A landlord and tenant negotiate a build-to-suit ground lease for a fast-food restaurant. The tenant will design and build the restaurant at the tenant's expense on the landlord's land. The lease term is 20 years with two 10-year renewal options. Who benefits most from the renewal options?
Correct Answer
B) The tenant, because renewal options allow the tenant to extend the lease and continue using the improvements built at the tenant's expense
In a ground lease where the tenant constructs improvements at their own expense, renewal options are particularly valuable to the tenant because they allow the tenant to continue operating in the building they built. Without renewal options, the tenant would lose the improvements at lease expiration.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A life estate is a freehold estate that grants ownership rights for the duration of someone's life.
Real property is immovable land and anything permanently attached to it, while personal property (also called chattels) is movable.
Tenancy by the entirety is a form of co-ownership available only to married couples that includes the right of survivorship and protection from individual creditors. Neither spouse can unilaterally sell or encumber the property.
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A commercial tenant wants to sublease half of her leased space to another business. The original lease is silent on subleasing. Can the tenant sublease the space?
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A percentage lease has a base rent of $60,000 per year and a percentage rent rate of 6 percent. The natural breakpoint is the sales volume at which percentage rent begins. What is the natural breakpoint for this lease?