Commercial leasing Flashcards
(140 cards)
1
Q
lease
A
-is a contract were the landlord convey the land and structure to a tenant for a specific time in exchange for tent
- upon the termination the land and structure revert back to the landlord ( reversion)
2
Q
There is 6 common lease types
A
There is 6 common lease types
3
Q
Gross lease
modified lease ( hybrid version)
A
-tenant pays fixed rent and the landlord is responsible for all operating expenses
- landlord include a rent escalation clause in the lease to mitigate unexpected increases in operating costs during the lease terms
4
Q
single net lease
A
tenant pay base rent plus a specific operating expense ( property tax or utilites)
5
Q
double net
A
tenant pays a base rent plus two operating expense ( taxes and insurance)
6
Q
triple net
A
tenant pays a base rent plus all operating expenses
- sometimes referred to as pass through lease all operating expenses pass through to the tenant
- be caution the landlord my include other capital related expenses ( structural repairs and upgrades) in the pass through working ( which be very expensive to tenant)
7
Q
absolute net lease, carefree lease
A
tenant is responsible for all costs relating to structure + operating expenses
8
Q
abbreviated reference
A
may appear on commercial listing to save space
9
Q
percentage lease
A
tenant pay BASE RENT + OPERATING EXPENSES + PERCENTAGE OF GROSS INCOME GENERATED IN ECESS OF A PRE-ESTABLISHED MIN
-the landlord generates revenue from renal of the property but also financial success
-tenant submit sales volumes and percentage rent to the landlord each month
- as an added benefit the landlord gain an insider view of the tenant retailing performance and can better assess the risk of the business failure
10
Q
ground land lease
A
long-term lease of land only in which the tenant agrees to construct a building
11
Q
essential elements of a lease
A
- capacity of parties legally capable of entering into a contract
-lawful object ( have lawful intent not illegal) - offer/ acceptance ( mutual concsent
genuine intention
12
Q
fixed or periodic
A
13
Q
formal lease
A
- set out exact terms between landlord and tenant
–commercial lease are typically lengthy and complex
- fully articulate what was set out in an agreement to lease ( letter of intent)
-settled form of lease
- it is attached to the agreement to lease to ensure there is no confusion since all landlord terms are signed
14
Q
Agreement to lease
A
agreement for lease without settled form of lease
15
Q
letter of intent
A
involve preliminary lease negotiations that leads to the framing of final lease terms
- there is no standard format the letter an range from very general to specific
16
Q
law impacting commercial leases
A
17
Q
Statute of Frauds
A
- the statute of frauds- states that a lease with 3 years or longer must be in writing
- commercial lease with terms of fewer than 3 years does not have to legally be in writing BUT verbal agreement are always discouraged given complication and problems
-
18
Q
short form of leases Act
A
this legislation permits the use of abbreviated terms rather than lengthy wordings
19
Q
commercial tenancies act
( CTA)
A
consists of three parts
1- landlord/tenant rights
2- the right to distrain
3- issues regarding overholding ( remain on the premises after lease expire)
20
Q
CTA and RTA
A
CTA is not nearly as detailed as RTA, commercial lease wordings are more complex
21
Q
important CTA provision
A
1- landlord/tenant legal
obligation
- landlord– must inform tenant when a breach ofd the lease occurs and give a reasonable time for the tenant to remedy ( lease termination is an option if the tenant does not comply) - landlord have legal recourse throught small claims court and superior court
- Tenant– must fulfill all lease obligation including rent payment ( must inform the landlord of beaches and allow for reasonable time to remedy) ( the tenant can’t withhold red when in a dispute with the landlord) - have legal recourse through small claims court or superior court
22
Q
A
2- non- payment of rent
- option 1— change locks - the landlord has the right to enter the property and change locks on the 16th day after the rent was due ( without formal notice to the tenant)
option 2- seize tenant property —when the landlord enter the property in option 1 he has the right to seize and dispose of tenant property without notice ( unless notice is provided in the lease)
- However the landlord is required to notify the tenant of the seizure and rent back
- the landlord has to hold the tenant property for 5 days
- if the rent back is not paid- the landlord can proceed with the disposal of the tenant property
- any dispute fall to the superior court of ontario
23
Q
periodic tenancy
A
option 3 - termination —
– periodic tenancy - 30 day notice - landlord or tenant can terminate on 30 days written notice for a month to month tenancy
- periodic commercial tenancies require 30 days while residential require 60 days
24
Q
fixed term tenancy
A
no notice - tenancy ends at the end of the term not like the residential tenancy were it converts to a periodic tenancy - the tenant no longer had a legal right to occupy the premises
25
overholding
if a tenant overholds ( remain in the unit ( the tenant can be subject to a penalty) ( two month rent for each month overhold ) plus cost - the landlord can seek an eviction order from superior court of justice
26
there are NO rent- related restrictions
unlike the residential the CTA is silent on such things as rent increase restriction and deposits ( RENT are determined by normal supply/ and demands
