Surrender and Renewal

Question 1

What is a surrender and renewal valuation?

Answer 1

When the landlord / tenant wants a surrender of the existing lease and agrees to grant a new lease - usually a longer or on different lease terms simultaneously

Question 2

How do you value a surrender and renewal?

Answer 2

Calculation of a premium to reflect the change in the value of the leasehold interest

Need to value the before and after leasehold interest

Question 3

What is a premium in relation to a transaction?

Answer 3

A capital payment made by one party to another

Question 4

In what instances do premiums commonly arise?

Answer 4

• Key money paid by an in-going tenant of a retail property to secure a prime shop
• Sum of money to represent fixtures and fittings within a building, paid by an in-going tenant
• Sum of money paid by an in-going tenant for a leasehold interest, to represent the positive difference between the passing rent and the market rent of the property. This is the profit rent
• In the event that there is a negative difference, a reverse premium may be paid by the out-going tenant to the new tenant
• The sum of money paid by a landlord to a tenant for the surrender of a leasehold interest and the granting of a new lease