Lease Review Flashcards
Leases give individuals the right to ______, while licenses only give individuals the right to _____
Control property; act on it
Commercial (space leases)/True leases are considered true because it passes _______ for lessor to claim ______, including _______.
Lessee claims lease payments as ______
Accounting requirements; tax benefits; depreciation deductions
Capital expense
Finance lease/synthetic lease is one where the lessor _________ for a lessee and ______ over a defined period.
Lessee makes payments that cover the ______ during the lease period. In some cases, a larger payment will be made at the end of the contract, also known as ______
Purchases the asset; rents it out
Original cost; balloon payment
Percentage leases are common in _____
Retail space
NNN-Leases allow ______ (TIM) to be passed through to Tenant
Taxes, insurance, and maintenance
Gross lease consists of a ______ payment
Single rental
Bond-type leases/credit credit leases exist where money is lent on the __________ of the Tenant
Strength of credit
Some particular lease types are: (R/M SORW)
- Residential/Multifamily
- Self-storage “leases”
- Office
- Retail
- Warehouse
“Term” of a lease consists of ______ and ______
Commencement date; Expiration date
For Commencement Date, consider:
- Date certain vs. completion of landlord/tenant work
- Ready for occupancy/tenant’s occupancy/certificate of occupancy
- Effective date vs. Commencement date
- “Lease Years”
Expiration Date is contingent on _____
Commencement date
(Renewal Rights)
Landlord: (REL)
Tenant: (FM)
Landlord:
- Maintain current tenant
- Ease of transition
- (No) lease-up costs
Tenant:
- Flexibility
- Minimize business disruption and relocation costs
(Renewal rights) For renewal economics, consider: (R(FA)A)
- Renewal rent (FMV, Arbitration)
2. Additional leasing commissions due?
(Renewal rights) For renewal provisions, check for:
- How many
- How long
- Required notice (form and timing)
- Personal to tenant?
- Need to be “good tenant” in order to renew (e.g., no defaults)
(Holdover)
Landlord: (SEI)
Tenant: (M)
Often, for Holdovers, Landlords charge ______ of base rent, sometimes with _______.
Landlord:
- Space utilization
- Extract additional economics from Tenant for bad behavior
- Indemnity for all damages including Tenant-in-waiting issues
Tenant:
1. Minimize “hurt” from overstaying welcome
125-150%; consequential damages
(Guarantor and Security Deposit)
Security Deposit - Cash in an _________ account
Letter of credit: Check for ________
Guarantee: (TCM)
Protecting Tenants: Watch out for _______ or _______
Interest-bearing, segregated
Transfer requirements/fees
- Term
- Coverage
- Amendments
Reduction of deposit; termination of guarantee
(Rent)
Landlord: Maximize _______
Tenant: _______
Base Rent may be _____ or ______
Landlord: Revenues/profits
Tenant: Cost certainty
Base Rent: Fixed; Increases
Additional Rent includes: (O(C)TMYAUHL)
- Operating expenses (capital expense exclusion/inclusion)
- Taxes
- Monthly estimates of Tenant’s proportion of expenses
- Year-end tune ups
- Audit rights by tenant
- Utilities/electric inclusion
- HVAC
- Late charges
Due to COVID, check for ______ present in any amendments (allows Landlord to capture any possible ______.
Rent escalation clauses; rent deferral
Restaurant or retail leases have rent that is _____.
Before COVID, there was a trend away from _____, but may be accelerated now.
Linked to sales
Percentage rent
Co-tenancy occurs when tenant’s obligation to _______
If not met, then Tenant may have right to _______
Occupy the Premises is tied to an anchor Tenant
Terminate or renegotiate
Co-tenancy is more common in _______ context and ______
Retail/restaurant; shopping center/malls
Co-tenancy may also involve ______ with other Landlord property
Radius restrictions
(SNDA)
Landlord may be required to attempt to obtain _______
Standard of cooperation is ________
SNDA (current/future lenders)
Best efforts; commercially reasonable efforts
(SNDA)
Landlord: (SIT)
Tenant: P
Lender: (RLFR)
Landlord:
- Satisfy lender requirements
- Interference by Tenant
- Tenant in place (attornment obligation)
Tenant:
1. Preserve rights/benefits under Lease
Lender:
- Rating Agency requirements
- Loan seller representation
- Foreclosure effects
- Remedies
(Subordination Provisions)
- Is the lease subordinate to ______ (FGS)
- Subordination is often conditioned upon ______ or ______ by Tenant
- Fee mortgages; ground leases; superior liens
2. Non-Disturbance; Receipt of NDA/SNDA
(Non-Disturbance and Attornment Provisions)
- Is attornment ______?
