Lease Negotiation & Terms Flashcards
7 cards from real CGA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Lease Negotiation & Terms flashcards as text
A lease with a 'recapture clause' allows the landlord to:
Answer: Terminate the lease and reclaim the space if the tenant requests consent to sublease or assign
A recapture clause gives the landlord the right to terminate the lease and retake the space when a tenant seeks to sublease or assign, capturing any increased market value.
Which of the following best describes a 'step-up' lease?
Answer: A lease where rent increases are predetermined at specified intervals throughout the lease term
A step-up (or graduated) lease specifies fixed rent increases at predetermined dates, providing both parties with rent certainty.
An appraiser is valuing an office building where a major tenant has a 'right of first offer' (ROFO). How does ROFO affect property value?
Answer: It may reduce value by restricting the owner's ability to sell at full market price
A ROFO can reduce marketability and value by requiring the owner to offer the property to the tenant first, potentially limiting competitive bidding from outside buyers.
In a percentage lease, the 'natural breakpoint' is calculated as:
Answer: Base rent divided by the percentage rent rate
The natural breakpoint is base rent divided by the percentage rate; sales above this amount trigger percentage rent payments to the landlord.
A lease provision requiring the tenant to maintain the property in good condition and surrender it in the same state is known as:
Answer: A yield-up or surrender clause
A yield-up or surrender clause specifies the condition in which the tenant must return the premises to the landlord at lease expiration.
When analyzing leases for appraisal purposes, 'effective gross income' from a leased property is BEST calculated as:
Answer: Contract rent plus expense reimbursements minus vacancy and collection loss
Effective gross income equals contract rent plus reimbursements and other income, less an allowance for vacancy and collection loss.
A 'gross-up' provision in an office lease allows the landlord to:
Answer: Calculate operating expenses as if the building were fully occupied, even if it is not
A gross-up provision normalizes variable operating expenses to a full-occupancy basis so tenants share costs equitably regardless of actual building occupancy.