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
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 commonalities 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 com - monly being granted to the tenant). As relates to maintenance and repairs, the land - lord will generally be responsible only for those matters that affect the structural integrity of the building, such as the roof, foundation and exte - rior 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 park - ing 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 ten - ant will pay 1/12 of the tenant’s pro rata share each month. Any necessary adjustment upward or downward at the end of the year to account for actual operating 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
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 improve - ments 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 leasing of manufactured or mobile home spaces (as opposed to rental of the home itself, which is governed by Chapter 562A). While Chapter 562 governs commercial leases, such leases are still primarily controlled by the lease instrument and common law. Chapter 562 mandates that certain terms be included in a lease (eg, agricultural 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 delivered upon default, and the manner and method of evictions.
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