When contract rent exceeds market rent, what is the excess called?

When contract rent exceeds market rent, the term used to describe the difference is known as excess rent. This concept arises in scenarios where a lease is signed at a rate that is higher than what the current market rates reflect for similar properties.

Excess rent indicates that the tenant is paying more than the average rental rates in the market. It can happen for various reasons, such as a long-term lease agreement established before a market decline or the property offering unique amenities that warrant a higher price.

Understanding excess rent is crucial for appraisers because it provides insights into rental trends and market dynamics. It can influence the valuation of a property and inform investment decisions. Recognizing this excess allows appraisers to make adjustments in their analyses when determining the value of a property based on its rental income potential.