USA – IOWA Law and Practice Contributed by: David M. Erickson, Christopher S. Talcott, Amy S. Montgomery and Shannon M.H. Hasse, Dentons Davis Brown PC
Net Lease Under a “net lease” arrangement, the tenant will pay base monthly rent, as well as the tenant’s share of operating expenses as additional rent. Additional rent typically includes items such as the tenant’s share of property taxes, insurance and expenses related to the maintenance and repair of the common areas on the property. The usual net lease will also include a true- up provision to account for any unforeseen variance in the operating expenses that occur over the course of the lease year. Gross Lease A “gross lease” arrangement obligates a tenant to pay only monthly base rent without the additional rent. In a gross lease, the landlord accounts for all expenses as part of the monthly base rent, which requires the landlord to have a firm grasp on anticipated operat - ing expenses of the property if the landlord wishes to enter into a multi-year lease with the tenant. Ground Lease Though not used as frequently, in a ground lease, a lessee lets real estate from a lessor for the purpose of constructing improvements on the leased ground. Lease arrangements vary as to who will be deemed the owner of the improvements at the expiry of the ground lease. 6.3 Regulation of Rents or Lease Terms In Iowa, rent and lease terms are governed by three separate and distinct chapters of the Iowa Code depending on the property being let: • the general code chapter (Chapter 562) applies to commercial leases and agricultural leases; • the Iowa Uniform Revised Landlord Tenant Act (Chapter 562A) applies to all residential leases; and • the Manufactured or Mobile Home Landlord and Tenant Law (Chapter 562B) applies to the leas - ing of manufactured or mobile home spaces (as opposed to rental of the home itself, which is gov - erned by Chapter 562A). While Chapter 562 governs commercial leases, such leases are still primarily controlled by the lease instru - ment and common law. Chapter 562 mandates that certain terms be included in a lease (eg, agricultural
the entity’s profits. In contrast, a corporation must pay a corporate income tax on its profits, and, when dividends from those profits are issued to its share - holders, those dividends will be taxable income to the individual shareholders. 5.3 REITs There is no authority for the creation of a real estate investment trust under Iowa law. 5.4 Minimum Capital Requirement There is no express minimum capital requirement to form an entity to invest in real estate under Iowa law. However, the failure to properly fund an entity may be a factor considered by a court in determining whether to “pierce the corporate veil” and impose personal liability on an entity’s equity owners for liabilities of the entity. 5.5 Applicable Governance Requirements See 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity . 5.6 Annual Entity Maintenance and Accounting Compliance All entities that are formed by filing with the Iowa Sec - retary of State must file biennial reports with the Iowa Secretary of State for a filing fee that varies by entity type, but in each case is less than USD100. 6. Commercial Leases 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time Generally, the only method by which another can occupy real estate without purchasing the property is through a lease. However, a licence agreement or easement agreement will allow a party to use property without entitling the party to exclusive occupancy or possession. 6.2 Types of Commercial Leases The two primary methods of commercial lease are dif - ferentiated by the method of rental payments.
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