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Base Lease |
| A contract, i.e., lease agreement,
setting out minimum tenancy requirements
applicable to all tenants. Base leases are
used in both residential and commercial
properties. |
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| A base lease typically contains minimum
rents, services provided, allocation of
common areas, and other items common to all
tenants. While precise wordings vary,
certain elements are present in all leases.
As with an agreement/contract or a mortgage,
the lease must contain specific information,
the lack of which could render the agreement
invalid. The elements are: |
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- Names of all parties;
- Description of the leased premises;
- Statement of consideration;
- Legality of use;
- Commencement and expiration dates;
and
- Rights and obligations of the
parties, e.g., restrictions, additional
costs, and exclusive covenants as
governed by the particular
circumstances.
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| Failure to specify the above in
sufficient detail and clarity can result in
problems irrespective of legal issues
surrounding the drafting of a lease. |
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| The base lease is best described as a
general form of agreement designed to suit
as many tenants and requirements as is
practical given the specific nature of the
property being leased. Special tailoring of
the base lease is necessary, particularly in
the commercial field, for tenants with
diverse demands and amendments. In a
multi-tenancy complex, i.e., office
building, the base lease normally includes a
multi-page document and various schedules. |
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Schedule A–Premises |
| A large scale building plan or floor
plan shows the exact configuration of the
leased premise, together with all mechanical
details. The plan is typically required by
the tenant’s interior designer or architect
as the basis for detailed interior
construction plans for submission to, and
approval by, the landlord. |
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Schedule B–Land (Site Plan) |
| A plot plan or site plan showing the
overall lands, dimensions, access and egress
systems, boundary roads or highways,
parking, loading facilities, and the
building located thereon, together with
common areas. The demised or leased premises
will be outlined on the site plan. |
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Schedule C–Landlord’s and Tenant’s Work |
| A detailed breakdown of work to be
completed, based on drawings by the tenant
and approved by the landlord. |
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| Generally, the landlord’s work relates
to structural items while the tenant’s work
focuses on the leased area and the
installation of mechanical and structural
improvements. Special requirements and
provisions of the landlord are normally
outlined in this schedule. The scope of
landlord and tenant work will vary
significantly as terms are subject to
negotiations between the parties concerning
the lease. |
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Schedule D–Rules and Regulations |
| The detailing of rules and regulations
governing the operation of the complex
including maintenance requirements (e.g.,
keeping interior/exterior clean, maintaining
mechanical apparatus, and refraining from
undue accumulation of garbage and packing
boxes), and agreeing not to undertake
certain activities (e.g., kitchen
facilities, maintaining stipulated hours of
operation, and adhering to various property
management requirements). |
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Base Rent |
| The minimum rent payable by the tenant
under a lease as distinguished from
additional rents associated with operating
costs and from percentage rent. |
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| In commercial property, base rent was
often referred to as a net/net/net lease or
a triple net lease . Such terms proved
confusing in the marketplace as net and
net/net arrangements were also used. Real
estate practitioners now commonly refer to
such rent as simply base rent or minimum
rent . Base rent is an amount payable based
on the rentable square foot/square meter
area of the demised premises. Base rent
should not be confused with additional rents
that typically involve other expenses borne
by the tenant in relation to the overall
maintenance and operation of the building. A
typical lease wording for base rent
involving an office complex follows: |
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The tenant will throughout the term pay the
land lord at its head office or at any other
place designated by the land lord, in
Canadian or US funds, without demand and
without
deduction, abatement or
compensation, as Base Rent, then annual sum
of 48,000 payable
in equal consecutive
monthly installments of $4,000 each in
advance on the first day of
each
calendar month. The Base Rent is calculated
by applying the annual rate of $4.00
per
square foot to the Rentable area of the
premises. |
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| It is also customary,
when describing the base or minimum rent in
a lease, to set out provisions for
pro-rating any partial month, postdated
cheques in each consecutive year of the
lease term, and a penalty for any cheques
that are not honored when presented. |
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Base Year |
| The year of a lease term
(or other point in time), used as the
standard or benchmark when applying an
escalator clause or some form of an index to
calculate incremental changes in lease
payments. |
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| Typically, an escalator
clause sets out the year for comparison
(base year) and then provides for annual
rental adjustments based on a formula using
the Consumer Price Index (CPI) or a
comparable inflation measurement. The
formula stipulated in the lease also
provides for the frequency of adjustment and
any limitations or ceilings for such
calculations using the base year. The base
year can also be used to establish expense
limits paid by the landlord, with subsequent
amounts being the tenant’s responsibility. |
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| Example
of
Base Year |
| Lessor Wong owns a small
commercial plaza and leased a 2,000 square
foot office to ABC Realty Inc. The parties
agreed that the rental would be $17.00 per
square foot per year for a 5-year term
subject to increases based on the Consumer
Price Index (CPI). Therefore, the base year
rent for calculation purposes is: |
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| $17.00 x 2,000 = $34,000
(total yearly rent payable) |
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| In the following year,
assuming that the CPI increases by 1.7%
(0.017), rent per square foot for that year
would be: |
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| $17.00 + ($17.00 x
0.017) = $17.29 (rounded) |
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| The total yearly rent
would then be: |
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| $17.29 x 2,000 = $34,580 |
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Base Line |
| A line running in an
east-west direction used by surveyors in
conjunction with a north-south line
(meridian) to locate and describe property.
Base and meridian lines are used in
rectangular surveys common to Western Canada
in which all land descriptions relate the
north-south meridian line to its east-west
base line. |
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See Also |
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Meridian Lines |
