A ground lease with 40 years remaining and fixed rent creates for the landlord:
Correct Answer
C) A leased fee interest valued on the rent stream and reversion
Why this is correct: The landlord's interest under a ground lease is a leased fee estate. Its value consists of two parts: the present value of the fixed ground rent for the 40-year term, and the present value of the reversion (the land and any improvements) at the end of the lease. Why the other choices are wrong: The lease is an encumbrance, so ownership is not fee simple free and clear. The landlord does not have a leasehold interest. The landlord's right to possession of buildings is deferred until lease expiry. Exam tip: Leased Fee Value = PV of Contract Rent + PV of Reversion.
Why This Is the Correct Answer
Why this is correct: The landlord's interest under a ground lease is a leased fee estate. Its value consists of two parts: the present value of the fixed ground rent for the 40-year term, and the present value of the reversion (the land and any improvements) at the end of the lease. Why the other choices are wrong: The lease is an encumbrance, so ownership is not fee simple free and clear. The landlord does not have a leasehold interest. The landlord's right to possession of buildings is deferred until lease expiry. Exam tip: Leased Fee Value = PV of Contract Rent + PV of Reversion.
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