Journal of Property Tax Assessment & Administration


This article uses a comparative analytical approach to present a methodology for estimating the fair value of leasehold interests in developed land with long-term ground lease rights. It explains the rationale for why such leaseholds generally should be valued at less than an interest of outright ownership (i.e., fee simple) even though there may be a possibility that the leases can be extended and continue without termination until the end of the service life of the erected building or other development. The proposed approach enables appraisers to introduce some elaborations into applicable methods to develop fair rents and estimate fair acquisition prices for converting land possession to the leaseholder during a buyout process as well as for fair assessment of leasehold interests for taxation. The novelty of this approach is that it introduces explicit land taxation aspects into the picture and considers some analytical dependencies that ensue from it, including those relating to the assessment level for land.

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Valuation of leased property