I have been looking at an investment property, it states:

Term: 30 years based on 15 + 5 + 5 + 5 Initial rent per unit: Ranging from $13,500 to $19,000 gross plus GST if any (including free-stay value). Reviews: 2% (compounding) increase starting after year 3 and market review on renewals. Return: Up to 6.95% gross (see pricing schedule) Price per title: Ranging from $199,855 to $273,542 + GST (if any).

Country is New Zealand, it is a commercial apartment hotel investment.

Can I please ask why it is presented in such a way? why not tell me it is a 30 year lease?

  • 1
    You need to add more details. As it is your question is unclear. – Mindwin Oct 6 '16 at 17:05
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    What country is this? Is this residential or commercial? – Joe Oct 6 '16 at 17:23

A 15/5/5/5 lease is an initial 15 year lease with three 5 year options (meaning the tenant can leave without penalty, or without significant penalty, after 15, 20, or 25 years). This is common in commercial properties where the tenant would like the surety of knowing the lease terms for a longer time (30 years) but also the ability to leave prior to the full lease term if business conditions change.

Of course, a 15/5/5/5 lease will cost a bit more than a straight 30 year lease typically (the tenant pays some premium for the ability to have option years).

The lease would have more specifics, including whether anything changes at the option year points and whether there is any exit fee for turning down the option years.

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