Shared Flashcard Set


Chapter 14
Property Management and Leasing

Additional Management Flashcards




Which of the following would be described as a "tenancy at sufferance"?

1) Jack is letting his brother Tim live in his basement. They have no formal agreement as to rent and Jack can ask Tim to leave at any time.
2) Diane has rented the top story of her commercial building to a group of artists on a month-to month basis.
3) The lease between Susan, as landlord, and Mark, as tenant, specifies that the term shall be for 3 years commencing on December 1.
4) Andrew's lease for a store in a shopping centre expired on November 1. It is now January 15 and Andrew is still in possession without a new lease with the landlord.
Option (4) is a tenancy at sufferance, also known as a "holding over". This occurs when the lease term expires but the tenant does not vacate. Although there is no agreement in existence, rent is still payable. Option (1) is a tenancy at will, option (2) is a periodic tenancy, and option (3) is a fixed term tenancy.
Which of the following shopping centre leases would be described as a "gross" lease?

1) Jenny's lease states that she will pay annual minimum rent at $15.00 per square foot plus additional rent which shall include her share of the operating costs for the shopping centre including property taxes but excluding structural repairs.
2) Teresa's lease states that she will pay annual rent at $25.00 per square foot which includes her complete share of the operating costs for the shopping centre.
3) Shirley's lease states that she will pay as minimum rent five percent (5%) of the total amount of gross sales during the year in or upon the premises, plus her share of the operating costs for the shopping centre, excluding property taxes, non-structural and structural repairs.
4) Lisa's lease states that she will pay annual minimum rent at $17.00 per square foot of the premises plus her share of HVAC, lighting and property taxes for the shopping centre.
Answer: 2
Options 1, 3 and 4 are all variations of a net lease. Option 2 is a gross lease because, regardless of any increases in operating expenses during the term, the tenant's share is limited to her annual rent of $25.00 per square foot.
Which of the following would be of concern to a property manager in selecting a tenant for shopping centre but would not be of concern to a property manager in selecting a residential tenant?

1) The prospective tenant has history of terminating tenancies early.
2) The prospective tenant's credit cards are over their limit and he or she is behind in some loan payments.
3) The prospective tenant carries on the same type of business as four of the other tenants in the building.
4) The prospective tenant was asked to vacate his or her last tenancy because of bad smells emanating from his or her unit.
Only for a commercial building, or shopping centre, is the property manager concerned with maintaining a varied tenant mix. However, property managers of both residential buildings and shopping centres are concerned with a prospective tenant's reputation for long-term occupancy, ability to pay rent and to maintain good housekeeping standards.
Which of the following is NOT a prime concern when developing a leasing plan for a shopping centre?

1) Developing customer traffic.
2) Filling vacancies as soon as they come up.
3) Ensuring that the services or products supplied by the various tenants complement each other.
4) Catering to the needs of the customers within the trading area.
Answer: 2
Filling vacancies as soon as possible is not a prime concern when developing a lease plan for a shopping centre. Finding appropriate tenants is critical for the long term success of a shopping centre, and this may from time to time require that a vacancy not be filled immediately.
Because the lease document is usually drafted on behalf of the landlord, the covenants and conditions tend to favour the landlord. For this reason it is important for the tenant to carefully scrutinize the lease during negotiations to make sure that the lease clearly states the tenant's intent. In reviewing the following standard lease clause, what questions would a tenant be wise to ask?

The landlord covenants with the tenant to provide to the leased premises during normal business hours processed air in such quantities, at such temperatures and of such humidity as shall maintain in the leased premises conditions of reasonable temperature and comfort in accordance with good standards of interior climate.
A) What is meant by "of reasonable temperature"?
B) What are "normal business hours"?
C) Are any such services provided outside of "normal business hours"?
D) What are "good standards of interior climate"?

1) A, B and C
2) B and C only
3) All of the above
4) All of the above and any other questions involving the possible effects of the tenant's specific business on the HVAC system
Answer: 4
It is very important that each clause in the lease be scrutinized to make sure that it addresses the intent of the parties. The tenant should ask all of the listed questions and make sure that the answers are set out in the lease. If the tenant's business requires a greater amount of service than the landlord intends, the matter should be discussed and resolved in the lease because later disputes may result in litigation.
Which of the following would the tenant normally be responsible for insuring?

A. Leasehold improvements installed by the tenant.
B. Third party liability for common areas.
C. Improvements installed by the landlord in the common areas.
D. Trade fixtures and inventory of the tenant.

1) All of the above.
2) Only A and C.
3) Only A and D.
4) Only B and C.
Answer: 3
The tenant is normally responsible for obtaining insurance coverage for trade fixtures, furniture, equipment, inventory and all other items on the leased premises, leasehold improvements installed by the tenant and against third person liability for any occurrence on the leased premises. Whereas the landlord is usually responsible for insuring the building and any improvements (except for those installed by tenants) and for obtaining third party liability for the common areas. Remember that this is the usual situation, and is subject to the actual terms of the lease.
What is the effect of a "hold harmless" clause?

1) The tenant must install improvements that meet certain safety specifications.
2) The tenant is required to insure all improvements on the leased premises regardless of whether they were installed by the tenant or the landlord.
3) The tenant agrees to protect the landlord from all costs, claims or legal actions resulting from the the tenant's negligence.
4) In the event that the building or the leased premises is damaged to the extent that it can no longer be occupied, then the rent shall abate during the period when occupation is interrupted.
Answer: 3
A "hold harmless" or, indemnity clause, binds the tenant to protect or "hold harmless" the landlord from all costs, claims or legal actions which may result because of the negligence or wilful acts of the tenant, including the tenant's agents and other persons in or about the leased premises.
You are the property manager of a warehouse in an industrial park which you are trying to lease. With your knowledge of tenant criteria for industrial premises, which of the following characteristics of the warehouse would you be most likely to emphasize to a prospective tenant?

1) The amount of public parking available in the area.
2)The frequency of public transportation.
3) The proximity of the warehouse to shopping, restaurant and health club amenities.
4) The relaxed environmental standards for the area.
Answer: 4
A prospective industrial tenant is not usually going to be very interested in the availability of public parking, the proximity of amenities or frequency of public transportation. However, such a tenant will likely be extremely interested in the environmental standards of the area.
Which of the following would be appropriate further inducements to offer to a prospective tenant who is hesitant to sign a triple net lease for office space?

A) Insertion of an operating cost rent escalation clause.
B) A three month rent free period.
C) Three free parking spaces in the building's underground parking lot.
D) A ceiling on operating expenses for the first 3 years of the term.

1) A,B and C
2) B,C and D
3) A,C and D
4) All of the above
Answer: 2
Because this is a triple net lease, an operating cost rent escalation clause does not apply, and in any event, including this clause would not be an inducement to a tenant to sign the lease. All the other items may be inducements for a tenant to enter a triple net office lease.
A demise by a lessee for a term which is shorter than the whole of the remaining interest granted in the original lease is referred to as:

1) an assignment.
2) a tenancy by sufferance.
3) a sub-lease.
4) a tenancy at will.
Answer: 3
When a leasee (tenant) leases some or all of the leased premises for a term which is shorter than the original term, it is called a sub-lease. An assignment involves the tenant giving up all of its rights for the duration of the term. A tenancy by sufferance and a tenancy at will are terms which describe the type of tenancy enjoyed by the tenant.
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