors. There is a risk that the city will step in and require the lessors to demolish the building, which along with the potential of the property becoming fully vacant, is the primary risk, although I don't foresee the city requiring action in the near future, particularly without assistance to the lessors.

There is really no incentive for the lessors to use the lease as a block of competitors in this case. Unless there is something that they are refraining from telling me, the more development on the site, the better in this case.