PROP 1020 / CHAPTER 4

Question 1

OFFER TO LEASE?

Answer 1

Bridge from negotiations to a formal lease agreement.

Question 2

WHAT IS A USE CLAUSE?

Answer 2

Use clause: This clause accounts for what the leased property can be used for.

As an example, a lease agreement may specify the property can only be used for restaurant space, retail or warehousing.

Limiting the use of the property can help a landlord lease similar space to similar businesses without major overhauls to the property.

Question 3

WHAT IS AN EXCLUSIVITY CLAUSE?

Answer 3

Exclusivity clause: This clause will likely be requested by the tenant when worried a landlord could lease nearby commercial space to a competitor, such as in a strip mall.

This type of clause, from the landlord’s perspective, can be included but should be as specific as possible to avoid preventing the landlord from renting to non-competitors.

Question 4

LIST 4 CLAUSES FLOUND IN A TYPICAL LEASE?

Answer 4

(a) Date of the lease;

(b) Reference information, if the lease is registered;

(c) Legal description or other identification of the leased premises; (d) Name of lessor – owner or landlord;

(e) Name of lessee – tenant;

(f) Lease term;

(g) Occupancy date;

(h) Rental amount, including any percentage rent, graduation or escalation provisions, rent concessions and terms of payment;

(i) Landlord’s covenants – i.e., lessor’s responsibilities for items such as taxes, insurance, maintenance, utilities, etc.;

(j) Lessee’s responsibilities – i.e., lessee’s responsibilities for items such as taxes, insurance, maintenance, utilities, etc.;

(k) Right to assign or sublet – can the lessee assign or sublet and on what terms and conditions;

(l) Use of Premise (Purpose & Use) clause: states what type of business the premises may be used for;

(m) Option to renew - what rights does the lessee have and what are the obligations;

Question 5

WHAT IS A “GOING DARK” PROVISION IN A LEASE?

Answer 5

This provision allows the retailer to either shut down operations (“go dark”) and/or receive a substantial rent reduction in the case where a major tenant in the mall closes.

Question 6

WHAT IS A TRIPLE NET LEASE?

Answer 6

Triple Net Lease - tenant pays rent, utilities, taxes, insurance, and maintenance; property owner pays structural repairs only.

Question 7

ASSIGNMENT OF LEASE?

Answer 7

An assignment of a lease is a complete transfer of the right to be the tenant under the lease.

Question 8

WHAT IS A SUBLEASE?

Answer 8

A sublease is a new lease agreement between the tenant as sublessor and a third party as sublessee for all or a portion of the leased premises. The original lease between the tenant and the landlord remains in place, unaffected by the sublease.

Question 9

FILL IN THE BLANK

Once a ________ has been executed by the parties, it will provide direction and guidance for lawyers in preparation of a final agreement.

Answer 9

Once a TERM SHEET has been executed by the parties, it will provide direction and guidance for lawyers in preparation of a final agreement.

Question 10

EXPLAIN DISTRESS / THE RIGHT TO DISTRAIN?

Answer 10

Distress

The right to distrain (seize) the goods of a tenant for non-payment of rent is an important remedy available only to landlords in respect of commercial tenancies.

It is probably the most effective remedy that a landlord has when a commercial tenant fails to pay the rent.

Upon the tenant’s default, the landlord has the right to enter the premises and impound and sell any goods found there.

Question 11

WHAT IS A GROSS LEASE?

Answer 11

In a gross lease is a type of commercial lease where the tenant pays a flat rental amount, and the landlord pays for all property charges regularly incurred by the ownership, including taxes, utilities and water. Most apartment leases resemble gross leases.

Question 12

TRUE OR FALSE?

For commercial tenancies security deposits are a matter of negotiation between the landlord & tenant

There are no legal restrictions regarding security deposits for commercial tenancies?

Answer 12

ANSWER: TRUE

Question 13

TRUE OR FALSE?

An Offer to Lease is a binding agreement by the parties to execute a Lease Agreement, subject to a series of conditions.

Answer 13

ANSWER=TRUE

Question 14

FILL IN THE BLANK

_ _ _ _????_ _ _ _ serve an important role in bringing potential tenants to landlords and helping tenants find suitable and affordable space.

Answer 14

COMMERCIAL BROKERS serve an important role in bringing potential tenants to landlords and helping tenants find suitable and affordable space.

Question 15

This is a financial summary of the current provisions for lease rent for all leases for the property.

Answer 15

Rent Roll

Financial summary of the current provisions for lease rent for all leases for the property.

Question 16

TRUE OR FALSE?

Gross leases are less common today than triple net leases

Answer 16

ANSWER = TRUE

Question 17

EXPLAIN RENTABLE SQUARE FOOTAGE?

Answer 17

Rentable square footage is your usable square footage PLUS a portion of the building’s shared space.

Question 18

TRUE OR FALSE?

Commercial rent is always calculated on RSF.

Answer 18

ANSWER = TRUE

As a tenant in a commercial space, you pay for a portion of the shared space and thus your monthly rent is always calculated on RSF.

Question 19

The actual space you occupy from wall to wall.

Answer 19

ANSWER:

USEABLE SQUARE FEET

Question 20

This is the increase in the rentable square footage above your usable square footage

Answer 20

The increase in the rentable square footage above your usable square footage is referred to variously as the “load factor,” “common area factor,” or “add-on factor.”