Memorandum 18-085 Ground Lease Amendments

Memorandum 18-085

TO:                        Mayor Zak and Homer City Council  

FROM:                 Katie Koester, City Manager

DATE:                   July 18, 2018  

SUBJECT:          Base Lease changes

Resolution 18-066 makes updates to the base lease template the City of Homer uses for ground leases on the Homer Spit. The changes were necessary to bring the base lease template in line with current City Code after City Council adopted changes to property management code at the last Council meeting in Ordinance 18-16(S)(A).

Homer City Code18.08.030 requires the City Manager to develop a standardized ground lease to be reviewed by the City Attorney and approved by Council. Deviations from the standard ground lease are required to be reasonable and necessary to protect the City’s best interests and approved by Council in the final lease. The ground lease template was reviewed and rewritten by the City Attorney about 5 years ago. Changes between that version and the version before you include:

-Re-wording and reordering to provide clarity (including those detailed below with conforming changes throughout)

-Redefining Rent to be one term including Base Rent and Additional Rent (1.01(i) Definitions and Attachments)

-Redefining Term to be one term including Initial Term and Extended Terms (1.01(s) Definitions and Attachments)

-Removing reference to Lease Policy and defining Lease Ordinance (1.01(m) Definitions and Attachments)

-Clarifying use of the term Required Improvements to encompass improvements that have to be on the property and are integral to the proposed use of the property, regardless of whether they are present at lease commencement or will be constructed by Tenant as part of its proposed use of the property (throughout)

-Changes to bring base lease in line with policy that all improvements (including Required Improvements) become property of the Landlord at lease termination, whether by expiration or early default, but protecting City from being involuntarily saddled with derelict improvements (6.08)

-Changes to bolster the City’s ability to contest a non-consensual assignment by a trustee in bankruptcy (Article 8 Assignment and Sublease)

-Tied insurance minimums back to the Lease Ordinance requirements to allow the City’s required insurance minimums to change over time (Article 9)

-Adding improvements to real property to the list of collateral for a security interest in the leasehold improvements (Article 5 Security Interest)

-Added option provision waiving environmental insurance based on authorized use (9.04 Insurance Requirements)

-Removed insurance certificates as an exhibit to be present at lease signing, but clarified that all insurance certificates and endorsements remain part of the Lease (1.02)