A leased fee interest represents:
Correct Answer
A) The landlord's ownership interest subject to the lease
A leased-fee interest is the landlord’s ownership subject to the lease, with contract income and reversion rights as actually defined. The tenant holds the leasehold. Neither a mineral interest nor a generic temporary-use right alone identifies the landlord’s estate.
Why This Is the Correct Answer
Option A is correct because a leased fee interest is the landlord's ownership interest subject to the lease. The landlord conveys use and occupancy to the tenant but keeps the right to contract rent and the reversion at the end of the lease term.
Why the Other Options Are Wrong
Option B: A partial interest in the mineral rights only
Option B, a partial interest in the mineral rights only, describes a separate subsurface interest. A leased fee concerns the landlord's ownership subject to a lease, not mineral rights.
Option C: The right to use someone else's property temporarily
Option C, the right to use someone else's property temporarily, describes the user's position, such as a tenant's or licensee's, not the owner's estate. It does not identify the landlord's leased fee.
Option D: The tenant's right to occupy and use the property
Option D, the tenant's right to occupy and use the property, describes the leasehold interest. The leased fee is the landlord's interest, not the tenant's.
Fee goes with the owner
The owner keeps the FEE subject to the lease; the tenant HOLDS the leasehold.
How to use: Use this to assign leased fee and leasehold interests to the right party.
Exam Tip
If an option describes the tenant's rights, it is describing the leasehold, not the leased fee.
Common Mistakes to Avoid
- -Confusing the leased fee with the leasehold
- -Valuing a leased property as fee simple without considering lease terms
- -Treating the leased fee as a temporary use right
Concept Deep Dive
Analysis
This question tests the definition of a leased fee interest. It is the landlord's ownership interest subject to a lease, including the right to receive rent and to get the property back at the end of the term.
Background Knowledge
When a property is leased, the fee simple is divided into the leased fee held by the lessor and the leasehold held by the lessee. Valuing a leased fee involves the contract rent for the remaining term plus the value of the reversion.
Real-World Application
An appraiser values an office building fully leased to tenants for a buyer. Because the buyer acquires the owner's position subject to the leases, the appraiser values the leased fee interest using contract rents and the reversion.
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