Test Bank Answer Key
Chapter 18 Leases
TRUE/FALSE
1. A tenant’s right to the leased premises is subject to all the landlord’s title defects.
2. A tenant’s right to the leased premises is not subject to all the landlord’s title defects.
3. A foreclosure of a prior mortgage on leased premises will terminate the lease.
4. A foreclosure of a prior mortgage on leased premises will not terminate the lease.
5. Failure of a landlord to perform obligations under a lease is always an excuse for the tenant
not to pay rent.
6. Failure of a landlord to perform obligations under a lease is not always an excuse for the
tenant not to pay rent.
7. A lease must describe the property that is being rented.
8. A lease without a specified term is deemed to be a perpetual lease.
9. A lease may provide that possession will begin several months in the future after the
lease is signed.
10. Rent is generally payable in arrears.
11. Rent is generally payable in advance.
12. The tenant’s contractual obligation to pay rent will continue even if the tenant has transferred
his or her interest in the lease and vacated the premises.
13. The tenant’s obligation to pay rent under the lease will terminate upon the tenant’s transfer of
the lease or the vacation of the premises.
14. A percentage rent clause in a retail lease will generally provide that a percentage of the tenant’s
net income will be paid to the landlord as rent.
15. A percentage rent clause in a retail lease will generally provide that a percentage of the tenant’s
gross sales or net sales on the premises will be paid to the landlord as rent.
16. The clause in a lease that prohibits a tenant from opening another store within a certain
geographical distance of the leased premises is known as a nondisturbance agreement.
17. A provision in a lease that prohibits a tenant from opening another store within a certain
geographical area of the leased premises is known as a radius clause.
18. A lease in which the tenant pays rent plus all expenses of the premises is known as a
gross lease.
19. A lease in which the tenant pays rent plus all expenses of the premises is known as a net lease.
20. A CPI rent escalator in a lease protects the tenant against inflation.
21. A CPI rent escalator in a lease protects the landlord against inflation.
22. A lease provision that agrees to release and hold harmless both the landlord and the tenant from
each other’s actions in regard to any casualty to the premises impairs an insurance company’s
right of subordination.
23. Under common law, a tenant was obligated to continue paying rent even if the leased premises
had been damaged or destroyed.
24. Under common law, a tenant was excused from the obligation to pay rent when the leased
premises were damaged or destroyed.
25. A landlord generally has a right to terminate a lease for tenant’s default.
26. A landlord may have a right to dispossess the tenant without termination of the lease for
tenant’s default.
27. A landlord’s covenant that the tenant will peacefully and quietly enjoy the premises without
hindrance or interference by the landlord is known as a grace period.
28. A landlord’s failure to perform under the lease generally gives the tenant the right to terminate
the lease.
29. A landlord’s failure to perform under the lease generally does not give the tenant the right to
terminate the lease.
30. A transfer of a tenant’s complete interest in a lease is known as a sublease.
31. A transfer of a tenant’s complete interest in a lease is known as an assignment.
32. The original tenant, after an assignment or sublease, remains responsible under the lease.
33. The original tenant, after an assignment or sublease, is released from responsibility under
the lease.
34. An assignee of a lease under all circumstances is responsible for the lease covenants.
35. A subtenant has no responsibility to the original landlord under the lease.
36. A subtenant is responsible to the original landlord for all lease covenants.
37. A subtenant is responsible to the original landlord for rent but not for other lease covenants.
38. A mortgage holder’s agreement to honor a tenant’s lease upon foreclosure of the mortgage is
known as a subrogation.
39. A mortgage holder’s agreement to honor a tenant’s lease upon foreclosure of the mortgage is
known as an attornment.
40. A mortgage holder’s agreement to honor a tenant’s lease upon foreclosure of the mortgage is
known as an estoppel.
41. A trustee or debtor in bankruptcy has 120 days after the bankruptcy petition has been filed to
either reject or assume leases.
42. If a debtor does not reject a lease within the time period provided for in the bankruptcy act, the
lease will be deemed automatically assumed.
43. The Uniform Residential Landlord and Tenant Act requires good faith in landlord and
tenant dealings.
