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WASHINGTON, DC-Legislation that would allow landlords to amortize the costs of improvements made for tenants in non-residential properties over 10 years was introduced in the Senate last week, drawing praise by the National Association of Realtors. The Leasehold Improvement Act of 2001, sponsored by Sens. Kent Conrad, D-ND, and Don Nickles, R-OK, is a companion to a bill in the House of Representatives. Such improvements must now be depreciated over a 39-year period, which NAR officials say isn’t realistic because neither the leases nor the improvements will last that long.

“Shortening the recovery period will make renovation and revitalization of business properties more attractive,” said Conrad, in announcing the bill. “That’s not just good for the property owners. That’s good for economic development professionals who want to attract new businesses to empty downtown storefronts or aging strip malls. It’s good for entrepreneurs who want to start or expand their businesses. And it’s good for the architects and contractors who do the renovations.”

NAR president Richard A. Mendenhall notes the cosponsors of the House and Senate bills are from both ends of the political spectrum and from rural and urban areas. “This fact, coupled with the findings of a study by the US Treasury in 2000 that indicates current law for leasehold improvements is unfair, should be proof enough for other lawmakers to recognize that this law needs to be revised,” he says.

The NAR is pushing for the legislation because officials say it’s unfair for building owners to have to amortize the costs of improvements made for new tenants such as wiring, cable, technology, kitchen and bathrooms over 39 years, since the usual term for leases is between 8 and 15 years. A “more realistic” 10-year span would provide more incentive for owners to upgrade space, says Mendenhall, which in turn helps keep older buildings more viable.

“The current 39-year depreciation period is detrimental to our business, because it does not accurately reflect the real life span of most tenant improvements, such as new carpeting or wiring upgrades, or the term of most commercial leases.” Mendhenall says.

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