Chapter 3

Question 1

What is base rent?

Answer 1

The monthly recurring charges as stated in the lease.

Question 2

What is additional rent?

Answer 2

They are expense escalations and common area operating expenses.

Question 3

What are sundry billings?

Answer 3

They are miscellaneous charges.

Question 4

What is a lease?

Answer 4

A written agreement between the tenant and the owner of a building for the use of psace in that building for a time.

Question 5

What is the lease commencement date?

Answer 5

The date that the tenant moves in and starts paying rent.

Question 6

What is stepped rent?

Answer 6

Rent that has a lower than average first year rental rate that gradually increases throughout the lease term.

Question 7

When is stepped rent commonly used?

Answer 7

It is used when overall rental rates are lower than average, to intice potential tenants to the building, when a tenant is a start-up company that is cash poor.

Question 8

What is holdover rent?

Answer 8

An amount stated as a multiple of the current rental rate. It is charged if the tenant continues to occupy space after the lease term expires.

Question 9

What is additional rent?

Answer 9

Rent charged to capture the the increased cost of operating the building through agreeded upon increases to the minimum rent.

• operating expenses
• taxes
• utilities
• inflation

Question 10

What is percentage rent?

Answer 10

Rent collected from a retail store if sales figures exceed an agreed upon level. This helps to cover building owners costs for upgrades to attact retail customers and helps the owner participate in the tenant’s success.

Question 11

What is cash receipts journal?

Answer 11

It is a listing of revenues charged and received that are recorded on a daily basis.

Question 12

What is the minimal amount of information that should be kept in a tenant database?

Answer 12

1) Unique Tenant ID
2) Tenant Legal Name
3) Tenant Billing Address
4) Lease terms
5) Rental Square Footage
6) Base Rent
7) Other recurring monthly charges

Question 13

Explain tenant reminder notices.

Answer 13

Reminders sent to tenants of lease obligations. They are not invoices and not sending them does not absolve tenants of payment obligations.

Question 14

Eplain proper collection policy.

Answer 14

1) Reminder sent by the 25th of the month before rent is due.
2) Past due note sent of rent payment is not received by the 5th.
3) Reminder call if rent is not received by the 10th.
4) Reminder visit with payment plan made if rent is not received by the 15th.
5) Collection efforts communicated to building owner by letter or call.
6) If rent is 30 days late legal action is initiated with owner’s approval.

Question 15

What is the cutoff date?

Answer 15

The date marking the end of monthly activity.

Question 16

Why is there a cutoff date rather than using the end of the month?

Answer 16

It provides for sufficient time to categorize, verify and transfer data to the monthly financial statement reports.

Question 17

What are the three basic varieties of tenant billings?

Answer 17

Base rent, additional rent, sundries

Question 18

Define holdover rent and rent abatement.

Answer 18

Holdover rent-rent that is charged to a tenant who occupies a space past the end of a lease.
Rent Abatement is free rent.

Question 19

Which charges esentially pass along the expense of operating the building to the tenant?

Answer 19

Additional rent-charges for operating expenses, real estate taxes, common area maintenance.

Question 20

Fill in the blank: A consistent, uniform collection policy is a key succesful rent collection, and also ensures that adequate ________ is available if legal action is necessary.

Answer 20

Documentation

Question 21

Your exsisting tenant’s lease expired last month. Their monthly rents is $9234 and the have a holdover clause at 125%. What is their monthly holdover rent?

a) $2,308.50
b) $9,234.00
c) $11,524.50
d) $13,851.00

Answer 21

c) $11,524.50

Question 22

Stepped increases may be used in which situation?

a) when rental rates are expected to remain constant over the coming years
b) for start-up companies with low initial cashs flow that are expected to increase
c) to improve up-front cash flows of the building
d) when rental rates are expected to decrease in the coming years

Answer 22

B for start-up companies with low initial chas flows that are expected to increase over the coming years

Question 23

Rent abatements are also known as:

a) rent credits
b) rent reductions
c) rent blockage
d) free rent

Answer 23

d) free rent

Question 24

Tenant charges and collections are summarized in the:

a) cash receipts journal
b) tenant database
c) income statement
d) general ledger

Answer 24

a) cash receipts journal

Question 25

To facilitate tehir monthly rent payment, tenants may recieve a (an):

a) invoice
b) statement
c) billing
d) bank check request

Answer 25

b) statement