16634 Lecture 8: Valuation of Leasehold Interests Part 2
Document Summary
Incentives are commonly given in the marketplace to accelerate the letting up of buildings. The level of inducement offered to attract a tenant will be proportionate to current market conditions. Obviously, in a market downturn, incentives can form a significant part of a leasing deal. Premiums are, conversely, paid by tenants in a strong demand-led market to ensure their tenancy. A premium is a lump sum paid by the lessee at the commencement or during the period of a lease. This is treated as consideration payable by a tenant in addition to, or instead of, rent. As it is a definable charge to the lessee, it must be connected in some way to the amount of the rental being paid. To give a more accurate picture of the lessee"s responsibilities, the valuer will have to convert this lump sum to an annual equivalent, which can then be added to the actual rental being paid.
