CRECI Tenant and Owner Relations 3 — Questions and Answers
Question 1: A commercial lease requires the tenant to restore the premises to their original condition upon vacating. This obligation is known as:
- Restoration or yield-up clause (Correct answer)
- Surrender and acceptance
- Holdover provision
- Reversionary interest clause
Correct answer: Restoration or yield-up clause
A restoration clause requires the tenant to remove alterations and return the space to its original condition at lease end.
Question 2: Which document confirms to a prospective purchaser or lender that a commercial lease is in full force and that the tenant has no claims against the landlord?
- Estoppel certificate (Correct answer)
- SNDA agreement
- Lease abstract
- Subordination agreement
Correct answer: Estoppel certificate
An estoppel certificate is a signed statement by the tenant confirming the lease terms and that no defaults or claims exist.
Question 3: A tenant negotiates a 'dark clause' in its retail lease. What does this provision allow the tenant to do?
- Cease operations while continuing to pay rent without triggering co-tenancy remedies (Correct answer)
- Turn off lighting during non-business hours
- Sublease to a competitor without landlord approval
- Terminate the lease if the anchor tenant closes
Correct answer: Cease operations while continuing to pay rent without triggering co-tenancy remedies
A dark clause permits a tenant to stop operating ('go dark') without breaching the lease as long as rent is paid.
Question 4: What is the landlord's primary duty under the implied covenant of good faith and fair dealing in lease renewals?
- Negotiate renewal terms honestly and not act to deprive tenant of reasonable lease benefits (Correct answer)
- Guarantee below-market renewal rates
- Provide the tenant with first right of refusal on all adjacent spaces
- Automatically renew the lease on identical terms
Correct answer: Negotiate renewal terms honestly and not act to deprive tenant of reasonable lease benefits
The implied covenant of good faith requires both parties to act honestly and not frustrate the other party's reasonable lease expectations.
Question 5: In commercial real estate, what is the purpose of a 'SNDA' agreement?
- It subordinates the lease to the mortgage, provides non-disturbance to the tenant, and requires the tenant to attorn to a new owner (Correct answer)
- It transfers the security deposit to a new lender
- It eliminates the tenant's obligation to pay operating expenses
- It gives the tenant priority over the mortgage lender
Correct answer: It subordinates the lease to the mortgage, provides non-disturbance to the tenant, and requires the tenant to attorn to a new owner
A Subordination, Non-Disturbance, and Attornment agreement protects both the lender's lien priority and the tenant's right to remain if foreclosure occurs.
Question 6: A tenant discovers the landlord has been charging it for more square footage than the space actually contains. What type of measurement discrepancy is this called?
- Rentable vs. usable area dispute (Correct answer)
- Common area maintenance fraud
- Zoning misrepresentation
- Building classification error
Correct answer: Rentable vs. usable area dispute
Rentable square footage includes a proportionate share of common areas, while usable square footage is the actual occupied space, and disputes arise when these measurements are overstated.
Question 7: Which type of commercial lease structure requires the landlord to pay all property expenses while the tenant pays only a fixed rent?
- Gross lease (Correct answer)
- Triple net lease
- Modified gross lease
- Percentage lease
Correct answer: Gross lease
Under a gross lease, the landlord covers taxes, insurance, and maintenance while the tenant pays a single all-inclusive rent amount.
CRECI Tenant and Owner Relations 3
A commercial lease requires the tenant to restore the premises to their original condition upon vacating.
This obligation is known as: