CRECI Commercial Lease Analysis 3 — Questions and Answers
Question 1: A 'subordination, non-disturbance, and attornment' (SNDA) agreement primarily protects:
- The landlord's right to terminate underperforming leases
- The tenant's right to remain in occupancy if a lender forecloses (Correct answer)
- The landlord's ability to increase rent upon refinancing
- The tenant's right to purchase the property at a fixed price
Correct answer: The tenant's right to remain in occupancy if a lender forecloses
An SNDA ensures that if the property is foreclosed, the tenant's lease survives and the new owner must honor its terms, provided the tenant recognizes the new owner.
Question 2: In commercial leasing, 'rentable square footage' differs from 'usable square footage' because it:
- Excludes exterior walls from the measurement
- Includes a pro-rata share of common areas (Correct answer)
- Reflects only leasable private office space
- Is calculated using BOMA 2017 standards exclusively
Correct answer: Includes a pro-rata share of common areas
Rentable square footage adds the tenant's proportionate share of common areas (lobbies, restrooms, corridors) to the usable area, resulting in a higher figure.
Question 3: Which provision in a commercial lease restricts the landlord from leasing nearby space to direct competitors of the tenant?
- Exclusivity clause (Correct answer)
- Non-compete clause
- Co-tenancy clause
- Use restriction clause
Correct answer: Exclusivity clause
An exclusivity clause grants the tenant the sole right to conduct a particular type of business within the property or a defined area, preventing the landlord from leasing to competitors.
Question 4: A 'dark store' clause allows a tenant to:
- Sublet to another retailer without landlord approval
- Stop operating the business while still paying rent (Correct answer)
- Reduce rent if anchor tenants vacate the center
- Terminate the lease if the property loses its certificate of occupancy
Correct answer: Stop operating the business while still paying rent
A dark store clause permits a tenant to vacate and cease operations while continuing to pay rent, often used strategically by large retailers to limit competition.
Question 5: Under a modified gross lease, which party typically pays for increases in operating expenses beyond a base-year amount?
- The landlord absorbs all increases
- The tenant pays increases above the base-year stop (Correct answer)
- Both parties split all increases equally
- Increases are governed by the CPI cap only
Correct answer: The tenant pays increases above the base-year stop
In a modified gross lease, the landlord covers operating expenses up to a base-year stop, and the tenant is responsible for any expense increases above that threshold.
Question 6: What does 'CAM reconciliation' refer to in commercial leasing?
- Adjusting the lease term based on actual occupancy costs
- Comparing estimated CAM charges paid throughout the year to actual costs incurred (Correct answer)
- Renegotiating CAM terms at lease renewal
- Calculating the landlord's net operating income annually
Correct answer: Comparing estimated CAM charges paid throughout the year to actual costs incurred
CAM reconciliation is the year-end process of comparing the tenant's monthly CAM estimates to actual expenses, resulting in either a credit or additional payment.
Question 7: A 'relocation clause' in a commercial lease gives the landlord the right to:
- Move the tenant to a comparable space within the building (Correct answer)
- Increase rent if the tenant's business outgrows the space
- Convert the leased space to a different use
- Terminate the lease with 30 days' notice
Correct answer: Move the tenant to a comparable space within the building
A relocation clause allows the landlord to move the tenant to another space of similar size and quality within the building, typically with advance notice and at no additional cost to the tenant.
CRECI Commercial Lease Analysis 3
A 'subordination, non-disturbance, and attornment' (SNDA) agreement primarily protects: