Certified Residential Appraiser Practice Exam

What rights does a lease fee interest hold for the lessor?

1. The right to sell the property

2. The right to receive contract rent and reversionary rights upon lease expiration

3. The right to occupy the property

4. The right to modify the lease terms

The correct answer is: The right to receive contract rent and reversionary rights upon lease expiration

A lease fee interest is an ownership interest held by a lessor (the landlord) in property that is leased to a lessee (the tenant). This interest encompasses several rights, the most significant of which include the right to receive contract rent from the lessee and reversionary rights upon the lease's expiration. Receiving contract rent means that the lessor is entitled to the payments made by the lessee throughout the duration of the lease. This income stream is a vital aspect of a lessor's financial return on their property investment. Reversionary rights are the rights the lessor retains to the property after the lease term ends, meaning that the lessor can regain possession and control of the property once the lease expires. The other options do not reflect the primary rights associated with lease fee interest. While the lessor may have the right to sell the overall property, this is not specifically inherent to the lease fee interest, as this involves broader ownership rights. The right to occupy the property typically belongs to the lessee during the lease term. Additionally, the ability to modify lease terms generally requires agreement from both parties and does not automatically fall under the lessor's rights through the lease fee interest.