27
how privity fits in
- it is relevant when it comes to assignments and subletting. there is two types
28
privity of Estate
- two or more parties ( landlord and tenant) have an intrest in the same property
- leased premises in which the tenant has an intrest in the property ( occupies it for a specified period), before the estate revert back to the landlord when the lease ends
29
privity fo contract
both parties have signed a lease and only those partied can enforce the lease terms
30
Assignments
when an Assignments occurs the tenant entire interest in the lease is assigned to another party
- legaly--- the assignee assumes all lease obligation and the original tenant now doesn't have privity of estate but privity of contract ( since the signed lease remain) --- and for that the original tenant continue to be responsible under the lease
31
A well written lease will require
1- the landlord must approve any assgiments
2- approval is subject to terms and conditions ( this determine the approved assignee responsibilities regarding lease obligations)
-including if the original tenant is off the hook
32
assignment agreement
the landlord will typically require a formal lease assignment detailing how the tenant right and obligations are transferred to the assignee
the assignment agreement - will effectively assign privity of contract and privity of estate
33
subletting
sublease is basically transfer of all of the leased premised for a period less than the entire lease term
-sublet is a temporary arrangement that ends before the original lease expire
33
subletting
sublease is basically transfer of all of the leased premised for a period less than the entire lease term
-sublet is a temporary arrangement that ends before the original lease exire
34
subletting agreement
the landlord will seek some written assurance, lease term will typically include formal subletting agreement
35
the landloard can withhold either and asisgment or subletting on reasonable grounds
36
stsatirary compliance
accrssibilty leg is intended to reduce and remove barried for people with disabilites
37
accebility for ontarians with disabilities act ( AODA)
Acessibility for ontarians with disabilities act ( AODA)
38
ontario building codes
- applies to extensive renevotion
39
new commercial buildings have been designed to accommodate accessibility needs
40
Quite possession ( fundamental legal right)
- the landlord cannot substantially interfere with the tenant occupancy of the leased premised or in any way that adversely impact its business operation
- this is often referred to as the most fundamental right of a tenant
- conveyancing and law of property act
- this right has evolved to include situations such as the inability to access the rental premises ( the presence of excessive noise and extensive)
- basically anything that substantially interferes with the tenant right to use the leased premise
41
Types of rental Arrangement
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fixed rent
the total rent payable by the tenant under gross lease
- - gross lease - tenant pays a flate rate and the landlord is responsible for all operating expenses
43
base min rent
- min rent payable by he tenant is a NET LEASE
- it does not include any payment relating to operating expenses
, percentage rent
44
additional rent
tenant proportionate share of operating expenses as detailed in the lease
45
percentage rent
- found in shopping centre leases
46
harmonised sales tax
HST applies to commercial leases
47
rent deposits/intrest
commercial tenancies act does not regulate what rent or security deposit can be charged - such matters are determined in negotation
48
rent- free periods, concessions and incentives
- supply and demand forces drive wether or not rent based incentives are offered
- common incentives involves a rent-free period ( precedes the actual start date of the lease) - early occupancy
-landlord my also offer tenant improvement allowances
49
supplementary rent
-it may be an annual adjustment based on an index ( consumer price index (CPI)
50
rent and advance tax payment
landlord may require tenant to make advance payment for propriety taxes so that funds are available to align with intermin tax payments due to dates set by the municipality
51
occupancy or rent to abate
1- if the rental premises is not ready for occupancy as set out int he lease - the tenant doesn't have to pay rent until it is ready
- the tenant cannot make any other claim ( take legal action because of delay ) against the landlord
52
expense stop
a landlord is not obligated to pay for a specific operating expense above a specific dollar limit
53
pass throught
check the lease wording carefully a landlord my pass through certain costs relating to capital improvement
54
common Area maintenance ( CAM )
this is all areas not included as rentable space under individual leases apply yo all areas used by two or more tenant
55
energy expense
LEED certified building - attract larger tenant due to energy efficiency, improved work environment, advanced recycling system, and reduced HVAC
56
common lease provisions
- guarantor, indemnifiers and co-tenants
- guarantor - sign a document and agrees, to be responsible should a tenant default on a lease
indemnification agreement- landlord seek the broader protection of an indemenfication agreement( agreeing to take place of the tenant and perform all obligation under the lease
57
co-tenancy - in which the guarantor become a tenant and is then jointly and severely responsible for all matters involving the lease ( extend to bankrupcy)
58