- Attornment is also often conditioned upon ______ or ______ by Tenant
- Automatic
2. Non-Disturbance; Receipt of NDA/SNDA
(Options)
For Options, consider: (PRER)
- Purchase Options
- ROFO or ROFR on sale/transfer of fee interest in the property
- Expansion rights
- ROFR on vacant space
(Parking Rights)
For parking rights, consider: (RF)
- Reserved/unreserved?
2. Fees or free?
(Insurance)
For insurance, check for: (PLGWO)
- Property (casualty; all-risk)
- Loss of business covering Tenant’s property income
- General liability
- Workers’ compensation
- Others
(Insurance)
Check whether Landlord requirement to carry property insurance on building operating expense is ________
Allocated to tenants
(Insurance)
Insurance terms should include: (ANCW)
- Identity of additional insureds
- Notice of cancellation/modification
- Certificate delivered annually
- Waiver of subrogation by Tenant’s and Landlord’s insurers
(Insurance)
Landlord needs to make sure the insurance complies with _______ and adequate for _______
Check whether there are provisions for _______
Lender requirements; given market conditions
Self-insurance rights
(Tenant Improvements)
If Landlord improves: (D/T)
If Tenant improves: (A/R F/D R/E)
Landlord: Delivery/Timing
Tenant: Allowance/rent credit (e.g., abatement); force majeure/delays; reserves/escrows
(Alterations)
Landlord: ______ over changes to building/premise
Tenant: Need right to make ______ without ______
Thresholds: (SE)
Ent of term: Title and cost to ________
Landlord: Keep control
Tenant: Minor changes; Landlord interference
Thresholds: Structural; Expense (mechanic lien issues)
End of term: Remove alterations and tenant improvements
(Alterations)
Tenant improvements may be _____, and so use footnotes to confirm that _______
Behind schedule; milestones are reached
(Casualty and Condemnation)
Landlord:
- Keep tenant lease for _____
- Landlord right to _______ after substantial damage (___%)
- Termination rights for _____ (MIE)
- Minor damage
- Rebuild premises; 25%
- Major casualty; insurance insufficiency; end of term
(Casualty and Condemnation)
Tenant:
- Maximize ability to exit if _______
- Obligation to ________
- Right to _____ if major casualty in last year of lease term
- Interruption lasts too long
- Rebuild and repair premises
- Terminate
(Assignment and Subletting)
Landlord:
- _____ over premises/lease
- Not allow Tenant to become ______
- Maximize economic benefits upon _____ (recapture/profit share)
- ______ in connection with transfer request
- Maintain control
- Competing landlord
- “Break” of lease
- Recoup expenses
(Assignment and Subletting)
Tenant:
- Maximize _____ and _______
- Minimize landlord interference with _______
- Flexibility; economic opportunities
2. Business operations/transitions
(Assignment and Subletting)
Some general prohibitions include: (ASLMOC)
- Assignment of lease
- Sublease of premises
- License/use by others
- Mortgage/hypothecation
- Operation of law
- Change of control (direct/indirect)
(Assignment and Subletting)
Permitted Transfers include: (ASMF)
- Affiliates
- Sale of assets/ownership interests
- Mergers
- Financial tests (net worth, etc.)
(Assignment and Subletting)
For “consent”, consider: (RSF)
- Required notice (timing and form)
- Standard of consent (sole discretion, cannot unreasonable withhold)
- Fees
(Maintenance Responsibilities)
Landlord: ______ of the building
Tenant: Damage caused by ______
HVAC maintenance depends on ______
Landlord: Structural elements
Tenant: Tenant
HVAC: Location (i.e., whether within premises)
(Environmental Covenants)
For environmental covenants, check for: (UAC)
- Use of premises and common area
- ADA for new improvements, alterations
- Compliance (whether express/implied)
(Other Provisions)
Force majeure clauses should exclude _______
Monetary obligations
(Other Provisions)
For Landlord Liens, is Landlord required to deliver _____ and ______
Landlord: Preserve ______ for tenant default
Tenant: Need to be able to finance business with ______
Lien Waiver; Access Agreement
Maximum recovery
Secured lending
(Events of Default)
Events of default includes: (FPBB)
- Failure to pay rent
- Performance breach
- Breach of representations
- Bankruptcy
(Events of Default)
Some remedies for events of default include: (PSCT)
- Possession, re-let, suit for damages
- Suit for rent not received over fair market rent as liquidated damages
- Claim for costs, expenses
- Termination of lease
(Indemnities)
Landlord: _______ for claims/damages caused by Tenant
Tenant: Indemnify for losses caused by ______ of invitees and damage to premises
- In NY, it is against public policy to ________
Landlord: Maximize protection
Tenant: Default, accidents, acts
- Disclaim liability for negligence
(Related Lender Considerations)
For related lender considerations, consider:
- Liability for _______?
- Limitations on liability to _______?
- Prior landlord’s acts
2. Interest in property
