I currently hold a lease in which rent is based on the replacement costs of the buildings and the land. Recently there has been a dispute over the value of the replacment cost of the land. Does anyone have any suggestions on how to put a value on the replacement cost of raw land? I am somewhat questioning that the replacement value of land is equal to fair market value of the land.

The replacement cost of land is its current market value.

How do you figure that? Thanks.

Run the comps on vacant land and estimate it's value based on that, same as you would do with a house or anything else like that.

Does that vacant land need to be of the same market value as the original land or of similar use, etc?

Hire an appraiser as you are in need of professional help.

What is the dispute? Does the tenant feel the value is lower? How did the tenenat or you come by the value???

The tenant takes the position that the value of the replacement costs of the land is lower than the market value, because the property is in a prime location. This is a summer camp that is leased based on the value of the replacement costs of both the buildings and land. The lease was created a long time ago and now with market values skyrocketing, we have a major dispute over what the definition of replacement value is on land. I have called an appraiser and he takes the position that you can't appraise replacement costs on land. What are your thoughts?

Find an appraiser that specializes in commercial properties and hhas the MAI designation. What did the appraiser say the definition of replacement value of land was? The replacement cost is what it would cost to buy the land and that is its current market value.

Paul is right: You will need a qualified appraiser to determine the following:
(a) The current market value of the property;
(b) The current Replacement Costs New of the Improvements on the property Less Depreciation;
(c) Resulting in -- Current Market Value, Less Depreciated value of Improvements, equals current Land Value;

If you are being overcharged, the Appraiser's Report will most likely aid you in any negotiations for a reduction with your landlord.

Important Notice: This information is provided as basic educational information by the author and is not a substitute for the advice of an expert and/or the advice of a lawyer. There is NO representation as to legality, accuracy, correctness of the herein information and the reader is strongly urged to consult a lawyer in the relevant jurisdiction to ensure accuracy before acting on this information .

This topic can always be a subjective one. I guess thats usually the case when appraisers are brought in for the final say so. A, B, and C of Devil's post is right on track, even the disclaimer! lol

I'm guessing you are talking about Market Value of the land?? The Devil got it right... there is no such thing as "replacement cost of land". Real estate is an immobile asset, and economic trends affect its locational quality in relation to competing properties. In other words, each piece is unique. But, you can estimate it's market value from comparable sales with similar locations, having the same economic influences. Only the improvements can be depreciated. Therefore, a replacement cost can be estimated only on the improvements. The land is land, and has a market value. But it can not be depreciated, and does not have a "replacement cost".

Certified General Appraiser/Broker/Investor/Builder

The term "replacement cost of land" reminds me of an property insurance agent trying to justify his high premiums. LOL