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Dechert > Lease Review > Flashcards

Lease Review Flashcards

1
Q

Leases give individuals the right to ______, while licenses only give individuals the right to _____

A

Control property; act on it

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2
Q

Commercial (space leases)/True leases are considered true because it passes _______ for lessor to claim ______, including _______.

Lessee claims lease payments as ______

A

Accounting requirements; tax benefits; depreciation deductions

Capital expense

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3
Q

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 ______

A

Purchases the asset; rents it out

Original cost; balloon payment

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4
Q

Percentage leases are common in _____

A

Retail space

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5
Q

NNN-Leases allow ______ (TIM) to be passed through to Tenant

A

Taxes, insurance, and maintenance

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6
Q

Gross lease consists of a ______ payment

A

Single rental

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7
Q

Bond-type leases/credit credit leases exist where money is lent on the __________ of the Tenant

A

Strength of credit

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8
Q

Some particular lease types are: (R/M SORW)

A
  1. Residential/Multifamily
  2. Self-storage “leases”
  3. Office
  4. Retail
  5. Warehouse
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9
Q

“Term” of a lease consists of ______ and ______

A

Commencement date; Expiration date

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10
Q

For Commencement Date, consider:

A
  1. Date certain vs. completion of landlord/tenant work
  2. Ready for occupancy/tenant’s occupancy/certificate of occupancy
  3. Effective date vs. Commencement date
  4. “Lease Years”
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11
Q

Expiration Date is contingent on _____

A

Commencement date

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12
Q

(Renewal Rights)

Landlord: (REL)
Tenant: (FM)

A

Landlord:

  1. Maintain current tenant
  2. Ease of transition
  3. (No) lease-up costs

Tenant:

  1. Flexibility
  2. Minimize business disruption and relocation costs
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13
Q

(Renewal rights) For renewal economics, consider: (R(FA)A)

A
  1. Renewal rent (FMV, Arbitration)

2. Additional leasing commissions due?

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14
Q

(Renewal rights) For renewal provisions, check for:

A
  1. How many
  2. How long
  3. Required notice (form and timing)
  4. Personal to tenant?
  5. Need to be “good tenant” in order to renew (e.g., no defaults)
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15
Q

(Holdover)

Landlord: (SEI)

Tenant: (M)

Often, for Holdovers, Landlords charge ______ of base rent, sometimes with _______.

A

Landlord:

  1. Space utilization
  2. Extract additional economics from Tenant for bad behavior
  3. Indemnity for all damages including Tenant-in-waiting issues

Tenant:
1. Minimize “hurt” from overstaying welcome

125-150%; consequential damages

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16
Q

(Guarantor and Security Deposit)

Security Deposit - Cash in an _________ account

Letter of credit: Check for ________

Guarantee: (TCM)

Protecting Tenants: Watch out for _______ or _______

A

Interest-bearing, segregated

Transfer requirements/fees

  1. Term
  2. Coverage
  3. Amendments

Reduction of deposit; termination of guarantee

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17
Q

(Rent)

Landlord: Maximize _______
Tenant: _______

Base Rent may be _____ or ______

A

Landlord: Revenues/profits

Tenant: Cost certainty

Base Rent: Fixed; Increases

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18
Q

Additional Rent includes: (O(C)TMYAUHL)

A
  1. Operating expenses (capital expense exclusion/inclusion)
  2. Taxes
  3. Monthly estimates of Tenant’s proportion of expenses
  4. Year-end tune ups
  5. Audit rights by tenant
  6. Utilities/electric inclusion
  7. HVAC
  8. Late charges
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19
Q

Due to COVID, check for ______ present in any amendments (allows Landlord to capture any possible ______.

A

Rent escalation clauses; rent deferral

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20
Q

Restaurant or retail leases have rent that is _____.

Before COVID, there was a trend away from _____, but may be accelerated now.

A

Linked to sales

Percentage rent

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21
Q

Co-tenancy occurs when tenant’s obligation to _______

If not met, then Tenant may have right to _______

A

Occupy the Premises is tied to an anchor Tenant

Terminate or renegotiate

22
Q

Co-tenancy is more common in _______ context and ______

A

Retail/restaurant; shopping center/malls

23
Q

Co-tenancy may also involve ______ with other Landlord property

A

Radius restrictions

24
Q

(SNDA)

Landlord may be required to attempt to obtain _______

Standard of cooperation is ________

A

SNDA (current/future lenders)

Best efforts; commercially reasonable efforts

25
Q

(SNDA)

Landlord: (SIT)

Tenant: P

Lender: (RLFR)

A

Landlord:

  1. Satisfy lender requirements
  2. Interference by Tenant
  3. Tenant in place (attornment obligation)

Tenant:
1. Preserve rights/benefits under Lease

Lender:

  1. Rating Agency requirements
  2. Loan seller representation
  3. Foreclosure effects
  4. Remedies
26
Q

(Subordination Provisions)

  1. Is the lease subordinate to ______ (FGS)
  2. Subordination is often conditioned upon ______ or ______ by Tenant
A
  1. Fee mortgages; ground leases; superior liens

2. Non-Disturbance; Receipt of NDA/SNDA

27
Q

(Non-Disturbance and Attornment Provisions)

  1. Is attornment ______?
  2. Attornment is also often conditioned upon ______ or ______ by Tenant
A
  1. Automatic

2. Non-Disturbance; Receipt of NDA/SNDA

28
Q

(Options)

For Options, consider: (PRER)

A
  1. Purchase Options
  2. ROFO or ROFR on sale/transfer of fee interest in the property
  3. Expansion rights
  4. ROFR on vacant space
29
Q

(Parking Rights)

For parking rights, consider: (RF)

A
  1. Reserved/unreserved?

