Chapter 6FEE SIMPLE ANDPARTIAL INTE

Chapter 6

FEE SIMPLE AND
PARTIAL INTERESTS


113 Fee Simple and Partial Interests

A ccording to the bundle of rights theory, complete real property ownership, known as fee simple or title in fee, consists of a group of distinct rights. Each of these rights can be separated from the bundle and conveyed by the fee simple owner to other parties in perpetuity or for a limited time period. When a right is separated from the bundle and transferred or mortgaged, a partial, or fractional, property interest is created.1

Appraisers must understand partial interests to define appraisal problems. At the start of any appraisal assignment, the property rights to be valued must be clearly identified. Valuations of partial interests are often required because many forms of real estate ownership and lease agreements involve less than the complete bundle of rights. Evaluations of partial interests are also needed in real estate decision making.

Property interests may be examined from many perspectives because the ownership, legal, economic, and financial aspects of real estate overlap.

The ownership of property interests can be divided in various ways. For example, several parties may have undivided partial ownership rights in a specific property through joint tenancies or tenancies in common. A land trust is a vehicle for partial property interests in which a group of property owners continues to operate and manage a property, but the legal title is conveyed to a trustee. Other legal arrangements and title holding entities that divide property rights among groups of owners include corporations, partnerships, cooperative corporations, condominiums or strata lots, and interval ownerships or timeshares. In these arrangements, property rights or interests are divided among several parties, and an appropriate legal entity is chosen to hold the property title. In the case of strata or condominium, portions of the property are separately assigned to individual owners, with only the common property held by a separate legal entity.

Separate economic and legal interests derived from the bundle of rights are involved in many kinds of income producing properties, and each of these interests is distinct in its form and content. Leased fee, leasehold, and subleasehold estates are created when leases are conveyed in accordance with established legal procedures.

The leasing of real estate is one practical and familiar application of the bundle of rights theory. An owner of a complete bundle of rights (the lessor) may convey to a tenant (the lessee) rights to use and occupy a property for a fixed period of time. In return, the tenant agrees to pay periodic rent.

Over time, common law and legal precedent have provided, with certain restrictions, wide ranging freedom of contract, which allows for flexibility in lease arrangements. A variety of lease contract clauses and provisions have been developed and used, and many have been tested and interpreted by the courts. The flexibility of leasing arrangements has resulted in leasing practices that are responsive to changing economic and financial conditions.

In valuing the economic and legal interests created by leases, appraisers must consider the following factors: the relationship between contract rent and market rent, the length of the lease, and the credit (risk) rating of the tenant. These factors may strongly influence the selection of discount rates. If, for example, the tenant has a low credit rating, an appraiser may not give much consideration to the lease arrangement. If the same lease is assumed by a tenant that is a major business entity with an AAA credit rating, the appraiser would give significant weight to the lease terms. The outlook for future income is much clearer in this case, and the value of the leased fee may exceed the market value of the property


114 The Appraisal of Real Estate

unencumbered by the lease.

Complex interrelationships may create a variety of situations. For example, a below market contract rent to be paid by a tenant with a poor credit rating may be more certain than an above market contract rent to be paid by a tenant with a good credit rating.

The financial aspects of property interests have a major impact on real estate investment practices. The analysis of mortgage and equity components is of particular importance. Mortgage funds are secured debt positions, while equity investments are venture capital. Mortgage and equity components may be subdivided into fee simple, leased fee, and leasehold interests. They may also be broken down according to the proportions of land and building in the overall property. Other possible financial arrangements include senior and subordinated debt, i.e., first and junior mortgages, sale leaseback financing, and equity syndications.

The ownership, legal, economic, and financial perspectives from which lease interests and other fractional property interests can be described illustrate the complexity and usefulness of the bundle of rights. A thorough understanding of the property rights to be valued in an appraisal assignment is needed not only to define the problem, but also to produce an appropriate solution.

TYPES OF PROPERTY INTERESTS
Fee Simple Estate

Possession of a title in fee establishes the interest in property known as the fee simple estate, i.e., absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, expropriation, police power, and escheat.

