What does Excess Rent indicate?

Excess rent signifies the situation in which the contract rent paid by a tenant is greater than the economic rent, which is the market value or fair rental value of a property given its location, condition, and other factors. This concept often arises in real estate when analyzing leases and determining whether they are more favorable or disadvantageous compared to prevailing market rates.

This distinction is crucial for property valuation and assessments because understanding excess rent helps assessors measure the financial performance of a property. When contract rent exceeds economic rent, it can indicate that a property is rented at a premium, possibly due to factors such as high demand, location desirability, or unique property characteristics.

The other options discuss related concepts but do not accurately describe what excess rent specifically means. For instance, while the difference between actual and expected rents is about rent performance, it does not focus on the comparative analysis central to excess rent. Similarly, lease payments being less than market rates and increases in rent following property improvements relate more to market dynamics but do not encapsulate the essence of excess rent.