Property Valuation
A Rhode Island commercial property is under a long-term lease below current market rent. How would an appraiser typically account for this?
AIgnore the lease and appraise at market value
BValue the leased fee interest (which may be below market) separately from the leasehold interest✓ Correct
CAdd a premium for the stability of below-market rent
DUse only the cost approach
Explanation
When a property is under a below-market lease, the appraiser values the leased fee interest (ownership subject to the lease) which may be lower than the fee simple value. The leasehold interest (tenant's benefit from below-market rent) has its own value.
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