The value of all rights in a property is $950,000. The owner conveys the air rights, which account for $140,000 of that value. The rest of the value is allocated to the retained rights, and no other fractional effects or deductions apply. What amount is allocated to the retained rights?
Correct Answer
B) $810,000
Retained allocation=950000−140000=810000 dollars. Common errors: reporting the air-right contribution gives $140,000; adding the air right instead of subtracting it gives $1,090,000; reporting the all-rights value gives $950,000.
Why This Is the Correct Answer
Option B is correct because the retained allocation equals $950,000 minus $140,000, which is $810,000. The value is allocated between the conveyed and retained rights with no other fractional effects or deductions, so a straight subtraction applies. This is an allocation result and does not imply that separately sold interests always add up to the whole in the market.
Why the Other Options Are Wrong
Option A: $140,000
Option A is wrong because $140,000 is the conveyed air-right contribution itself, not what remains. The retained rights are $950,000 − $140,000 = $810,000.
Option C: $950,000
Option C is wrong because $950,000 is the all-rights value, which ignores that the air rights were conveyed. Subtracting the $140,000 air-right contribution gives $810,000 for the retained rights.
Option D: $1,090,000
Option D is wrong because $1,090,000 comes from adding the air right instead of subtracting it ($950,000 + $140,000). Conveying a right removes it from the owner's bundle, so the correct figure is $950,000 − $140,000 = $810,000.
Whole minus sold equals kept
When part of the bundle of rights is conveyed, subtract that part from the whole to find what the owner keeps.
How to use: Use this for any residual question where one interest is carved out of a whole.
Exam Tip
Check whether the question asks for the conveyed part, the whole, or the remainder before choosing a figure.
Common Mistakes to Avoid
- -Reporting the conveyed air-right value as the retained value
- -Adding the conveyed right to the whole instead of subtracting it
- -Assuming separately sold interests always sum to the whole
Concept Deep Dive
Analysis
This question tests a simple residual allocation within an additive allocation. The all-rights value is given, along with the contribution of the air rights being conveyed. Here the retained rights equal the whole minus the conveyed part.
Background Knowledge
Real property rights can be divided into components, such as surface, air and subsurface rights, or leased fee and leasehold interests. Residual techniques allocate value to one component by deducting the value of other components from a total. In actual markets the sum of separately sold interests may not equal the unencumbered whole, so an additive allocation is a stated fact of the assignment, not a general rule.
Real-World Application
A downtown owner sells development air rights over a low-rise building to an adjacent developer. In an assignment that calls for an additive allocation, the appraiser deducts the air-rights contribution from the all-rights value to estimate the retained interest, while noting the assumption.
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