1800 Real Estate Leases
University Properties has overall responsibility for negotiating, executing, and managing all real estate leases to which Yale is a party. This policy provides general principles and rules to ensure that real estate leases to which Yale University is a party are properly reviewed, approved, and signed. This Policy covers the lease of both commercial and residential space:
- For commercial space needs, see Procedure 1800 PR.01 Leasing Commercial Space; and
- For residential space needs, see Procedure 1800 PR.02 Leasing Residential Space.
Property management or tenant services agreements may be associated with the above leases and are covered in the scope of this policy. Tenant services agreements are detailed in Procedure 1800 PR.03 Tenant Services Agreements.
University Properties has overall responsibility for negotiating, executing, and managing all real estate leases to which Yale is a party. University Properties must ensure that all real estate leases to which Yale is a party are in the best interests of the University.
Reason for the Policy
Effective control over all real estate leasing activities ensures that leases are consistent with Yale’s mission and that they are fiscally prudent and comply with all administrative, legal, insurance, and tax requirements.
Commercial space is real property (or a subdivided portion of real property) that is used for business activities. For Yale, commercial space may include real property that is used for academic, administrative, clinical, office, research, arts/performance, restaurant, retail, storage, or other business-related purposes (e.g., cellular signal towers).
Real Estate Lease
A real estate lease (“lease”) is a contract in which one party (the “renter” or “lessee”) agrees to rent real property (or a subdivided portion of real property) from another party (the “landlord” or “lessor”) for a specified period of time in exchange for consideration, usually in the form of regular, periodic rent. A real estate lease, unless otherwise agreed to in a particular lease document, provides the lessee exclusive use of the leased space during the term of the lease. A real estate lease generally provides the lessee with broad rights and responsibilities for the space. A real estate lease may cover continuous time (e.g., a unit’s full use of a non-Yale-owned space for one year) or periodic time (e.g., medical session space on particular days of the week for one year).
Note: A real estate lease is different from a use agreement, in which the renter receives a non-exclusive right to the rented space for a specified period of time (typically hours or days). In the event that Yale is the intended renter in a proposed use agreement (e.g., daily rental of a non-Yale-owned space for a meeting), Policy 3201 General Purchasing governs and requesters should follow the appropriate procedures. If Yale, or a Yale unit, is the intended landlord in a proposed use agreement (e.g., a local performance group renting a Yale-owned performance space for a single day), Policy 2100 Revenue Principles, General governs and requesters should follow Procedure 2100 PR.01 Executing Revenue Agreements.
Residential space is real property (or a subdivided portion of real property) that is used exclusively for living purposes by the tenant and/or authorized occupants.
It is important to the University that there is effective control and oversight regarding leases to which it is a party. Effective control and oversight regarding leasing activities ensures that leases are consistent with Yale’s mission and that they are fiscally prudent and comply with all administrative, legal, insurance, and tax requirements. All leases to which Yale is a party must meet the following general principles:
- Leases must be consistent with the University’s mission, or must achieve another important objective, such as revenue generation, neighborhood revitalization, or community development;
- Leases must be in the best interests of the University;
- Leases must be based on fair market value (FMV) rates. (If prices are other than FMV, a written justification must be approved by the University Properties authorized signer of the lease); and
- Leases must be based on arm’s-length negotiations to avoid any real or perceived conflicts of interest, and ensure proper stewardship of property and funds.
The above principles are the foundation of appropriate leasing practices for the University. To meet those principles, compliance with the following rules is required:
- Yale must be a party to all leases involving Yale business. Yale units and individuals must not negotiate or sign leases involving Yale business as alternative parties (e.g., Department X must not negotiate or sign a lease in the name of Department X).
- All proposed leases must go through the review process outlined in the supporting procedures (see Related Information section below);
- Yale-owned space must be considered for suitability prior to considering leasing non-Yale-owned space;
- Leasing of Yale-owned space to an external party must only be considered if the space is not needed for the University’s academic and administrative functions, and the proposed lease has been approved by the Tax-Exempt Bond Compliance Director or higher level authorized official (see Procedure 1200 PR.02 Procedure for Ensuring Post-Issuance Tax-Exempt Bond Compliance, Section II.B.2);
- Leases must be negotiated and signed by University Properties to ensure that the above principles are satisfied. Yale units and individuals other than University Properties are not authorized to negotiate or sign leases;
- All leases must be approved by the University’s Office of the General Counsel (“OGC”). (Leases may also utilize standardized templates pre-approved by OGC without requiring additional approval);
- Property management agreements and tenant services agreements must be negotiated, signed, and managed by University Properties, and approved by OGC and the Tax-Exempt Bond Compliance Director or higher level authorized official (see Procedure 1200 PR.02 Procedure for Ensuring Post-Issuance Tax-Exempt Bond Compliance, Section II.B.4); and
- University Properties must retain all leases, property management agreements, and tenant services agreements, as required by Policy 1105 Retention of University Financial Records.
Among other reasons, Yale may opt not to enter into leases because the proposed space is located outside certain geographical boundaries from the University. Requests for leases involving distant geographical space (including out-of-state requests) must, however, still comply with this policy and related procedures. University Properties and OGC may advise Yale units and community members on appropriate procedures in instances when Yale opts to not enter into a lease based on the proposed space’s geographical location.
Requests for leases involving international space are not subject to the provisions of this policy. Rather, all such requests must be directed to OGC.
Roles & Responsibilities
Office of General Counsel (“OGC”)
OGC provides legal counsel, representation, and oversight of work on the wide range of legal matters affecting Yale and its component organizations. OGC reviews and approves leases to which Yale is a party.
University Properties has overall responsibility for negotiating, executing, and managing all real estate leases to which Yale is a party. University Properties ensures that all real estate leases to which Yale is a party are in the best interests of the University.
The Yale Corporation, also called the Board of Trustees, is Yale’s governing body. The Yale Corporation delegates authority to specific individuals to sign leases on behalf of the University.
Yale Units and Community Members
Yale units and community members (faculty, staff, students, and affiliates) are responsible for being familiar with this policy and its related procedures. They are responsible for complying with this policy and its related procedures in the event they wish to request a lease to which Yale is a party.