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
leases must commence on March 1st and must be terminated by written notice by September 1st of the year preceding the termination). In contrast, both Chapter 562A and Chapter 562B have a significant number of lease terms that are deemed to be a part of every lease, whether expressly set forth in the lease or otherwise. Additionally, both chapters include very precise procedures for defaults, notices to be deliv - ered upon default, and the manner and method of evictions. 6.4 Typical Terms of a Lease While it is difficult to say that there are “typical terms” in a commercial lease, there are some commonali - ties with regard to certain terms such as length of the lease, maintenance obligations and frequency of rent payments. Frequently, a commercial lease will have an initial term of five to ten years, with an option or series of options for renewal periods (such options most commonly being granted to the tenant). As relates to maintenance and repairs, the landlord will generally be responsible only for those matters that affect the structural integrity of the building, such as the roof, foundation and exterior of the building. Virtually all other expenses will be borne by the tenant directly or indirectly as part of the operating expenses in a net lease. For example, the cost for maintaining the parking lot will initially be borne by the landlord, but will be recouped through the tenant’s payment of its pro rata share of operating expenses. Finally, most leases require the tenant to pay monthly rent. As noted above, in the situation of a net lease, the tenant is also required to pay its pro rata share of operating expenses of the building. The landlord will generally provide the tenant with a yearly budget of anticipated operating expenses for the year and the tenant will pay 1/12 of the tenant’s pro rata share each month. Any necessary adjustment upward or down - ward at the end of the year to account for actual oper - ating expenses is accomplished through a true-up. 6.5 Rent Variation It is a common occurrence for the monthly rent – even the monthly base rent – to vary over time. Especially for leases with longer terms, landlords and tenants will build in variations of rent over time. Most often,
the variances are effectuated through rental escalators where the rent increases by a set percentage for each renewal term. In certain circumstances, the rent may vary and be based on retail sales (if applicable), at least in part. In some agricultural leases, the rental escalators that are built in are derived through an annual cash rent sur - vey, which is compiled and published by Iowa State University. 6.6 Determination of New Rent See 6.5 Rent Variation . 6.7 Payment of VAT No taxes or governmental levy are payable on rent in Iowa, beyond state and federal income taxes. 6.8 Costs Payable by a Tenant at the Start of a Lease Generally, a tenant may be required to make payments to the landlord at the commencement of the lease in addition to the first month’s rent. In almost every case, the tenant will be required to pay a security deposit, which the landlord will hold in trust pend - ing the tenant’s fulfilment of its obligations under the lease. Further, a tenant may be required to contribute some amount to capital improvements, although this practice varies greatly from lease to lease. In some cases, any capital improvements to the leased premises must be contracted for, carried by and paid for by the tenant. In other cases, the landlord will undertake all capital improvements and figure the cost of such improvements as part of the rent to be charged. In certain other circumstances, the landlord may provide a build-out allowance, with any additional improvements to be paid for by the tenant. 6.9 Payment of Maintenance and Repair
See 6.4 Typical Terms of a Lease . 6.10 Payment of Utilities and Telecommunications
As with charges for maintenance and repairs to com - mon areas of the rental property, charges for services, utilities and telecommunications are most frequently paid indirectly by the tenant through the additional
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