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HUD Section 202, Air Rights

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Arturo Fossas

Freshman Member
Mar 16, 2008
Professional Status
Certified General Appraiser
Puerto Rico
I'm appraising a proposed 29 apartment building with HUD 202 program. The proposal calls for a lease of the land. However, the building sits over the second underground level of a parking structure. Hence, the real property interests appraised are air rights. HUD Handbook 4465.1 Ch. 2 (2) states that Fair Market Value is not based on highest and best use but proposed use. Chapter 4, 4 states that the ground level is valued in "fee simple as if unencumbered by the air rights". The question is: The term fee simple of chapter 4 assumes highest and best use or proposed use, excluding the air rights? I get the impression that the handbook calls for highest and best use, however it is not clearly denoted since it keeps refering to other chapters in the process.
Thanks for sharing any light in this issue.
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