CLP Risk Management & Insurance Flashcards
6 cards from real CLP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CLP Risk Management & Insurance flashcards as text
What is 'vacancy risk' in commercial real estate leasing?
Answer: The financial loss resulting from unleased space that generates no rental income
Vacancy risk represents the potential income loss when commercial space remains unleased, directly reducing property cash flow and diminishing asset value.
Which risk mitigation strategy involves leasing to multiple smaller tenants rather than one large anchor tenant?
Answer: Tenant diversification
Tenant diversification reduces dependency on any single occupant so that losing one tenant does not catastrophically impact the property's total income.
A Subordination, Non-Disturbance, and Attornment (SNDA) agreement primarily protects which parties?
Answer: Both the tenant and the lender: tenant's lease survives foreclosure while the lender's mortgage priority is recognized
An SNDA protects tenants by ensuring their lease remains valid through a foreclosure event while simultaneously confirming the mortgage lender's lien priority.
What is the purpose of 'due diligence' in risk management before executing a commercial lease?
Answer: Thoroughly investigating the property's physical, legal, financial, and environmental condition before committing to the lease
Due diligence involves comprehensive investigation of a property to identify risks—including title issues, environmental conditions, zoning restrictions, and structural defects—before lease execution.
What does a 'casualty and condemnation' provision address in a commercial lease?
Answer: The rights and obligations of each party if the property is destroyed by casualty or taken by eminent domain
Casualty provisions address rebuilding obligations if the building is damaged, while condemnation provisions govern each party's rights if a government authority takes the property through eminent domain.
What is an 'estoppel certificate' and what risk management function does it serve?
Answer: A signed tenant statement confirming current lease status—including rent paid and absence of landlord defaults—used to protect buyers or lenders
An estoppel certificate is a binding tenant certification of key lease facts to a third party such as a buyer or lender, preventing the tenant from later making contradictory claims.