first right of refusal
-- allowing tenant to rent additional space for expansion
59
purchase or renewal
- purchase- give the tenant the right to acquire the leased property on mutual agreement term
renew- gives tenant the right to renew the lease on mutual agreement
60
maintenance/repair responsibilities
various maintenance and repair related provision -vary depends on the lease type
61
fixtures/trade fixtures
provision regarding trade fixtures are typically set out in the lease to avoid any confusion
IF THE FIXTURE IS OWNERD BY THE TENANT - THE TENANT CAN REMOVE THE FIXTURE
- IF IT CAN BE TAKEN OUT WITHOUT DAMAGING THE PROPERTY AND IF ITS NECESSARY TOT HE BUSINESS OPERATION
- any damage cause by the tenant removing trade fixture is their responsibility
62
landlord and tenant insurance
landlord provision is typically open-ended, he can obtain for damage to the building and improvement, loss of rental income, liability
- landlord insurance would typcially not cover tenant-specific issues ( tenant loss of income)
63
tenant is typically required to provide proof of insurance coverage
64
landlord approval for changes
this clause typically restricts the tenant form making any changes without written landlord approval
65
security provisions
lease can detail what security items are supplied by the landlord ( multiple camera surveillance)
66
naparking allocations
the lease should detail cost per space or if provided for free
67
signage compliance
required permits and other municipal specification, insulation costs, maintenance charges
68
unique clauses in retail leases
retail use restrictions- use restrictions are intended to ensure that shipping centres offer retailing diversity ( restaurants, sporting goods..)
69
lease wordings ( primary / secondary use )
primary use restriction - anchor tenant being protected form another similar store
secondary use restrictons- anchore store that markets cell phones while allowng other smaller retailers to market cell phones
70
not permitted scheduale
- attached to individual leases detail what specific uses are not allowed
71
anchor tenant
special use arrangement
72
limitations on merchandise
permitted times and location for merchandise and other deliveries
73
continuous use requirement
dark space- store empty
go dark clause- allows the tenant to vacate the premises if finical problems arise
74
unique clauses in industrial lease
- limits office floors area
-environmental standard compliance ( environmental protection act) - - environmental site assessment is required at the start and the end of the lease term to determine any variation from that baseline ( any contamination has occurred)
75
hazardous material restrictions
76
AGREEMENT TO LEASE
short lease- primarily for older properties - gross lease arrangement
long form- found in net leases
77
both forms include
-identification of parties, premises to be leased, consideration and definite terms
- provision for the execustion
78
amendment
- used when parties wish to make a change after the agreement has been finalized
- full cross-reference
--specific details as to what is being deleted and address
-irrevocable date
signature of all parties
79
notice of fulfillment
- full cross reference
-insert conditions
-obtain signature
80
blend and extend renewal
give and take strategy to renegotiate the terms of an existing lease prrior to the end of the term
81
landlord responsibilities
-- make certain reasonable access is provided for showing
--insure property complies with Ontario building code
- fulfill obligations set out in the lease
-- insure insurance coverage is placed on property
--
82
identifying potential uses
saleperson can effectively expand the potential target market to a specific property
83
representing lanlord
1- demonstrate conscientious and competent service
2- gathering information
3- identify potential use
4- perpare a marketing plan
5- assit in qualifying potential tenant
6- lease negotions - enusure landlord interest are protected
84
code advertisment
1- clearly and prominently disclose your name, as well as he employing brokerage name as registered with RECO
2-include specific reg status
85
remuneration
commission
86
fit-up ( rent free period0
the time provided to a tenant to prepare the premises for their particular use
- customize space for their business needs
87
tenant loss of income insurance
should be obtained by the tenant and not the landlord
88
internal meter is better option to ensure accurate charged based on usage in office space
89
assuming a brokerage has a remuneration agreement in place when representing a tenant client
--the tenant is typically responsible for any deficiency between the agreed remuneration and the amount paid by the landlord
-- remueration can be based on a price per square foot
- if a remuneration agreement is not established by he landlord the tenant will be required to pay the entire remunersation
90
remuneration owner to the brokerage is not part of the lease
they are in a representation or customer service agreement
91
traffic counts are mostly common with retial use not industrial
92
industrial lease feature
-floor loard
-live load and dead load
-electrical system
- sprinkler density
-clear heights ( unobstructed distance from floor to ceiling- sprinklers ) / ceiling heights ( all the way from the floor to the roof)
- bay size and bay depth
-heating, ventilation and air conditioning
- loading docks and delivery areas
-Availability of Utilities, Requirements, and Costs
-Environmental Issues
93
trade fixture
