Rights question

[Taramarietag]

One question I cannot seem to find a direct answer to for my studying to (retake) my exam - if someone owns a 2 unit property, let’s say a duplex, and lives in one side and rents the other side out — do they have leased fee interest or fee simple?

 

[Elliott]

The owner has a fee simple interest. The owner has a lease fee interest in the leased unit.

 

[Mark K]

Leased fee.

The owner has conveyed the right to possess and live in the property to the tenant (within the terms of the lease or rental agreement), therefore the owner does not have Fee Simple interest in the leased portion.

However, you can appraise the FS subject to a Hypothetical Condition that the lease doesn't exist.

 

[Mark K]

The tenant has a lease fee interest.

The tenant's rights are leasehold.

 

[Taramarietag]

Leased fee.

The owner has conveyed the right to possess and live in the property to the tenant (within the terms of the lease or rental agreement), therefore the owner does not have Fee Simple interest in the leased portion.

However, you can appraise the FS subject to a Hypothetical Condition that the lease doesn't exist.

That is what I thought! Because yes they live there but they rent one side out. I was so confused and back and forth on it. On the test they asked about the whole building, so I thought it has to be leased fee because the owner doesn’t have rights over the entire building. I’ve been stressing about getting this straight since I took the test on Friday lol

 

[Sadie]

Real Property Valuation Issues – Fee Simple versus Leased Fee - Commercial Alliance of Realtors

Author: Greg Holt, Appraiser, Mercantile Bank Valuation theory holds that interests or rights in real estate are to be valued rather than physical land and buildings themselves. Standards require that interests or rights be identified and reported. In ordering and completing appraisal reports...

www.carwm.com

 

[Sadie]

Since the typical transaction involves the owner and not the tenant, the answer they are probably looking for is fee simple.

 

[Taramarietag]

Since the typical transaction involves the owner and not the tenant, the answer they are probably looking for is fee simple.

That’s why I’m confused. If owner has fee simple rights on one side and technically leased fee on the other side…… HOW is this a question?! I have no idea! Ugh lol

 

[Terrel L. Shields]

erefore the owner does not have Fee Simple interest in the leased portion.

In my opinion, if the tenant cannot sublease the property, they have zero leasehold value, therefore, fee simple = leased fee value.

 

[Taramarietag]

In my opinion, if the tenant cannot sublease the property, they have zero leasehold value, therefore, fee simple = leased fee value.

This is a hard circumstance! I hope it’s not on the test again tomorrow but I’ve been dying to find out what everyone thinks!!