Chapter 10

Question 1

Which document is a frequent source of confusion for tenants, and why?

Answer 1

The lease-they are drafted by attorneys and many tenants have not read the entire document or understood each clause.

Question 2

What is the property or facility manager’s role during a lease dispute?

Answer 2

To resolve disputes by having a good working knowledge of the lease.

Question 3

What is base rent?

Answer 3

The rent paid per the lease.

It is written as a total for the lease term and then broken down to monthly payments

Question 4

What is abated rent?

Answer 4

Free rent

Question 5

What should the policy be concerning late charges on tardy rent payments?

Answer 5

If late charges are included in the lease then they should be charged whenever rent is late.

Question 6

How are late charges calculated?

Answer 6

As a percentage of past due rent
As a percentage of monthly rent
As a flat fee
They may include interest on an outstanding balance

Question 7

What is the commencement date?

Answer 7

The date the lease obligation begin for the tenant

Question 8

What is a gross lease?

Answer 8

It is a lease containing base rent only with no additional rent or operating expenses.

Question 9

What is CPI?

Answer 9

It stands for the Consumer Price Index

Question 10

What is a pass-through?

Answer 10

It is an agreement between tenant and owner concerning a method of increasing rent in addition to the CPI.

Question 11

What are two common examples of additional rent?

Answer 11

Operating Expenses

Property Taxes

Question 12

What is ad valorem?

Answer 12

Taxes levied based on property value (property taxes)

Question 13

What is a letter of credit?

Answer 13

It is a check from the tenant’s bank, with expiration dates, held instead of cash deposit until it is determined that a claim will be filed on the tenant’s security

Question 14

What are requirements for interest on security deposits?

Answer 14

Deposits may be required by state law or lease clauses to be held in interest bearing accounts.

Question 15

What are customary and additional billable services?

Answer 15

Customary-water, electricity, heating & cooling, janitorial

Additional-overtime HVAC, sub-metered electricity, other repairs or replacements

Question 16

What is a sublease?

Answer 16

It is when the lessee agrees to lease his or her space to a third party

Question 17

What is holdover rent?

Answer 17

Rent charged when a tenant continues to occupy a space after the lease term expires.
It is expressed as a percentage of base rent. 150% is common.

Question 18

What is an option to renew?

Answer 18

It is a lease clause that gives the tenant the choice to extend his or her current lease for a specified period of time.

Question 19

List some examples of non-financial lease clauses.

Answer 19

default
insurance certificates
cancellation rights
personal guarantees
use of premises

Question 20

What is a lease abstract?

Answer 20

It is a form that reminds a reader of important lease clauses to review and flows well with the lease document.

Question 21

What is a tenant roster?

Answer 21

It is an alphabetical or numerical listing of all current tenants in the building.

Question 22

What is a rent roll?

Answer 22

It is a quick reference of the entire property that contains information about each tenant.

Question 23

What is a tenant profile?

Answer 23

It is a printout of data from the lease abstract after it has been entered.

Question 24

What is a reminder notice?

Answer 24

It is a courtesy reminder of lease obligations

Question 25

What are rent steps?

Answer 25

Scheduled rent increases in a tenant’s lease

Question 26

What is a lease expiration report?

Answer 26

It is a list of each tenant’s lease in the order of its expiration date with most current expirations first.

Question 27

How are late charges normally assessed?

Answer 27

As a percentage of outstanding balance
As a percentage of monthly rent
As a flat fee
Late fees may also include interest on the outstanding balance

Question 28

What is a lease commencement date?

Answer 28

It is the date on which rental obligation begins.

Question 29

Define holdover rent.

Answer 29

It is rent charged to a tenant occupying a space after the lease expiration date.
150% is the most common holdover rate.

Question 30

List some common lease clauses that may require abstraction but do not have direct financial implications.

Answer 30

Default
Right of first refusal
Insurance certificates
cancellation rights
personal guarantees
use of premises

Question 31

Security deposits must be returned to the tenant:

a) in accordance with state law
b) immediately upon expiration of the lease
c) ten days after the tenant vacates the space
d) one month after the tenant vacates the space

Answer 31

a) in accordance with state law

Question 32

Leases are usually drafted by the:

a) tenant
b) landlord
c) tenant’s attorney
d) landlord’s attorney

Answer 32

d) landlord’s attorney

Question 33

Lease terms and rental payments are generally structured on a(n):

a) semi-annual basis
b) quarterly basis
c) daily basis
d) monthly basis

Answer 33

d) monthly basis

Question 34

Late charges should be assessed:

a) when the tenant has been late for three months in a row
b) when the tenant is about to default on the lease
c) every month the tenant is late
d) only for a tenant with a questionable credit history

Answer 34

c) every month the tenant is late

Question 35

The lease abstract form should be designed to:

a) slow down the abstraction process
b) remind the abstractor of typical important lease clauses
c) function as an output document
d) replace the actual lease document

Answer 35

b) remind the abstractor of typical important lease clauses

Question 36

The first step in finding answers about lease questions is usually:

a) referring to the tenant profile or lease abstract
b) searching trough the lease until the answer is found
c) referring to the relevant clause in the standard lease
d) contacting the lawyer who drew up the lease

Answer 36

a) referring to the tenant profile or lease abstract