CHI Lease Negotiation & Terms 2 — Questions and Answers
Question 1: A tenant requests a lease clause allowing them to sublet the property. Which term best describes the original tenant's ongoing liability if subletting is permitted?
- Primary liability
- Privity of contract (Correct answer)
- Vicarious obligation
- Concurrent tenancy
Correct answer: Privity of contract
Privity of contract means the original tenant remains legally bound to the landlord even when a subtenant occupies the property.
Question 2: During lease negotiations, the landlord insists on a 'holdover' clause. What does this clause typically specify?
- Early termination penalties
- Tenant's rights after lease expiration without renewal (Correct answer)
- Conditions for mid-lease rent increases
- Procedures for property inspections
Correct answer: Tenant's rights after lease expiration without renewal
A holdover clause defines what happens—usually conversion to a month-to-month tenancy at a higher rate—when a tenant stays beyond the lease end date.
Question 3: A commercial lease includes a 'percentage rent' provision. What does this require the tenant to pay?
- A percentage of the property's appraised value annually
- Base rent plus a percentage of gross sales above a threshold (Correct answer)
- A percentage increase in rent each year tied to CPI
- A percentage of the security deposit returned at lease end
Correct answer: Base rent plus a percentage of gross sales above a threshold
Percentage rent requires tenants—typically retailers—to pay base rent plus a percentage of their gross revenue once sales exceed a specified breakpoint.
Question 4: Which lease term gives a tenant the right to extend the lease at a pre-negotiated rent without requiring landlord approval?
- Right of first refusal
- Option to renew (Correct answer)
- Automatic renewal clause
- Escalation option
Correct answer: Option to renew
An option to renew grants the tenant a unilateral right to extend the lease term at agreed-upon terms, without needing fresh negotiation.
Question 5: In a triple-net (NNN) lease, which costs are typically the tenant's responsibility?
- Mortgage and capital improvements only
- Property taxes, insurance, and maintenance (Correct answer)
- Base rent and utility deposits only
- Marketing costs and common area improvements
Correct answer: Property taxes, insurance, and maintenance
In a triple-net lease, the tenant pays property taxes, building insurance, and maintenance costs in addition to base rent.
Question 6: A tenant negotiates a 'free rent' period at the beginning of a new lease. This concession is best described as:
- A rent abatement (Correct answer)
- A rent deferral
- A rent escalation waiver
- A subletting credit
Correct answer: A rent abatement
A rent abatement is a period during which the landlord waives rent entirely, often used as a lease-signing incentive.
Question 7: What is the purpose of an 'estoppel certificate' in lease negotiations or property transfers?
- It terminates the lease upon property sale
- It confirms lease terms and status as represented by the tenant (Correct answer)
- It allows the landlord to alter rent mid-term
- It waives the tenant's right to sublet
Correct answer: It confirms lease terms and status as represented by the tenant
An estoppel certificate is a signed statement by the tenant confirming lease terms, rent amounts, and that no landlord defaults exist, used to protect buyers and lenders.
CHI Lease Negotiation & Terms 2
A tenant requests a lease clause allowing them to sublet the property.
Which term best describes the original tenant's ongoing liability if subletting is permitted?