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BUSI 331 > Appendix 3 > Flashcards

Appendix 3 Flashcards

1
Q

Absolute Net Lease

A

A lease in which the tenant pays all expenses including structural maintenance and repairs; usually a long-term lease to a high-quality tenant.

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2
Q

Assignment and Subletting

A

The transfer by one party of their interest under a contract to another party. A sublease is created where the tenant transfers less than the full interest in all or a portion of the premises to a third party. If all the rights are transferred, an assignment has occurred; if less than all rights are transferred, it is considered a sublease.

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3
Q

Base Rent

A

The amount of rent to be paid before the inclusion of additional expenses or other factors that increase the amount of rent to be paid; typically specified in dollars per square foot per year.

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4
Q

Blend and Extend

A

A lease that is modified to reflect space that is added during the term of the lease.

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5
Q

Contract Rent

A

The actual rent specified in a lease

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6
Q

Covenants

A

Clauses in a lease that delineate the rights and obligations of the landlord and tenant

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7
Q

Escalator or Escalation Clauses

A

Lease covenants that, over the term of the lease, provide for periodic increases in contract rent and annual increases in re-chargeable operating expenses and property taxes above a base year.

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8
Q

Escape Clause

A

Permits the landlord and/or tenant to cancel a lease due to specific circumstances such as expropriation of the property or damage

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9
Q

Estoppel Certificate

A

A document signed by the tenant concerning the status of an agreement, usually a lease, and the performance of obligations under the agreement; commonly requested as part of a transfer of ownership or refinancing

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10
Q

Excess Rent

A

The amount by which contract rent exceeds market rent at the date of the appraisal

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11
Q

Exclusivity

A

Most common in retail leases, this clause provides the tenant with an exclusive right to sell their product or service on the property, thus obligating the landlord to prevent other tenants from selling those same goods or services

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12
Q

Flat Rental Lease

A

Specifies a level of rent that continues throughout the duration of the lease.

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13
Q

Going Dark

A

A go dark provision in a lease is a tenant-driven term where the tenant may elect to cease operations in its leased space, but continue to pay rent to the landlord.

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14
Q

Graduated Rental Lease

A

Provides for specified changes in the rent at one or more points during the lease term.

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15
Q

Gross Lease

A

A lease in which the owner/landlord or lessor pays taxes, insurance, maintenance, services, operating costs, etc.

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16
Q

Ground Lease

A

A lease that grants the right to use and occupy land. Improvements made by the ground lessee typically revert to the ground lessor

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17
Q

Index Lease

A

Usually a long-term lease and provides for periodic adjustments based on a change in a specific economic index such as the Consumer Price Index

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18
Q

Landlord Improvements

A

A detailed list of the work to be performed to the leased premises by the lessor at the lessor’s expense, often as an inducement to the tenant to enter into the lease.

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19
Q

Lease

A

A written document or contract conveying or transferring the right to the possession and enjoyment of real estate for a specified period of time in exchange for consideration, usually rent

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20
Q

Lease Interest

A

One of the real property interests that results from the division of the bundle of rights by a lease, i.e. the leased fee estate or the leasehold estate

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21
Q

Lease Rollover

A

The expiration of a lease and the subsequent re-leasing of the space

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22
Q

Leaseback

A

An arrangement in which the seller of a property is obligated to lease the property from the buyer under terms and conditions that are not negotiable

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23
Q

Leased Fee Interest

A

An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others.

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24
Q

Leasehold and Leasehold Estate

A

The lessee’s interest in the property created by the lease. The proper term is leasehold estate, but it is often referred to as leasehold interest or leasehold.

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25
Q

Leasehold Interest

A

The interest held by the lessee (tenant or renter) through a lease transferring the rights of use and occupancy for a stated term under certain conditions.

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26
Q

Lessee (Tenant)

A

The one who possesses the right of possession and enjoyment of the property of another. Also called the leaseholder.

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27
Q

Lessor (Landlord)

A

One who conveys by lease, the right of use of the property to another.

28
Q

Long-term Lease

A

Generally, a lease agreement extending for 10 years or more.

29
Q

Market Rent

A

The rent that a property would most probably command in the open market given reasonable exposure. It is indicated by the rents paid as per the recently signed arm’s-length leases. Sometimes referred to as economic rent.

30
Q

Modified Gross Lease

A

A lease in which the landlord receives stipulated rent and is obligated to pay most, but not all, of the property’s operating expenses and real estate taxes.

31
Q

Month-to-month Tenancy

A

A month-to-month lease agreement, either written or implied by law, is cancellable by either party usually upon 30 days’ notice.

32
Q

Negative Leasehold

A

A lease situation in which the market rent is less than the contract rent

33
Q

Net Ground Lease

A

A lease of unimproved land in which the tenant agrees to accept and pay the owner’s expenses, e.g. the ad valorem taxes, assessments, as well as all expenses for any improvements created by the tenant

34
Q

Net Lease

A

A lease in which the tenant pays a base rent plus their pro rata share of the property taxes, utilities, heating, repairs, maintenance costs, etc.

35
Q

Net Net Lease

A

A lease in which the tenant pays for utilities, janitorial services, property taxes, and insurance in addition to the rent, and the landlord pays for maintenance and repairs. Often used synonymously with single net lease but better stated as a partial net lease to eliminate confusion. Also called double net lease, NN, modified gross lease

36
Q

Net Net Net Lease

A

A net lease under which the tenant assumes all expenses of operating a property, including both fixed and variable expenses and any common area maintenance that might apply. However, the landlord is responsible for structural repairs. Also called triple net lease.