you are entitled to remove the installed barbed sink an barber chair form the leased premsied at the end of the lease ( they are deemed to be personal property under common law ) - unless it was provided in the lase other wise
94
the range of operating expenses can vary based on the specific use
office vs industrial use
95
percentage rate established often align with tenant product markup
percentage rate- markup
96
a lease of less then 3 year duration
count may confirm that a lease exists under the doctrine of part performance regardless of the fact that is is not in writing
97
exclusive use clause are
commonly found in leases for anchor tenant ( primary use)
- given their drawing power can normally demand and receive a much more broader use clause within the lease
----may grant one tenant the sole right to offer specific products or service within the retail shopping center
98
the head land lord must approve the sub-tenant
98
the head land lord must approve the sub-tenant
99
restrictive use clauses
in commercial lease are often used to establish proper tenant mix within a shopping center,
100
a breach of the lease can occur
if the tennat is deprived of quite enjoyment to the extent that the tenant cannot use and enjoy the property
101
continuous use clause
helps prevent a tenant from vacating a commercial space
102
wear and tear clause
is commonly found in commercial lease q
103
notices clause in the agreement to lease
co-operating brokerage fax number or email address could be inserted in the notices clause
104
guarantors
this guarantee relates to all obligation under the lease ( unless tenant is deemed by law to have no further obligation)
105
gross lease
can include an escalation clause to mitigate the impact of increases in costs
106
at the point of lease expiration
the tenant loses any right to lease hold improvement unless otherwise negotiated
107
non-payment of rent involves the landlord right concerning non-payment NOT the tenant right
108
anchor tenant
are often given certain rate concession due to their drawing power
109
privity of contract
the right and obligation under a contract are only enforceable upon the parties to that agreement
110
privity of estate
interest that two or more parties hold in the same property
111
the landlord must wait 16 day after the date on the rent was due before changing the locks
112
landlord and tenant's work
this is a common schedule attached to a base lease
- detailing these improvement
113
commercial tenancies do not automatically renew on a month to month basic
114
the tenant reports monthly sales figures to determine percentage rent owned
- monthly sales reported are submitted to establish what percentage rent is owned
115
the landlord is entitled to dispose of abandoned items at its sole discretion
115
the landlord is entitled to dispose of abandoned items at its sole discretion
116
CPi
supplementary rent
117
unreasonably withold
this means the landlord cannot arbitrary refuse the sublet without a valid reason
118
a new commercial tenant t signed a lease commencing as of may 1st, but the existing tenant will not move out on that date
- contact the landlord as the landlord can then take action to resolve the matter
- they can impose a financial penalty or obtain an eviction order
119
retail percentage lease
typically include a fixed min rent + percentage of gross income over and above the min rent
120
exclusive use clause
121
usable area is the area exclusively used by the tenant
122
the tenant can terminate the tenancy with one month notice
123
letter of intent
is a preliminary document that can establish the overall parameter of a lease
124
rent - free periods often occur in advance of the lease commencement date
- rent free concession - early occupancy prior to the official commencement
124
rent - free periods often occur in advance of the lease commencement date
- rent free concession - early occupancy prior to the official commencement
125
The distinction between assigning and subletting a
commercial lease is based on privity.
This is a legal concept that means a lease cannot confer rights or impose
obligations on anyone who is not a party to the lease
-A lease assignment means the original tenant's rights and obligations are transferred to the new tenant.
-A lease
subletting agreement is a more flexible arrangement that allows an additional tenant (the sub-tenant) to use the
leased space usually on a temporary basis.
126
co-tenant
direct contractual relationship with the landlord
127
restrictive use clauses
are used to establish a proper tenant mix within a shopping centre
128
the confirmation of acceptance is signed by the person who finally accepts the offer as binding agreement including all changes both typed and written
129
A signing officer signs the agreement and inset the statement " I have the authority to bind the corporation"
130
min rent that a tenant pay is also commonly referred to as base rent
131
doctrine of part performance
when the lease is not in writing and is less then 3 years- the court may confirm that a lease exists under the doctrine of part performance
132
the tenant pay rent and all expenses in a
triple net lease ( net net net lease)
133
landlord can apply to the small claim court or superior court of justice for rent-related dispute depending on the amount involved
134
fit-up period
the time provided to a tenant to prepare the premise foe their particular use
135
deposits relating to commercial tenancies
not required to pay annual interest on a commercial tenant security deposit for the lease term ( landlord and tenant may agree to such an arrangement )
136
guarantor
obligation under the lease
