BOMA BOMA Lease Administration 2 — Questions and Answers
Question 1: What does 'CAM reconciliation' involve in commercial property management?
- Comparing actual common area maintenance costs to estimated charges collected from tenants (Correct answer)
- Reconciling security deposits at lease end
- Matching tenant improvement costs to allowances
- Auditing parking revenue against projections
Correct answer: Comparing actual common area maintenance costs to estimated charges collected from tenants
CAM reconciliation compares the actual common area maintenance expenses incurred during the year to the estimated CAM charges already collected from tenants, resulting in either a refund or additional charge.
Question 2: Under BOMA guidelines, which of the following costs is typically EXCLUDED from operating expense pass-throughs to tenants?
- Janitorial services
- Property management fees
- Mortgage principal payments (Correct answer)
- Landscaping costs
Correct answer: Mortgage principal payments
Mortgage principal payments are capital financing costs that benefit the owner, not building operations, and are therefore excluded from tenant operating expense pass-throughs.
Question 3: What is the primary purpose of a 'subordination, non-disturbance, and attornment' (SNDA) agreement?
- To protect both the lender and tenant's rights in the event of foreclosure (Correct answer)
- To limit tenant improvements during the lease term
- To establish rent escalation schedules
- To define assignment and subletting rights
Correct answer: To protect both the lender and tenant's rights in the event of foreclosure
An SNDA agreement protects tenants by ensuring their lease remains in force if the property is foreclosed, while the tenant agrees to recognize a new owner and the lender's lien takes priority.
Question 4: In commercial leasing, what is 'percentage rent'?
- Rent calculated as a percentage of the property's appraised value
- Additional rent based on a percentage of the tenant's gross sales above a specified breakpoint (Correct answer)
- A rent discount percentage applied to long-term tenants
- The landlord's percentage share of tenant improvement costs
Correct answer: Additional rent based on a percentage of the tenant's gross sales above a specified breakpoint
Percentage rent is additional rent paid by retail tenants based on a specified percentage of their gross sales once sales exceed a natural or artificial breakpoint.
Question 5: What does 'co-tenancy' clause protection provide to a retail tenant?
- The right to share space with another tenant
- Rent reduction or termination rights if key anchor tenants leave the property (Correct answer)
- Protection against rent increases when new tenants move in
- The right to lease additional space adjacent to their unit
Correct answer: Rent reduction or termination rights if key anchor tenants leave the property
A co-tenancy clause allows a retail tenant to reduce rent or terminate their lease if specified anchor tenants or a minimum percentage of the center's tenants vacate, protecting them from reduced foot traffic.
Question 6: What is the significance of a 'lease commencement date' versus a 'rent commencement date'?
- They are legally identical terms used interchangeably
- Lease commencement starts legal obligations while rent commencement is when rent payments begin, often after a free rent period (Correct answer)
- Lease commencement applies to base rent and rent commencement applies to CAM charges
- The lease commencement date always precedes the rent commencement date by exactly 30 days
Correct answer: Lease commencement starts legal obligations while rent commencement is when rent payments begin, often after a free rent period
The lease commencement date establishes when the lease term begins and legal obligations arise, while the rent commencement date is when actual rent payments start, often delayed to allow for tenant improvements.
BOMA BOMA Lease Administration 2
What does 'CAM reconciliation' involve in commercial property management?