Short answer
Vacant possession means the property is assessed or transferred as if the buyer is able to occupy, use or lease the property without an existing tenant or occupier remaining in possession, unless the valuation instructions state otherwise.
In valuation work, vacant possession can be important because a property sold with vacant possession may appeal to a different buyer profile than a property sold subject to an existing lease.
Vacant possession is not always the correct basis for a valuation. The appropriate basis depends on the purpose of the valuation, the property type, the instructions and any lease or occupation arrangement affecting the property.
Why this matters
The difference between vacant possession and subject to lease can materially affect value.
For residential property, vacant possession is often assumed where the property is owner-occupied or where there is no lease being considered as part of the valuation.
For leased residential or commercial property, the valuer needs to understand whether the property is to be assessed with vacant possession or subject to the existing lease.
This distinction can matter for Family Law, Capital Gains Tax, Stamp Duty, deceased estates, SMSF reporting, rental reviews and commercial property valuation.
How a valuer considers vacant possession
A valuer will consider the instructions and the actual occupation status of the property.
Relevant issues may include:
- Whether the property is owner-occupied
- Whether the property is leased
- The lease term and expiry date
- Any options or rights of renewal
- The passing rent compared with market rent
- Whether the tenant has occupation rights
- Whether the valuation purpose requires vacant possession or subject to lease
- Whether the report needs to disregard or include tenant fitout
- Whether the buyer profile would change depending on occupation
For a standard residential property, vacant possession may be a straightforward assumption.
For commercial property, the difference can be significant because investors often assess value by reference to income, lease security, tenant quality, lease term, outgoings and risk.
Vacant possession versus subject to lease
A vacant possession valuation usually considers the property as if it is available to the market without a continuing tenant.
A subject to lease valuation considers the property having regard to the existing lease arrangement, including rent, term, options, incentives, outgoings and tenant-related risks.
The two approaches may produce different value outcomes.
For example, a commercial unit leased at above-market rent may be worth more to an investor than the same unit with vacant possession. Conversely, a property leased at below-market rent, or with a weak lease covenant, may be less attractive than if it were available with vacant possession.
Related glossary
Related articles
- What is Market Value?
What is an arm’s length sale?
What comparable sales does a valuer rely on?
How do improvements affect property value?
The Valuation Process
Related services
Prepared by:
Tigran Amiyants, Certified Practising Valuer (CPV), Managing Director, Northbourne Valuers.
Last reviewed:
July 2026.
General information note:
This page provides general information only and does not constitute valuation, legal, taxation or financial advice. Every valuation depends on the specific property, purpose, valuation date, evidence, assumptions and instructions.