Owners in fee simple may choose to improve or not to improve their property. They may also retain ownership or transfer property title by selling the property or giving it away. When a fee owner dies, the property passes to his or her heirs or to others named in the will. This creates an estate, a right or interest in property. Inherited property interests are frequently the subject of valuation assignments.

Life Estates

A life estate is defined as the total rights of use, occupancy, and control, limited to the lifetime of a designated party. The designated party is known as the life tenant and is obligated to maintain the property in good condition and pay all applicable taxes. Life estates can be created by wills and by property deeds or transfers. For example, a fee owner may leave a will that gives land to his widow for her remaining lifetime and, at her death, the land is passed on to their children. Thus, the widow acquires a life estate and functions as a life tenant. A living fee owner may deed or transfer his or her property to a family member and, by the terms of the conveyance, retain a personal life estate. This practice eliminates the expense of probating the will after the owner dies.

To estimate the probable duration of the income from a life estate, an appraiser must rely on life expectancy statistics from actuarial studies. Once the net operating income from the estate and its duration are established, an appropriate discount rate can be selected and applied.


115 Fee Simple and Partial Interests

Lease Interests

Lease interests result when the bundle of rights is divided by a lease. The lessor and the lessee each obtain interests, which are stipulated in contract form and are subject to contract law. The divided interests resulting from a lease represent two distinct, but related, estates of property the leased fee estate and the leasehold estate. The leaseholder, or tenant, receives the right to use the real estate for specific purposes over a defined period of time.

The leased fee estate is the lessor's, or landlord's, estate. A leased fee estate is an ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others; the rights of lessor (the leased fee owner) and leased fee are specified by contract terms contained within the lease. Although the specific details of leases vary, a leased fee generally provides the lessor with rent to be paid by the lessee under stipulated terms; the right of repossession at the termination of the lease; default provisions; and the rights to sell, mortgage, or bequeath the property during the lease period. When a lease is legally delivered, or expired, the lessor must surrender possession of the property to the tenant for the lease period and abide by the lease provisions pertaining to the surrender.

The leasehold estate is the lessee's, or tenant's, estate. A leasehold estate is the right to use and occupy real estate for a stated term under the conditions conveyed in the lease. When a lease is transmitted, or comes into effect, a tenant usually acquires the rights to possess the property for the lease period, to sublease the property if desired, and occasionally to improve the property under the restrictions specified in the lease. In return, the tenant is obligated to pay rent, surrender possession of the property at the termination of the lease, remove any improvements the lessee has modified or constructed if specified, and abide by the lease provisions.

LEASES
Lease Terms

A lease is both a contract and a conveyance. It is a conveyance by which the landlord gives the tenant the right to occupy the property for the term specified in the lease. It imposes a contractual obligation on the tenant to pay rent to the landlord, and it may contain other promises and agreements between the landlord and the tenant. The legal interest held by the tenant is the leasehold estate. Leases may stipulate the use and occupancy of structures or parts of structures. Ground leases specifically grant the right to use and occupy land.

A contract dealing with a conveyance of land, such as a lease, must be set down in writing. A lease should clearly describe the rented property, specifying the geographic location, street address, and condition of the premises. The signatures of the lessor and the lessee effectively establish the legal power of a lease. The tenant's possession gene

Kết quả (Việt) 1:

