Commercial Lease Analysis Flashcards
7 cards from real CRECI practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Commercial Lease Analysis flashcards as text
What is the 'load factor' (also called the 'add-on factor') in commercial leasing?
Answer: The percentage added to usable area to arrive at rentable area
The load factor is the percentage difference between rentable and usable square footage, representing the tenant's proportionate share of common areas.
Which lease structure is most commonly associated with single-tenant retail properties such as fast-food restaurants and pharmacies?
Answer: Absolute NNN lease
Absolute NNN (bondable) leases require the tenant to handle all expenses including structural repairs, making them common for investment-grade single-tenant net-lease retail.
A 'continuous operation' clause in a retail lease requires the tenant to:
Answer: Remain open during all center operating hours
A continuous operation clause obligates the tenant to keep the store open and operating during specified hours, ensuring the center maintains foot traffic and anchor draw.
In analyzing a commercial lease, 'effective rent' accounts for which of the following that face-rate rent does not?
Answer: Free rent periods and tenant improvement allowances
Effective rent normalizes the actual economic value of the lease by spreading concessions such as free rent and TI allowances over the entire lease term.
A 'co-tenancy clause' typically allows a retail tenant to reduce rent or terminate the lease when:
Answer: An anchor tenant or required co-tenants vacate the property
Co-tenancy clauses give tenants rent relief or termination rights when anchor tenants or a minimum percentage of co-tenants vacate, reflecting the reduced customer traffic benefit.
Which of the following best describes a 'subordination' clause in a commercial lease?
Answer: The tenant agrees the lease ranks below the landlord's mortgage lien
A subordination clause makes the lease junior to the lender's mortgage, meaning in foreclosure the lender's interests take priority over the tenant's lease rights (unless an SNDA is in place).
What is the primary function of a 'tenant improvement allowance' (TIA) in a commercial lease negotiation?
Answer: To provide landlord-funded money for buildout of the leased space
A TIA is a landlord contribution toward the cost of constructing or renovating the space to meet the tenant's specifications, often expressed as a per-square-foot dollar amount.