37
Q

Operating Expenses

A

The financial position of the landlord is dependent upon what share of the operating expenses (often defined as additional rent) will be absorbed by the tenant. Recoverable building expenses may also be referred to as operations and maintenance expenses (O&M) for office properties or common area maintenance expenses (CAM) in the case of retail properties. Most modern leases provide explicit details on which expenses are recoverable by the landlord.

38
Q

Overage Rent

A

The percentage rent paid over and above guaranteed minimum rent. It is not to be confused with excess rent. Overage rent is a contract rent and it may be market rent, part market and part excess or excess rent only.

39
Q

Overholding

A

If the tenant remains in possession of the premises after the end of the term without the execution of a new lease, the tenant is deemed to be overholding. Normally, the lease becomes a month-to-month tenancy, and the rent paid is revised in accordance with the wording of this clause.

40
Q

Percentage Lease

A

A lease where the tenant (usually retail) is required to pay a specified percentage of gross or net sales made upon the premises.

41
Q

Positive Leasehold

A

A lease situation in which the market rent is greater than the contract rent.

42
Q

Prime Tenant

A

When one or more subleases have been created in a property, the original lessee is sometimes referred to as the prime tenant

43
Q

Pro Rata / Proportionate Share

A

In most leases, tenants pay a contribution to operating expenses based on their pro rata or proportionate share. The normal calculation for this is based on their rentable area, expressed in square feet, divided by the aggregate rentable area in square feet of all portions of the property available for lease.

44
Q

Proprietary Lease

A

A type of lease given to tenant-shareholders in a cooperative apartment corporation. In such a venture, the tenant purchases a specific number of shares of stock to obtain possession of an apartment and makes monthly payments to the corporation to over their pro rata share of operating expenses and debt service.

45
Q

Purchase Option

A

A lease covenant granting the tenant an option to purchase the leased property.

46
Q

Recreational Lease

A

A lease on recreational facilities granted to a tenant in a condominium or townhouse development by a developer/lessor for a stipulated time and rent; typically long term with increased in rent tied to an index.

47
Q

Release Clause

A

A clause stipulating that, upon payment of a specific amount of money to the holder of a trust deed or mortgage, the lien on a particular described lot or area shall be removed, .e., from the blanket lien on the whole property

48
Q

Renegotiation of a Lease

A

To arrive at a new set of lease terms upon termination of an existing lease, generally for the purpose of revising the annual rent.

49
Q

Renewal Option

A

A lease covenant giving the tenant the right (but not the obligation) to extend the lease for an additional period of years on specified terms or using a pre-determined formula.

50
Q

Rent

A

All payments made by the tenant to the landlord

51
Q

Rent and Rental

A

The consideration paid by the tenant to the landlord for the possession and enjoyment of the property

52
Q

Restrictive Clauses

A

Any restrictions on either the lessor or the lessee

53
Q

Revaluation Lease

A

A lease that provides for periodic rent adjustments based on revaluation of the real estate at then current market prices.

54
Q

Right of First Refusal on Additional Space

A

A lease covenant that gives the tenant the right to lease any rentable space that becomes available, such space to be specified as part of the clause. Should the landlord receive a bona fide offer from a third party to lease this specified space, the tenant is to receive a copy of said offer and would have a set number of days within which to take the space on the terms specified in the offer. Should the tenant decline to take the space on these terms, the landlord can proceed with negotiating with the third party.

55
Q

Right of First Refusal to Purchase the Property

A

A lease covenant that gives the lessee the right to purchase the property in the event the lessor receives a bona fide offer from a third party. This type of clause may or may not restrict the marketability of the property, but it will likely delay the lessor’s acceptance of the offer depending on the timeframe the lessee has to exercise its “right of first refusal”. Where there is a right of first refusal in favour of the tenant, potential prospective purchasers may decline to make offers to the landlord.

56
Q

Riparian Lease

A

A lease on land situated between the high-water mark and the low-water mark

57
Q

Sandwich Lease

A

The middle or intermediary instrument in two or more leases on the same property; e.g. A leases to B, B subleases to C, C subleases to D: the lease between B and C is known as the sandwich lease

58
Q

Sandwich Lease Interest

A

When two or more leases exist on the same property, one or more parties are simultaneously a lessor and a lessee

59
Q

Short-term Lease

A

An indefinite term, but usually implies a contract with a term of less than 10 years

60
Q

Step-up or Step-down Lease

A

A lease that provides for a certain rent for an initial period, followed by an increase or decrease in rent over stated periods

61
Q

Sublease

A

An agreement in which the lessee in a prior lease conveys the right of use and occupancy of a property to another (the sublessee) for a specific period of time, which may or may not terminate at the same time as the underlying lease term.

62
Q

Sublessor, Sublessee

A

When a tenant is permitted to lease its leasehold estate to a third party, the original lessee becomes the sublessor. The new tenant is the sublessee and the new agreement between the two parties is know as the sublease. The original lease document may specify that a sublease requires the approval of the original lessor.

63
Q

Tenant Improvements (TIs)

A

A detailed list of the work to be performed by the tenant or at the tenant’s expense. In some instances, the tenant may negotiate a lower rent at the beginning in return for completing all or a portion of the necessary improvements. A landlord may provide a partial allowance for tenant fixturing, sometimes known as a TI allowance.

64
Q

Term

A

The number of years and months of the lease. The term may be stated directly or be indirectly implied by the stated lease commencement date and expiry date.

65
Q

Triple Net Lease

A

Net Net Net Lease

66
Q

Use of Premises

A

Specifies what the premises can be used for by the tenant

BUSI 331 (12 decks)

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