Chương 6LỆ PHÍ ĐƠN GIẢN VÀMỘT PHẦN LỢI ÍCH 113 phí đơn giản và một phần lợi ích Ccording một bó của lý thuyết quyền, quyền sở hữu hoàn toàn bất động sản, được gọi là lệ phí đơn giản hoặc tiêu đề trong chi phí, bao gồm một nhóm các quyền riêng biệt. Mỗi người trong số những quyền lợi này có thể được tách ra từ các gói và chuyển tải bởi chủ sở hữu phí đơn giản cho các bên khác vĩnh viễn hoặc cho một khoảng thời gian giới hạn. Khi quyền được tách ra từ các gói và chuyển giao hoặc thế chấp, một quan tâm đến một phần, hoặc phân đoạn, bất động sản là created.1Appraisers phải hiểu một phần lợi ích để xác định vấn đề thẩm định. Lúc bắt đầu của bất kỳ chuyển nhượng thẩm định, quyền sở hữu phải có giá trị phải được xác định rõ ràng. Giá trị của lợi ích một phần thường được yêu cầu vì nhiều hình thức của thỏa thuận quyền sở hữu và cho thuê bất động sản liên quan đến ít hơn so với các gói đầy đủ của quyền. Đánh giá của một phần lợi ích cũng là cần thiết trong bất động sản ra quyết định.Lợi ích bất động sản có thể được kiểm tra từ nhiều quan điểm vì quyền sở hữu, chồng chéo lên nhau khía cạnh pháp lý, kinh tế và tài chính của bất động sảnQuyền sở hữu tài sản lợi ích có thể được chia thành nhiều cách khác nhau. Ví dụ, một số bên có thể đã không phân chia quyền sở hữu một phần quyền trong một bất động sản cụ thể thông qua phần tenancies hoặc tenancies chung. Một đất trust là một chiếc xe cho một phần tài sản lợi ích trong đó một nhóm chủ sở hữu bất động sản tiếp tục hoạt động và quản lý một tài sản, nhưng tiêu đề pháp lý được chuyển tải đến một ủy viên quản trị. Sắp xếp pháp lý và tiêu đề đang nắm giữ thực thể phân chia quyền sở hữu trong nhóm của chủ sở hữu khác bao gồm các tập đoàn, quan hệ đối tác, công ty hợp tác xã, chung cư cao tầng hoặc địa tầng rất nhiều, và khoảng thời gian ownerships hoặc phân bổ. Trong các thỏa thuận, quyền sở hữu hoặc lợi ích được chia giữa các bên, và một thực thể pháp lý thích hợp được chọn để giữ tiêu đề tài sản. Trong trường hợp của địa tầng hay chung cư, phần của tài sản một cách riêng biệt được gán cho chủ sở hữu cá nhân, với chỉ là tài sản phổ biến được tổ chức bởi một thực thể pháp lý riêng biệt.Riêng biệt kinh tế và lợi ích pháp lý bắt nguồn từ các gói của quyền được tham gia vào nhiều các loại thu nhập sản xuất tài sản, và mỗi người trong số những lợi ích là khác biệt trong hình thức và nội dung của nó. Đã cho thuê lệ phí, leasehold và bất động sản subleasehold được tạo ra khi cho thuê được chuyển tải phù hợp với lập các thủ tục pháp lý.Cho thuê bất động sản là một ứng dụng thực tế và quen thuộc của các gói quyền lý thuyết. Một chủ sở hữu của một bó toàn bộ quyền (lessor) có thể truyền đạt cho một người thuê nhà (đồng) quyền sử dụng và chiếm một tài sản cho một khoảng thời gian cố định. Đổi lại, những người thuê nhà đồng ý trả tiền định kỳ cho thuê.Over time, common law and legal precedent have provided, with certain restrictions, wide ranging freedom of contract, which allows for flexibility in lease arrangements. A variety of lease contract clauses and provisions have been developed and used, and many have been tested and interpreted by the courts. The flexibility of leasing arrangements has resulted in leasing practices that are responsive to changing economic and financial conditions.In valuing the economic and legal interests created by leases, appraisers must consider the following factors: the relationship between contract rent and market rent, the length of the lease, and the credit (risk) rating of the tenant. These factors may strongly influence the selection of discount rates. If, for example, the tenant has a low credit rating, an appraiser may not give much consideration to the lease arrangement. If the same lease is assumed by a tenant that is a major business entity with an AAA credit rating, the appraiser would give significant weight to the lease terms. The outlook for future income is much clearer in this case, and the value of the leased fee may exceed the market value of the property 114 The Appraisal of Real Estateunencumbered by the lease.Complex interrelationships may create a variety of situations. For example, a below market contract rent to be paid by a tenant with a poor credit rating may be more certain than an above market contract rent to be paid by a tenant with a good credit rating.The financial aspects of property interests have a major impact on real estate investment practices. The analysis of mortgage and equity components is of particular importance. Mortgage funds are secured debt positions, while equity investments are venture capital. Mortgage and equity components may be subdivided into fee simple, leased fee, and leasehold interests. They may also be broken down according to the proportions of land and building in the overall property. Other possible financial arrangements include senior and subordinated debt, i.e., first and junior mortgages, sale leaseback financing, and equity syndications.The ownership, legal, economic, and financial perspectives from which lease interests and other fractional property interests can be described illustrate the complexity and usefulness of the bundle of rights. A thorough understanding of the property rights to be valued in an appraisal assignment is needed not only to define the problem, but also to produce an appropriate solution.TYPES OF PROPERTY INTERESTS Fee Simple EstatePossession of a title in fee establishes the interest in property known as the fee simple estate, i.e., absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, expropriation, police power, and escheat.Owners in fee simple may choose to improve or not to improve their property. They may also retain ownership or transfer property title by selling the property or giving it away. When a fee owner dies, the property passes to his or her heirs or to others named in the will. This creates an estate, a right or interest in property. Inherited property interests are frequently the subject of valuation assignments.
Life Estates

