Certified Residential Appraiser Practice Exam

What type of interest is held by a landlord when the rights of use and occupancy are transferred by lease?

1. Leasehold interest

2. Leased fee interest

3. Easement

4. Lessee

The correct answer is: Leased fee interest

The type of interest held by a landlord when the rights of use and occupancy are transferred by lease is known as leased fee interest. This interest represents the landlord's ownership rights in the property that are superior to those of the tenant (lessee) who is granted the right to occupy the property for a specified period under the lease terms. Leased fee interest includes the right to receive rent from the tenant, the right to regain possession of the property after the lease expires, and the right to impose lease terms. It is essentially the value of the landlord's interest in the income-producing property, taking into account both the lease obligations and the fair market value of the property. This distinguishes it from other types of interests related to property ownership and occupancy, such as a leasehold interest, which is held by the tenant, or an easement, which grants a specific right over someone else's property but does not involve possession or occupancy.