Leased Fee

A leased fee interest represents the ownership position of a landlord who has conveyed the right of occupancy to a tenant through a lease agreement, while retaining the underlying ownership of the property. The owner's rights are temporarily limited by the terms of the existing lease.

In appraisal practice, the leased fee interest is valued based on the income the property generates under its current lease terms, rather than its potential market rent. When lease rates differ significantly from current market conditions, the leased fee value may diverge from the fee simple value — a distinction that carries meaningful implications for collateral assessment.

Loan originators and reviewers should confirm which ownership interest is being appraised in income-producing or tenant-occupied properties, as appraising the wrong interest can result in a value conclusion that does not accurately reflect the collateral being secured.