Property Interest

[Vegan702]

I rarely do these type of properties, but had a question brought to my attention. On the old forms whether it was 1004, 1073 or 1025 you had 2 options for for property interest, either fee simple or leasehold. On the new forms you have 3 options with the 3rd option being other. In a scenario of a 4 plex with the owner living in 1 unit and renting out the other 3 units we would just check the fee simple box, however now I am under the impression we should be checking the other box and explaining briefly that it is a leased fee etc.

How is everyone else handling this situation? This would also apply to SFR's/Condo's/etc that are also occupied by tenants, correct?

 

[Mztk1]

This is a hornets nest topic. It is best that you just do what makes most sense to you.

 

[Elliott]

What?? Leasehold?? Ownership?? I don't think I've ever even
come close to hitting the 'leasehold' box. Maybe in Hawaii, I'd
worry about it. Maybe London property that's owned by the
Prince Charles and his Mom.

 

[Lloyd Bonafide]

In a 4-plex, it doesn't matter if the owner rents out 1, 2, 3, or 4 units - it's fee simple if the land is owned.

 

[Vivian Bachner]

Fee Simple - Unless you are appraising the tenants' possible leasehold interest.

 

[PropertyEconomics]

What?? Leasehold?? Ownership?? I don't think I've ever even
come close to hitting the 'leasehold' box. Maybe in Hawaii, I'd
worry about it. Maybe London property that's owned by the
Prince Charles and his Mom.

You would have to worry about it in Albuquerque where there exists a subdivision on land owned by a trust with all of the individual homes owned by the occupants. It is my understanding the original term of the lease was something along the lines of 99 years with in excess of 50 remaining ... however, the property owners hold the land via lease (leasehold) ... and mortgages in this subdivision occurr all the time. These are leasehold estates.

 

[Mztk1]

Well it is good to see the board is in agreement on this topic now. Going back about 2 months ago, it was a heated discussion that didn't seem to have a consensus.

 

[Mountain Man]

Fee simple. You wouldn't really get into a leased fee situation unless you had a long term lease, like 5+ years. Most residential leases are 6 or 12 months, with a month to month clause after that. Short term leases seem to have little effect, and usually have a clause to revoke or buy out the remaining lease. All of mine have a clause to pay 2 months worth of rent as a penalty for early termination by landlord or tenant.

 

[Elliott]

PE,
There was a condo near me that use to have a land lease and on the condo
form I'd check the 'leasehold.' It was always the first thing I asked lenders,
"Do you know that project has a land lease with a reversion." It was always
tough to find a lender. A few years ago the condo association bought the
land.

 

[CURT VAN HOOSER]

Here in our sunny desert areas (Pam Springs, Palm Desert, Rancho Mirage, Cathedral City...to name a few) there are thousands of properties on leased BIA land. I saw a condominium complex last week that had a developers lease on it. It is a renewable lease that still has 54 years remaining on the current lease. The leasehold status appears to have little, if any, impact on market value in this area and lenders don't seem to flintch as long as there is sufficient time remaining on the lease to satisfy the loan.