Glossary

Leased Fee Estate

The landlord's ownership interest in property that is subject to a lease, consisting of the right to receive contract rent during the lease term plus the reversionary right to regain full possession at expiration.

The leased fee estate is the mirror image of the tenant's leasehold estate: it is what the owner actually holds and can sell or mortgage once a property is leased. Its value depends on the durability and creditworthiness of the income stream (contract rent versus market rent, lease term remaining, tenant credit) plus the present value of the reversion when the leasehold ends. Appraisers must state explicitly whether a valuation is on a leased fee or fee simple basis, since a below-market long-term lease can depress leased fee value even though the fee simple (unencumbered) value of the real estate is higher — a distinction that matters heavily in sale-leaseback and net-lease investment analysis where the price paid is really a price for a bond-like income stream secured by real estate.