2. Fees or free?

30
Q

(Insurance)

For insurance, check for: (PLGWO)

A
  1. Property (casualty; all-risk)
  2. Loss of business covering Tenant’s property income
  3. General liability
  4. Workers’ compensation
  5. Others
31
Q

(Insurance)

Check whether Landlord requirement to carry property insurance on building operating expense is ________

A

Allocated to tenants

32
Q

(Insurance)

Insurance terms should include: (ANCW)

A
  1. Identity of additional insureds
  2. Notice of cancellation/modification
  3. Certificate delivered annually
  4. Waiver of subrogation by Tenant’s and Landlord’s insurers
33
Q

(Insurance)

Landlord needs to make sure the insurance complies with _______ and adequate for _______

Check whether there are provisions for _______

A

Lender requirements; given market conditions

Self-insurance rights

34
Q

(Tenant Improvements)

If Landlord improves: (D/T)
If Tenant improves: (A/R F/D R/E)

A

Landlord: Delivery/Timing

Tenant: Allowance/rent credit (e.g., abatement); force majeure/delays; reserves/escrows

35
Q

(Alterations)

Landlord: ______ over changes to building/premise

Tenant: Need right to make ______ without ______

Thresholds: (SE)

Ent of term: Title and cost to ________

A

Landlord: Keep control

Tenant: Minor changes; Landlord interference

Thresholds: Structural; Expense (mechanic lien issues)

End of term: Remove alterations and tenant improvements

36
Q

(Alterations)

Tenant improvements may be _____, and so use footnotes to confirm that _______

A

Behind schedule; milestones are reached

37
Q

(Casualty and Condemnation)

Landlord:

  1. Keep tenant lease for _____
  2. Landlord right to _______ after substantial damage (___%)
  3. Termination rights for _____ (MIE)
A
  1. Minor damage
  2. Rebuild premises; 25%
  3. Major casualty; insurance insufficiency; end of term
38
Q

(Casualty and Condemnation)

Tenant:

  1. Maximize ability to exit if _______
  2. Obligation to ________
  3. Right to _____ if major casualty in last year of lease term
A
  1. Interruption lasts too long
  2. Rebuild and repair premises
  3. Terminate
39
Q

(Assignment and Subletting)

Landlord:

  1. _____ over premises/lease
  2. Not allow Tenant to become ______
  3. Maximize economic benefits upon _____ (recapture/profit share)
  4. ______ in connection with transfer request
A
  1. Maintain control
  2. Competing landlord
  3. “Break” of lease
  4. Recoup expenses
40
Q

(Assignment and Subletting)

Tenant:

  1. Maximize _____ and _______
  2. Minimize landlord interference with _______
A
  1. Flexibility; economic opportunities

2. Business operations/transitions

41
Q

(Assignment and Subletting)

Some general prohibitions include: (ASLMOC)

A
  1. Assignment of lease
  2. Sublease of premises
  3. License/use by others
  4. Mortgage/hypothecation
  5. Operation of law
  6. Change of control (direct/indirect)
42
Q

(Assignment and Subletting)

Permitted Transfers include: (ASMF)

A
  1. Affiliates
  2. Sale of assets/ownership interests
  3. Mergers
  4. Financial tests (net worth, etc.)
43
Q

(Assignment and Subletting)

For “consent”, consider: (RSF)

A
  1. Required notice (timing and form)
  2. Standard of consent (sole discretion, cannot unreasonable withhold)
  3. Fees
44
Q

(Maintenance Responsibilities)

Landlord: ______ of the building

Tenant: Damage caused by ______

HVAC maintenance depends on ______

A

Landlord: Structural elements

Tenant: Tenant

HVAC: Location (i.e., whether within premises)

45
Q

(Environmental Covenants)

For environmental covenants, check for: (UAC)

A
  1. Use of premises and common area
  2. ADA for new improvements, alterations
  3. Compliance (whether express/implied)
46
Q

(Other Provisions)

Force majeure clauses should exclude _______

A

Monetary obligations

47
Q

(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 ______

A

Lien Waiver; Access Agreement

Maximum recovery

Secured lending

48
Q

(Events of Default)

Events of default includes: (FPBB)

A
  1. Failure to pay rent
  2. Performance breach
  3. Breach of representations
  4. Bankruptcy
49
Q

(Events of Default)

Some remedies for events of default include: (PSCT)

A
  1. Possession, re-let, suit for damages
  2. Suit for rent not received over fair market rent as liquidated damages
  3. Claim for costs, expenses
  4. Termination of lease
50
Q

(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 ________
A

Landlord: Maximize protection

Tenant: Default, accidents, acts

  • Disclaim liability for negligence
51
Q

(Related Lender Considerations)

For related lender considerations, consider:

  1. Liability for _______?
  2. Limitations on liability to _______?
A
  1. Prior landlord’s acts

2. Interest in property

Dechert (2 decks)

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