Lease Management and Execution Flashcards

Under a double net (NN) lease, the tenant pays base rent plus which two expense categories?

Answer: Property taxes and building insurance

In a double net lease, the tenant pays base rent plus property taxes and building insurance, while the landlord remains responsible for structural maintenance.

A commercial landlord wants to redevelop the property before the tenant's lease expires. Which lease clause would give the landlord the right to terminate the lease early for redevelopment purposes?

Answer: Demolition or redevelopment clause

A demolition or redevelopment clause (sometimes called a demolition clause) permits the landlord to terminate the lease early when they plan to demolish or substantially redevelop the building.

What is the purpose of a 'letter of credit' as a lease security device compared to a cash security deposit?

Answer: It allows the landlord to draw funds quickly without litigation if the tenant defaults

A letter of credit (LOC) allows the landlord to draw funds directly from the tenant's bank upon presenting required documentation, avoiding the legal disputes common with cash deposit returns.

Which of the following best describes 'turnkey' tenant improvements in a commercial lease?

Answer: The landlord delivers the space fully built out to agreed specifications at the landlord's cost

In a turnkey build-out, the landlord delivers a completed, ready-to-occupy space built to agreed specifications, assuming the risk of any cost overruns.

A commercial lease provides that rent will be adjusted annually based on the Consumer Price Index (CPI). This type of rent adjustment is best described as a:

Answer: Index escalation clause

An index escalation clause ties periodic rent increases to an economic index like the CPI, protecting the landlord against inflation without requiring renegotiation.

Under the doctrine of 'constructive eviction,' what must a commercial tenant demonstrate to justify abandoning the premises and terminating lease obligations?

Answer: The landlord's actions or omissions substantially interfered with the tenant's use and enjoyment of the premises

Constructive eviction requires showing that the landlord substantially interfered with the tenant's use of the property to a degree that effectively forced the tenant to vacate.

A commercial tenant negotiates a 'kick-out' clause in a retail lease. What right does this clause typically grant the tenant?

Answer: The right to terminate the lease early if sales fall below a specified threshold

A kick-out clause (also called a sales termination clause) allows a retail tenant to exit the lease if their gross sales don't reach a specified minimum level within a defined period.