VALUATION OF…
Ground Rentals
Rental payable for the use of land under a ground lease, separate from any buildings erected on it, valued on the capitalised ground rent.
Content status: Methodology and evidence log — Sources, Caselaw and Market Information are added incrementally.
Methodology
Ground rentals are valued using the Income Capitalisation Method, applying a capitalisation rate to the contracted or market ground rent payable under the ground lease, reflecting the value of the land only, exclusive of any improvements erected by the lessee, which typically revert to the landowner at the end of the lease term.
Under the Big Five framework, the Income Generating Unit is the land itself under lease; contract ground rent is compared to market ground rent for comparable sites (often expressed as a percentage of unencumbered land value or a rate per square metre), and the capitalisation rate applied reflects the lessee’s covenant, the remaining lease term and the value of any reversionary interest in improvements at expiry.
A Direct Comparison cross-check against the unencumbered land value, cross-referenced with the typical ground rent-to-land-value ratio for comparable ground leases in the area, should be used to test the primary valuation.
Caselaw
Case law, regulatory rulings and expert-determination disputes relevant to valuing this asset class. Each entry cites its source and summarises the practice implication for valuers — this is not investment, financial, or legal advice.
The Evidence Log is for VDH Members
The Evidence Log for Ground Rentals — sourced sales, disposals and rentals with Valuer’s Lens commentary — is included in VDH Membership: from R125/month for SACPVP candidates and students, R399/month standard. All prices include VAT.
The methodology and case law on this page remain free to read.