Governing policy: Lease Policy

Department: Finance & Property Services

Last revised: May 2011

Procedure

1. Facilities, Space and Asset Management Committee (FSAM) Review

For all operational leasing transactions that require Council/Mayor approval, Public Works Property Services must send a recommendation with an overview of the lease to FSAM for evaluation within the space needs of the City.

2. Facilities Use Permit (up to one week)

Rentals of City land or facilities for short-term events for private benefit, such as conference rooms or special events, for up to one week must be handled through the Facilities and Land Use permit process or the leasing process identified below.  Each permit must be approved by the CPED Director with respect to development property or the Finance Officer with respect to other City property, or their designees.  The fee schedule must be used to determine the permit fee.  For properties or special requirements not on the fee schedule, the CPED Appraiser will set the applicable fee.  The Minneapolis Convention Center is exempt from this process for scheduling its facility.

3. Obstruction and encroachment permits  

Obstruction permits, encroachment permits, special permits and other similar types of permits are not considered to be leases for the purposes of these procedures.  Those permits shall continue to be administered through ordinances, policies and procedures separate from the Lease Policy and Procedures.

4. Other real estate documents

The CPED Director with respect to development property and the Finance Officer with respect to other City property, or their designees, may sign temporary easements, plats, zoning applications and consents, and similar real estate documents that are not contractual in nature. 

5. Right of Entry

Occasionally, for City benefit, there may be service providers or other entities that need to have short-term access to City real property for appraisal, survey, testing, inspection or similar purposes. A standardized right of entry form will be used in these situations and each right of entry is subject to approval by the CPED Director with respect to development property or activities or the Finance Officer with respect to other property or activities, or their designees, provided the right of entry period is less than thirty (30) days.  The City will not charge a fee for such rights. 

See Right of Entry - City as Grantor

6. Short-Term and Long-Term Lease Process

Typically, leases of City space to outside parties will occur in situations where: 1) space is constructed with the specific intent to be leased in multi-use municipal parking facilities, 2) properties are acquired as part of land assemblies for City projects where existing tenants can remain for interim periods. The procedures below do not apply to leasing parking stalls for parking purposes in or for the Municipal Parking System.

Where City Property Services is mentioned below, the reference is limited to operational property.  Where CPED is mentioned below, the reference is limited to development property.  Where the department is mentioned below, the reference is to the department providing day to day management of the property.

1. City Property Services and CPED Property Management will identify property that is available for leasing after consultation with relevant department(s). 
2. If the property is available for over one year, a marketing plan is recommended to select the tenant.  Unless a public purpose is otherwise being served, a competitive process such as a request for proposals will be used, whenever possible. 
3. If the lease is to a private party, the market rate will be used as a basis for determining rent.  If needed, the CPED Appraiser or City Assessor will assist in determining market rent.  See Request for Appraisal
4. If applicable, CPED or City Property Services, and the department, will prepare and submit a general overview to the Facilities, Space and Asset Management Committee (FSAM) before formal approval of the lease.
5. If FSAM approves the staff recommendation, as applicable, then either (i) City Property Services or CPED will request Finance Officer or CPED Director approval, if Lease term is one year or less and total rent payments are $50,000 or less for the Lease term (Short Term Lease) or (ii) City Property Services or CPED will coordinate the City Council/Mayor approval process.  The real property disposition notice and public hearing requirements should be followed for leases of over 3 years in duration. 
6. City Property Services or CPED shall draft the lease agreement in conjunction with the City Attorney's Office, the Risk Management Office and the tenant.
7. City Property Services or CPED shall coordinate the signature and execution process for the lease agreement.
8. The lease will be entered into the City’s real estate lease database system.
9. The department or CPED shall be responsible for invoicing, tracking the revenue and managing the lease agreement.
10. All lease amendments must be coordinated through City Property Services or CPED.
11. Use the below Leasing of City Lands or Buildings Checklist as a guide for lease discussions
    1. Do you have basic information on the property you want to lease?
       1. Property Address, Legal Description and Square Footage
       2. Summary of:
          1. Utilities capacity including access points for water and electricity heat, and cooling
          2. Taxes and assessments
          3. Insurance Requirements
          4. Access and Security
          5. Easements held by other parties
          6. Tenant improvements the City will provide
          7. Property improvement required of the Lessee and their disposition at the end of the lease
       3. Time frame for the lease
       4. Liens, property access or easements you require
    2. Have you had a professional assessment(s) indicating the appropriate rental rate of the property? Yes___   No___   N/A___
    3. Have you done a cost benefit comparison for improvements you will have to make as opposed to revenue that will be created?  Yes___   No___   N/A___
    4. Do you have an outline for how you want to be paid?  Yes___   No___   N/A___
    5. Who carries the responsibility for lease improvements or for repairs over the lease period?
       1. Painting, carpeting or similar enhancements?
       2. Heat, cooling, water, and electricity
       3. Access and Security
       4. Damages
       5. Communications
    6. Who pays for assessments and taxes or additional utilities?
    7. Do you have a budget approved for the lease improvements you will make?
    8. Under what conditions will you terminate the lease?
       1. Convenience
       2. Time
       3. Breach
       4. Best interest of the City
       5. Uses constituting a public nuisance or creating pollution etc.
    9. Will you accept subleases or assignments?  Do you require prior approval for change in use or improvements to the property?
    10. Is the person with whom you are negotiating able to represent their company in the lease?
    11. Are you aware of any hazards (including chemicals or materials) on or near the property and have you informed potential tenants of them?  Do you understand the lessee’s proposed use and have you informed them of all potential conditions that may make their lease untenable?
    12. Are there any development plans proposed for your property?   
    13. Is your property up to Code?  Does it have a Certificate of Occupancy (if required)?  Does your lease state it does not waive any requirement of the Fire Department or Department of Inspections?