Short answer
Vacant possession value assesses the property as if it were available to the market without an existing lease or tenant occupation, subject to the assumptions in the report.
Subject-to-lease value assesses the property having regard to an existing lease or tenancy arrangement.
The two bases can produce different value conclusions, particularly where the passing rent, lease term, tenant risk or lease conditions differ from market expectations.
Why this matters
Commercial property value can depend heavily on occupation and lease terms.
A property leased to a strong tenant at market rent may appeal to investors differently from a vacant property.
A property leased at above-market or below-market rent, or leased on unusual terms, may need careful analysis.
Vacant possession basis
A vacant possession assessment usually considers how the market would value the property if it were available for occupation or leasing without the existing tenant arrangement.
It may be relevant where the property is vacant, owner-occupied, occupied by a related party, leased on expired terms, or being assessed for a purpose requiring an unencumbered basis.
The report should state the assumptions adopted.
Subject-to-lease basis
A subject-to-lease assessment considers the existing lease and tenant occupation.
Relevant matters may include lease term, passing rent, market rent, options, rent reviews, outgoings, tenant covenant, incentives and any lease-specific risks or benefits.
The valuer may compare the lease to market terms and consider whether the lease adds to or detracts from value.
Related-party occupation
Where the owner and occupier are related, the rent or occupation terms may not reflect an arm’s-length market arrangement.
The valuer may need to assess market rent and market value independently of the related-party arrangement, depending on the instruction.
The report should state the basis of assessment and any assumptions about occupancy.
Expired or informal leases
Expired, informal or undocumented occupation can create valuation uncertainty.
The valuer may need to rely on provided information, market rent evidence and assumptions about possession or lease status.
Where lease information is incomplete, the report should disclose the limitation.
Common misunderstandings
Vacant possession does not mean the property is physically empty today.
It is a valuation basis or assumption, not necessarily the current occupation status.
A lease is not always positive for value.
It depends on rent, term, tenant risk and market conditions.
Related-party rent may not be market rent.
The valuer may need to assess the property independently of the internal arrangement.
Lease documents matter.
Missing lease details can affect the reliability of the assessment.
The valuer does not interpret lease law.
Legal advice may be required where lease rights are disputed.
Related glossary
- Vacant Possession
- Subject to Lease
- Market Rent
- Passing Rent
- Lease
- Related Party Occupation
- Unencumbered Value
- Assumption
- Limitation
- Market Value
Related articles
- Commercial Property Valuations
- What is a commercial property valuation?
- What is market rent?
- What documents are needed for a commercial valuation?
- How are yields used in commercial valuation?
- How is tenant fitout considered?
- What is Vacant Possession?
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, leasing or financial advice. Commercial property matters should be considered with the appropriate qualified adviser. Every valuation depends on the specific property, purpose, valuation date, evidence, assumptions and instructions.