CGA Lease Negotiation & Terms 2

Question 1

A tenant negotiates a 'free rent' period at lease commencement. How should an appraiser treat this concession when estimating market rent?

Accepted Answer

Convert it to an effective rent by amortizing the concession over the lease term

Answer

Free rent concessions are amortized over the full lease term to derive effective (economic) rent, which is then compared to market rent.

Question 2

Which lease clause grants the tenant the right to remain in possession at the end of the lease term if no new agreement is reached?

Accepted Answer

Holdover provision

Answer

A holdover provision defines the tenant's rights and rent obligations when continuing occupancy after lease expiration without a new lease.

Question 3

Under a triple-net lease, which of the following expenses is the LANDLORD most likely responsible for?

Accepted Answer

Structural repairs to the building shell

Answer

In a triple-net lease, tenants pay taxes, insurance, and maintenance, but structural repairs to the building shell typically remain the landlord's responsibility.

Question 4

A CPI escalation clause in a lease ties rent increases to the Consumer Price Index. This clause primarily protects which party?

Accepted Answer

The landlord against inflation eroding real rent value

Answer

CPI escalation clauses protect the landlord by adjusting rent upward with inflation, preserving the real economic value of the lease income.

Question 5

When appraising a property with an above-market lease, the appraiser must account for a 'contract rent premium.' This premium is BEST described as:

Accepted Answer

The present value of the excess of contract rent over market rent for the remaining lease term

Answer

The contract rent premium is the present-value difference between the above-market contract rent and current market rent over the remaining lease term.

(CGA) Certified General Appraiser Practice Test

(CGA) Certified General Appraiser Practice Test

CGA Lease Negotiation & Terms 2