Controlling the incentive problems in real estate leasing

Benjamin, John D.; Torre, Cris de la; Musumeci, Jim

doi:10.1007/bf01096989

Cited by 24 publications

(11 citation statements)

References 27 publications

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“…If α þ ðε=2Þ< p 0 <α þ ε, then at the Nash-equilibrium prices determined under a. the demand for hotels would become positive. On the other hand, the presence of the outside option effectively decouples the competition among the hosts, whose respective demands are D 1 ¼ minfθ 10 …”

Section: Appendix A: Proofsmentioning

confidence: 99%

“…This meets with standard contractual arrangements involving moral hazard [12]. It also contains a penalty clause for the renter, which is common to limit abuse of leased real estate assets [10].…”

Section: Period 1: the Intermediary's Design Problemmentioning

confidence: 99%

“…10 Before seeking to optimize the intermediary's commission structure (h, r), it is useful to establish the invariance of demand in equilibrium.…”

Section: Lemma 3 the Intermediary's Profit Ismentioning

confidence: 99%

See 2 more Smart Citations

Intermediation in a Sharing Economy: Insurance, Moral Hazard, and Rent Extraction

Weber

2014

Journal of Management Information Systems

208

126

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Section: Appendix A: Proofsmentioning

confidence: 99%

Section: Period 1: the Intermediary's Design Problemmentioning

confidence: 99%

See 1 more Smart Citation

Intermediation in a Sharing Economy: Insurance, Moral Hazard, and Rent Extraction

Weber

2014

Journal of Management Information Systems

208

126

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“…Fundamentally, a purchase or holding of land and real estate is considered as an investment (Barlowe, 1990). From the investment standpoint, therefore, the reason for granting leases is to obtain rental income (Miller and Upton;Benjamin, 1995;Emerge Capital, 2014). Apart from rental income, several reasons underlie the grant of leases.…”

Section: The Evolution Of Leasehold Estates In Ssamentioning

confidence: 99%

The effect of ground rent and unexpired lease term on property values in Ghana

Awuah

Gyamfi-Yeboah

2019

IJHMA

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Purpose Although several factors influence property value determination depending on the market, relevant studies in sub-Saharan Africa (SSA) often fail to analyse the impact of factors, such as unexpired term of leasehold interest and ground rent, which are also germane to market transactions and value determination. This study aims to examine the effect of unexpired term of leasehold interests and ground rent on the valuation of residential properties in Ghana. Design/methodology/approach A questionnaire instrument was used to collect the views of a sample of professional real estate valuers on the relevance of these and other factors that affect value. In addition, the valuers were tasked to value a residential property located in Accra, Ghana. Ordinary least squares and quantile regression models were thereafter used to analyse the data to determine the effect of the subject variables on value. Findings The study finds a significant relationship between valuers’ views on the relevance of unexpired term of leasehold interest and the value placed on residential properties. Further, the respondents who viewed ground rent as an important factor in estimating values placed significantly lower values than those who viewed it as less important. Research limitations/implications The findings suggest that the respondents may have split opinion on the existing anecdotal evidence that market participants ignore the unexpired term of leasehold interest, an issue that should be settled in theory. The findings also highlight the diversity of opinion on some of the fundamental factors that affect value and the need to build consensus to prevent excessive variation in value estimates among valuers. Originality/value The study makes a significant contribution in terms of extending the existing literature by analysing the impact of unexpired term of leasehold interests and ground rent on residential property values based on empirical data, issue(s) which have often been ignored by existing studies. Findings from the study also provide insights into additional possible causes of valuation errors in Ghana and SSA, which are useful for policy formulation and practice.

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“…Rowland (1996a;1996b) studies how a rent, inclusive of property running costs, is adjusted to its equivalent net rent. Benjamin et al (1995) showed the moral hazard problems associated with a tenant's incentive to under-maintain or overuse a leased property. Brown (1995), using the discounted cash flow model, shows that lease incentives will distort the rental value market without any effect on the open market valuation of properties.…”

Section: Introductionmentioning

confidence: 99%

Lag vacancy, effective rents and optimal lease term

Tse

1999

Journal of Property Investment &Amp; Finance

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This paper analyses the choice of the optimal lease term of office property in relation to expected lag vacancy, periods of rent-free and expected rental income growth. The optimal lease term is the one that minimizes the expected costs of contract negotiation from the perspective of landlords. Specifically, it presents an analysis of how to estimate effective rents based on the lease term, expected lag vacancy and rent-free periods. This study shows that the optimal lease term tends to increase under the following conditions: when the expected rate of rental growth decreases, the discount rate increases, or the expected lag vacancy increases. A longer contract duration is less costly when future rentals are discounted at a higher rate. Altering the lease length will change the risks taken by the landlord. Thus, contract length can be used as a device for insuring vacancy risk. Moreover, we find that the optimal lease length is more sensitive to the lag vacancy when the discount rate is at a relatively high level.

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Controlling the incentive problems in real estate leasing

Cited by 24 publications

References 27 publications

Intermediation in a Sharing Economy: Insurance, Moral Hazard, and Rent Extraction

Intermediation in a Sharing Economy: Insurance, Moral Hazard, and Rent Extraction

The effect of ground rent and unexpired lease term on property values in Ghana

Lag vacancy, effective rents and optimal lease term

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