INCENTIVES

Incentives are often "secret" so that the valuer when comparing leases may not know of the incentives paid in comparable lease agreements other than by way of hearsay. Where the incentives are known, they can be converted into annual rental equivalents using compound formulae and deducted from the base rent to find the effective rent. The method is the same as treating the incentive as a "reverse premium".

The problem with using hearsay evidence is that it will not be admitted in a court hearing as evidence of market rent. Evidence of incentives can most likely be subpoenaed by the court   see Dickinson case (1991) The Valuer, November, 1992, p305.