Question 1

The choice of which method to use in constructing the contracted rental rate can be impacted by the term of the lease.With a shorter lease term,which of the following methods is most likely to be observed?

Accepted Answer

A)  Flat rent
B)  Graduated rent
C)  Indexed rent
D)  Percentage rent A

Question 2

Given the following information,calculate the effective monthly rent payment.Lease Term: 10 years,Concession: 1 year free rent to be spread over the term of the lease,Rental Space: 5000 square feet,Rental Rate: $20 per square foot per year,Landlord's discount rate: 10%.

Accepted Answer

A)  $4,676
B)  $5,901
C)  $7,081
D)  $10,122 C

Question 3

Given the following information,calculate the load factor for this office property.Total usable area: 20,000 sq ft,Tenant's prorated share of common area: 5,000 sq ft.

Accepted Answer

A)  0.25
B)  0.80
C)  1.25
D)  4.00 C

Question 4

As with any valid contract,enforceable leases must meet a number of requirements.One of these requirements is for each party to provide appropriate consideration.In a lease,which of the following constitutes the landlord's consideration?

Accepted Answer

A)  Promise to pay rent
B)  Passing on legal title to the property
C)  Permission to occupy the space or property
D)  Commission to the leasing agent

Question 5

While a sublease and an assignment are two distinct choices for a tenant who wishes to transfer his rights during the term of a lease,both agreements:

Accepted Answer

A)  transfer all of a tenant's rights to another party
B)  transfer only a subset of rights to another party
C)  grant another party the right to cancel the original lease before expiration
D)  maintain that the original tenant be held liable for fulfilling the original lease unless otherwise specified

Question 6

Some tenants who are subject to long-term leases may desire to transfer all of their tenant rights and obligations to another party.This is commonly referred to as a(n):

Accepted Answer

A)  assignment
B)  sublease
C)  concession
D)  lease option

Question 7

The lease is a contract between a property owner and tenant that transfers exclusive use and possession of space to the tenant,but allows the owner to retake possession of the property at the expiration of the lease.Which type of interest allows the owner to retake possession at the end of a lease?

Accepted Answer

A)  Remainder interest
B)  Reversion interest
C)  Spousal interest
D)  Co-ownership interest

Question 8

The majority of residential units in the U.S.are contained in multifamily structures,or apartment buildings that contain five or more housing units.Which of the following multifamily structures will range in height from four to nine stories and are typically found in both cities and suburbs?

Accepted Answer

A)  High-rise apartment buildings
B)  Midrise apartment buildings
C)  Garden apartments
D)  Condominiums

Question 9

When the supply of space exceeds the demand,it is common for owners to provide the tenant with a period of free or perhaps reduced rent.This is commonly referred to as a(n):

Accepted Answer

A)  tenant improvement allowance
B)  concession
C)  sublease
D)  expense stop

Question 10

For most commercial property types,lease lengths can vary considerably.Therefore,both parties must tradeoff between the advantages and disadvantages associated with particular leasing terms.Owners may prefer longer leases for all of the following reasons EXCEPT:

Accepted Answer

A)  Reduction of re-leasing costs
B)  Reduction of risk associated with declining interest rates
C)  Flexibility
D)  Stability of future cash flows

Question 11

A tenant who expects her business to grow may wish to have a clause included in her lease that grants her the choice to lease adjacent space as soon as it becomes available.This lease option is more commonly referred to as a:

Accepted Answer

A)  relocation option
B)  right of first refusal
C)  renewal option
D)  consideration

Question 12

The choice of which method to use in constructing the contracted rental rate can also be impacted by the type of property being leased.With which of the following property types would one expect to see a percentage rent method used?

Accepted Answer

A)  Apartment
B)  Office
C)  Industrial
D)  Retail

Question 13

A lease option is a clause that grants an option holder the right,but not the obligation,to renew the lease,cancel the agreement,relocate within a property,or even expand to adjacent space.The existence of these options in a leasing agreement:

Accepted Answer

A)  reduces the expected present value of lease cash flows to the owner
B)  increases the expected present value of lease cash flows to the owner
C)  does not impact the expected present value of lease cash flows to the owner
D)  causes the expected present value of lease cash flows to equal zero

Question 14

Retail establishments are found in a variety of forms,the simplest of which is: (Hint: fast-food franchise)

Accepted Answer

A)  Freestanding retail outlet
B)  Strip center
C)  Power center
D)  Regional mall

Question 15

The rental income generated by a lease can depend significantly on the proportion of property-level operating expenses paid by the tenant.In which of the following types of leases is the tenant responsible for all operating expenses?

Accepted Answer

A)  Gross lease
B)  Net lease
C)  Net-net lease
D)  Triple net lease

Question 16

Which of the following property subtypes is often considered the least vulnerable to functional obsolescence because of its relatively simple structure and long economic life?

Accepted Answer

A)  Industrial warehouse
B)  Hotel
C)  Retail strip centers
D)  Suburban office

Question 17

The two most important determinants of the classification of an office property are age and obsolescence.Which of the following classes includes office buildings that are older and reasonably maintained,but are below current standards for one or more reasons?

Accepted Answer

A)  Class A office
B)  Class B office
C)  Class C office
D)  Investment grade property

Question 18

Newer industrial parks have begun to specialize in providing space that can be configured to suit the diverse needs of various tenants.This type of industrial space is more commonly referred to as:

Accepted Answer

A)  Warehouse
B)  Plant and Factory
C)  Flex space
D)  Research and Development

Question 19

In an indexed lease,rents are dependent on a regularly reported index,most commonly the consumer price index (CPI).By using the CPI as an index rate,the risk of unexpected increases in general inflation is shifted to the _________,and therefore a _________ base rental rate will typically be required.

Accepted Answer

A)  owner;higher
B)  owner;lower
C)  tenant;higher
D)  tenant;lower

Question 20

Once possession and control are conveyed in a lease agreement,the owner must provide the tenant with uninterrupted use of the property without any interference from any entity that may threaten to impose upon the tenant's leasehold interest in the property.In other words,the tenant is entitled to which of the following?

Accepted Answer

A)  Quiet enjoyment
B)  Tenant improvement
C)  Concession
D)  Expansion option

Exam 22: Leases and Property Types