NetLease - Capturing Contract Provisions
Use Case: Users can realize significant value from having their leases tracked within a single unified system—well beyond the benefits of streamlining accounting processes. NetLease allows users to capture additional information related to the lease record, including lease contract provisions. Each contract provision is captured as a child record of the lease and NetLease users can aggregate and report on those contract provisions across their entire lease portfolio, allowing for simplified disclosure reporting as well as lease management.
Users can capture as many contract provisions for a lease as they would like.
KEY CONTRACT PROVISIONS DETAILS
Contract provisions represent legal provisions that make up certain clauses or conditions within a lease contract. The most common contract provisions requiring disclosure include the primary types in the Provision Type field:
- Lease Renewal Option
- Lease Expansion Option
- Lease Termination Option
- Lease Purchase Option
Additionally, other contract types can be captured within the Other Contract Provision category, which includes the following (this list can be expanded within the NetLease Other Clause Type list):
- Percentage Rent Clause (More detail needed for percentage rent clauses. See our separate guide.)
- Alterations
- Assignment
- Guarantor
- Holdover
- HVAC
- Insurance
- Late Charges
- Notice Period
- Notices
- Other
- Parking Rights
- Percentage Rent Clause
- Permitted Use
- Price Increase Caps
- Relocation
- Repairs & Maintenance
- Right of First Offer
- Right of First Refusal
- Security Deposit
- Sub-Leasing
- Tenant Estoppel
- Tenant Improvement Credit
Once a contract provision is created it can then be reported upon with searches, dashboards, email reminders and any other native NetSuite reporting. Thus ensuring you never miss a key date.
STEP BY STEP PROCESS
- After navigating to a lease record for which you would like to add a contract provision, select the Create New Icon at the top of the screen and select NetLease Contract Provision (alternatively you can create a new contract provision from the Contract Provisions subtab)
- Within the new NetLease Contract Provision record, complete the fields as appropriate:
Field Name | Description | Example |
Contract Provision Type | Indicates whether the contract provision is one of the primary disclosed provisions under the new lease accounting standard. These selected types are separately grouped within the contract provisions sublist on the standard NetLease form and included within the NetLease standard reports. | Lease Renewal Option |
Sub-Type (If “Other Contract Provision”) | Provides a more comprehensive listing of the other contract provisions that may be relevant for a lease contract. Note that this list is sourced from the bundled list NetLease Other Clause Type. If a type is not included in the listing, it can be subsequently added by an administrator. | Permitted Use |
Contract Paragraph / Reference | Refers to the specific section of the Lease Contract where the provision details are located | Section 2.a.(1) |
Provision Start Date | The start date of the contract being entered into (i.e. the start date of the renewal period). | 1-Jan-2025 |
| Provision End Date | The relevant end date of the contract being entered into. This may only apply to specific types of lease contract provisions (i.e. the end date of the renewal period). | 31-Dec-2025 |
Key Provision Amount (Purchase, Penalty, etc.) | The sum of any amounts associated with the contract provision, whether for purchase, penalty, incentive, etc (i.e. the amount due when the renewal is exercised). If the amount is a formula, it is typically captured in the Clause Details/Notes section | $25,000 |
Clause Details / Notes | Long-text field to capture any relevant information about the clause not captured elsewhere | Clause must be exercised in writing |
Exercised Provision Details (to be completed upon exercise or when provision becomes effective) | ||
Provision Exercised Date | The date on which the option is exercised (i.e. the date the lease is renewed). | 30-Nov-2024 |
Provision Exercised Notes | Long-text field to capture any relevant information about the exercise of the provision | Submitted & confirmed by Ray |
Option Additional Terms (to be completed if type is option) | ||
Option Available Date | The earliest date at which the option can be exercised | 7-July-2024 |
Option Term, If Renewal (Full Months) | Additional term provided via the option agreement | 24 |
New Lease End Date After Exercise | The updated lease end date after exercise of the option agreement | 31-Dec-2025 |
Likely to Exercise | Yes/No checkbox to indicate whether the option is likely to be exercised. Note that while this is necessary for disclosure reporting, adjustments to the primary lease schedule term and dates must be manually adjusted; selecting this box will not trigger adjustments to the lease record terms. | No |
Auto-Renewal / Evergreen Contract | Yes/No checkbox to indicate whether the option represents an auto-renewal or evergreen contract | No |
Guarantor Additional Terms (to be completed when “Guarantor” sub-type is selected) | ||
Guarantor Name | Sources from the contact list and represents the guarantor of the lease; a new contact can be created directly from this record | Rick James |
Guarantor Release Date | Indicates the date at which the Guarantor is released from their obligation | 1-Apr-2025 |
Guarantor Released | Yes/No checkbox to indicate that the guarantor has been released from their obligations | No |
| Percentage Rent Clause Additional Terms (to be completed when “Percentage Rent Clause” sub-type is selected) | ||
| Breakpoint Type | Breakpoint type used to calculate percentage rent. Options:
| Natural |
| Contract Percentage | The percentage of sales over the breakpoint to be paid out as rent. | 5% |
| Base Rent For Period | The base rent to be paid out over the contract. | $100,000 |
| Sales Breakpoint | The sales threshold after which percentage rent must be paid out. | $2,000,000 |
| Sales Search | Search defining how to calculate total sales over the period. | "NetLease Percentage Rent Sales - Rev Accounts" |
| Payment Frequency | How often are percentage rent payments made to the lessor? Options:
| Monthly |
| # of Months Paid in Arrears | The delay in months from the time sales are made to when the related percentage rent is paid. For sales in June, if the percentage rent is paid in August, that would be 2 months in arrears. | 1 |
- Additional documents or relevant information for the contract provision can also be entered or uploaded to the documents tab
- Select Save to save the contract provision associated with the lease
- If you need additional help when entering percentage rent clauses you may find our Percentage Rent article helpful.
UPLOAD CONTRACT DOCUMENTS & OTHER FILES
Use Case: NetLease can capture and associate any relevant documents or contracts related to a lease and store/link them to the lease record.
STEP BY STEP PROCESS
- During initial lease creation or in edit mode of any existing lease record, select the Documents subtab
- Press the New File button to upload contracts or other files that you would like associated with the lease to the NetSuite file cabinet or press the Attach button to attach a file that already exists in the file cabinet to the lease.
CAPTURING MODIFICATION OPTION DETAILS
This section is not used during the initial lease setup. Modifications that are made during the lease term are displayed on this tab. Modifications cannot be triggered prior to lease commencement and monthly journals being run. Modifications should be performed using the Modify button on the lease record.
CAPTURING TERMINATION OPTION DETAILS
This section is not used during the initial lease setup. Terminations that are made during the lease term are displayed on this tab. Terminations cannot be triggered prior to lease commencement and monthly journals being run. Terminations should be performed using the Terminate button on the lease record.
Set up Email Reminders
Email reminders can be set up for any renewal options that are set to expire within 90 days.
- In the search bar type "NetLease Renewal Options - 90 Days Template"
- Follow the instructions in the article Set Up Email Reminders to customize email reminders for this report.