Location
New Orleans, LA
Start Date
9-12-2011 9:45 AM
End Date
9-12-2011 10:45 AM
Description
When appraisals for property tax are statutorily required to reflect the market value of the underlying property, market rent should be the prevailing component of income to be capitalized in the income approach to value. Such rent captures what is typical in the market place, following the principle of allowing the market place as a whole, and not the specific rent associated with a given property, to be primary determining factor. Use of market rent also enables the valuation of the full bundle of rights associated with the property. Nevertheless, courts sometimes have ruled that contract rent, especially that associated with long term, below market leases, should be used to better reflect the constraints on the value of a property caused by such contracts. The authors have compiled case law on this issue from around the U.S. The presentation will focus on the major legal and appraisal related considerations found in a number of these cases and will include synopses of the cases. The presentation should be of interest to property tax appraisers and legal staff who may be called upon to defend appraisals made using market rent.
Recommended Citation
Dornfest, Alan AAS; Fiscus, Steve; and Olsson, Carl, "Legal and appraisal issues related to use of contract rent or market rent in determining the value of commercial property for property tax purposes" (2011). IAAO Annual Legal Seminar. 9.
https://researchexchange.iaao.org/legal/legal11/sessions/9
Legal and appraisal issues related to use of contract rent or market rent in determining the value of commercial property for property tax purposes
New Orleans, LA
When appraisals for property tax are statutorily required to reflect the market value of the underlying property, market rent should be the prevailing component of income to be capitalized in the income approach to value. Such rent captures what is typical in the market place, following the principle of allowing the market place as a whole, and not the specific rent associated with a given property, to be primary determining factor. Use of market rent also enables the valuation of the full bundle of rights associated with the property. Nevertheless, courts sometimes have ruled that contract rent, especially that associated with long term, below market leases, should be used to better reflect the constraints on the value of a property caused by such contracts. The authors have compiled case law on this issue from around the U.S. The presentation will focus on the major legal and appraisal related considerations found in a number of these cases and will include synopses of the cases. The presentation should be of interest to property tax appraisers and legal staff who may be called upon to defend appraisals made using market rent.