BOMA Lease Administration & Finance 3

Question 1

What is a 'letter of credit' (LOC) used for in commercial leasing?

Accepted Answer

A form of security deposit that gives the landlord a bank guarantee if the tenant defaults

Answer

A lender's commitment to provide financing for tenant improvements

Answer

A credit given to the tenant for early lease execution

Answer

A bank document certifying the tenant's creditworthiness to the landlord

Question 2

What is 'gross-up' in the context of operating expense calculations?

Accepted Answer

Adjusting variable operating expenses to reflect what they would be at full or near-full occupancy

Answer

Increasing rent annually by a fixed percentage to account for inflation

Answer

Adding management fees to gross operating expenses before allocation to tenants

Answer

Converting net lease expenses to gross lease equivalent for comparison

Question 3

What does a 'right of first refusal' (ROFR) give a commercial tenant?

Accepted Answer

The right to lease adjacent or additional space before the landlord offers it to others

Answer

First priority consideration for lease renewal before the landlord markets the space

Answer

The right to purchase the building before the landlord sells to a third party

Answer

Priority access to amenities before other tenants during peak hours

Question 4

What is a 'holdover' situation in a commercial lease?

Accepted Answer

When a tenant continues occupying space after the lease term expires without a new lease

Answer

When a landlord delays completing tenant improvements past the scheduled occupancy date

Answer

When lease payments are held in escrow during a lease dispute

Answer

When a tenant withholds rent due to unresolved maintenance issues

Question 5

In commercial real estate finance, what is a 'debt service coverage ratio' (DSCR)?

Accepted Answer

Net Operating Income divided by annual debt service (mortgage payments)

Answer

Total debt divided by property value at time of financing

Answer

Monthly mortgage payment relative to total monthly building income

Answer

Loan amount as a percentage of property's replacement cost

Question 6

What is the purpose of a 'subordination, non-disturbance, and attornment' (SNDA) agreement in commercial leasing?

Accepted Answer

To protect the tenant's lease rights in the event the landlord's lender forecloses on the property

Answer

To subordinate tenant improvement costs to the landlord's mortgage obligation

Answer

To establish priority among multiple tenants competing for the same space

Answer

To protect the landlord if a tenant assigns the lease to a creditworthy subtenant