44. The Uniform Residential Landlord and Tenant Act provides that a landlord may not receive a
security deposit from a tenant in an amount in excess of one month’s rent.
45. The Uniform Residential Landlord and Tenant Act provides that a landlord cannot receive a
security deposit from a tenant in an amount in excess of three months’ rent.
46. Under the Uniform Residential Landlord and Tenant Act, a willful and negligent failure on the
part of the landlord to provide heat, hot water, or other essential services gives the tenant a right
to terminate the lease.
47. The Uniform Residential Landlord and Tenant Act requires that the tenant be given at least 90
days to cure any defaults under the lease prior to termination of the lease by the landlord.
MULTIPLE CHOICE
1. A lease provision that prohibits a tenant from opening another store within a certain geographic
area of the leased premises is called a(n)
A. waiver of subrogation.
B. estoppel.
C. radius clause.
D. quiet enjoyment provision.
2. A lease is entered into between landlord and tenant on May 10 and provides that the tenant shall
take possession of the premises on August 1. The lease is effective and commences on
A. August 1.
B. May 10.
C. the date tenant actually takes possession of the premises.
D. none of the above.
3. Under a gross lease, a tenant would pay which of the following items?
A. Insurance
B. Utilities
C. Rent
D. All of the above
4. Under a net lease, a tenant would pay which of the following items?
A. Utilities
B. Taxes on the property
C. Insurance
D. All of the above
E. None of the above
5. A lease provision that provides that rent will increase in a predetermined amount on a
predetermined date is known as a
A. CPI escalator.
B. bump increase.
C. percentage rent clause.
D. net lease.
6. A lease provision that provides that landlord and tenant will hold each other harmless from one
another’s actions in regard to any casualty to the premises will impair an insurance company’s
right of:
A. attornment.
B. subrogation.
C. subordination.
7. A default by a landlord under the lease generally gives the tenant the right to
A. withhold rent.
B. sue the landlord for performance.
C. terminate the lease.
D. file a lien on the landlord’s property.
8. A lease provision that provides the landlord will not hinder or interfere with a tenant’s
possession of the premises is known as a(n)
A. grace period.
B. attornment, nondisturbance agreement.
C. quiet enjoyment provision.
D. waiver of landlord’s right of subrogation.
9. A landlord may not be able to proceed against which of the following parties in regard to
violations of lease provisions?
A. Original tenant
B. Sublessee
C. Sublessor
10. Typically the parties to an attornment nondisturbance agreement are
A. mortgagee and tenant.
B. mortgagor and landlord.
C. mortgagor and tenant.
D. landlord and tenant.
11. An obligation by a third party to pay a tenant’s rent under a lease is known as a(n)
A. attornment.
B. sublet.
C. guaranty.
D. memorandum of lease.
12. A landlord’s basic remedy/remedies for tenant’s default under the lease is/are
A. sue the tenant for performance.
B. terminate the lease and sue for damages.
C. dispossess the tenant without termination of the lease and sue for damages.
D. (a) and (b) above
E. all of the above
SHORT ANSWER
1. Better Widget Company has signed a lease as the tenant of a warehouse. The lease requires
Better Widget to pay rent and all other operating expenses of the property, such as taxes,
insurance and utilities. Is this lease considered a “gross” lease or a “net” lease?
2. Downtown Office Company, as landlord, has entered into an office lease with Hi-Tech, Inc. as
tenant. Hi–Tech fails to make its rent payments. Downtown would like to evict and remove Hi–
Tech from its space and relet the space. Downtown also wants to recover from Hi-Tech the
difference in rent if it cannot relet the space for the same rent that Hi–Tech paid. Can
Downtown do this?
3. Richland Mall has rented retail space to a tenant, Better Ice Cream. After being in the space for
several months, Better sells its business to Even Better Ice Cream and assigns its lease to Even
Better Ice Cream. The assignment contains an assumption of lease obligations by Even Better.
The ice cream business at the mall starts to melt and Even Better defaults on the lease. The
landlord, Richland Mall, wants to sue both Better Ice Cream and Even Better Ice Cream for the
delinquent rent. Will it be successful?