A life estate is defined as the total rights of use, occupancy, and control, limited to the lifetime of a designated party. The designated party is known as the life tenant and is obligated to maintain the property in good condition and pay all applicable taxes. Life estates can be created by wills and by property deeds or transfers. For example, a fee owner may leave a will that gives land to his widow for her remaining lifetime and, at her death, the land is passed on to their children. Thus, the widow acquires a life estate and functions as a life tenant. A living fee owner may deed or transfer his or her property to a family member and, by the terms of the conveyance, retain a personal life estate. This practice eliminates the expense of probating the will after the owner dies.

To estimate the probable duration of the income from a life estate, an appraiser must rely on life expectancy statistics from actuarial studies. Once the net operating income from the estate and its duration are established, an appropriate discount rate can be selected and applied.


115 Fee Simple and Partial Interests

Lease Interests

Lease interests result when the bundle of rights is divided by a lease. The lessor and the lessee each obtain interests, which are stipulated in contract form and are subject to contract law. The divided interests resulting from a lease represent two distinct, but related, estates of property the leased fee estate and the leasehold estate. The leaseholder, or tenant, receives the right to use the real estate for specific purposes over a defined period of time.

The leased fee estate is the lessor's, or landlord's, estate. A leased fee estate is an ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others; the rights of lessor (the leased fee owner) and leased fee are specified by contract terms contained within the lease. Although the specific details of leases vary, a leased fee generally provides the lessor with rent to be paid by the lessee under stipulated terms; the right of repossession at the termination of the lease; default provisions; and the rights to sell, mortgage, or bequeath the property during the lease period. When a lease is legally delivered, or expired, the lessor must surrender possession of the property to the tenant for the lease period and abide by the lease provisions pertaining to the surrender.

The leasehold estate is the lessee's, or tenant's, estate. A leasehold estate is the right to use and occupy real estate for a stated term under the conditions conveyed in the lease. When a lease is transmitted, or comes into effect, a tenant usually acquires the rights to possess the property for the lease period, to sublease the property if desired, and occasionally to improve the property under the restrictions specified in the lease. In return, the tenant is obligated to pay rent, surrender possession of the property at the termination of the lease, remove any improvements the lessee has modified or constructed if specified, and abide by the lease provisions.

LEASES
Lease Terms

A lease is both a contract and a conveyance. It is a conveyance by which the landlord gives the tenant the right to occupy the property for the term specified in the lease. It imposes a contractual obligation on the tenant to pay rent to the landlord, and it may contain other promises and agreements between the landlord and the tenant. The legal interest held by the tenant is the leasehold estate. Leases may stipulate the use and occupancy of structures or parts of structures. Ground leases specifically grant the right to use and occupy land.

A contract dealing with a conveyance of land, such as a lease, must be set down in writing. A lease should clearly describe the rented property, specifying the geographic location, street address, and condition of the premises. The signatures of the lessor and the lessee effectively establish the legal power of a lease. The tenant's possession gene