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ENGLISH FOR FINANCE НАВЧАЛЬНИЙ ПОСІБНИК

UNIT 6. LEASING

TEXT 1. LEASING

Task 1. Study the vocabulary:

asset	майно, активи
zither	цитра (муз. інструмент)
nuisance	прикрість, незручність
equipment	обладнання
lessee	наймач, орендар
lessor	орендодавець; той, хто здає в оренду, внайми
to negotiate	вести переговори; домовлятися (з ким-небудь); обговорювати умови
secured loan	кредит під забезпечення
tax reduction	зниження податку
to obtain	одержувати, отримувати
corporate income tax	корпоративний податок на прибуток
to repeal	відміняти, анулювати

Task 2. Read and translate the text:

LEASING

Almost any asset that can be purchased can be leased, from aircraft to zithers. When we take vacations or business trips, renting a car for a few days frequently seems a convenient thing to do. This is an example of a short-term lease. After all, buying a car and selling it a few days later would be a great nuisance.

Corporations lease both short-term and long-term more than five years. Long-term leasing is a method of financing property, plant, and equipment. More equipment is financed today by long-term leases than by any other method of equipment financing.

Every lease contract has two parties: the lessee and the lessor. The lessee is the user of the equipment, and the lessor is the owner. Typically, the lessee first decides on the asset needed and then negotiates a lease contract with a lessor. From the lessee standpoint, long-term leasing is similar to buying the equipment with a secured loan. The terms of the lease contract are compared to what a banker might arrange with a secured loan. Thus, long-term leasing is a form of financing.

Many questionable advantages are claimed for long-term leasing, such as "leasing provides 100-percent financing," or "leasing conserves capital." However, the principal benefit of long-term leasing is tax reduction. Leasing allows the transfer of tax benefits from those who need equipment but cannot take full advantage of the tax benefits associated with ownership to a party who can. If the corporate income tax were repealed, long-term leasing would virtually disappear.

A lease is a contractual agreement between a lessee and a lessor. The agreement establishes that the lessee has the right to use an asset and in return must make periodic payments to the lessor, the owner of the asset. The lessor is either the asset's manufacturer or an independent leasing company. If the lessor is an independent leasing company it must buy the asset from a manufacturer. Then the lessor delivers the asset to the lessee, and the lease goes into effect.

As far as the lessee is concerned, it is the use of the asset that is most important, not who owns the asset. The use of an asset can be obtained by a lease contract. Because the user can also buy the asset, leasing and buying involve alternative financing arrangements for the use of an asset.

Task 3. Match two parts of the sentences:

1. Almost any asset that can be purchased	f) can be leased.
2. Long-term leasing is	a) a method of financing property, plant, and equipment.
3. The lessee	i) the user of the equipment.
4. The lessor	c) is the owner.
5. The principal benefit of long-term leasing	g) is tax reduction.
6. When the lessor delivers the asset to the lessee,	h) the lease goes into effect.
7. A lease	b) is a contractual agreement between a lessee and a lessor.
8. If the corporate income tax were repealed,	e) long-term leasing would virtually disappear.
9. The lessee has the right to use an asset,	d) and in return must make periodic payments to the lessor.

Task 4. Write out the synonyms for the following words and word combinations.

property –

to buy –

to go on holiday –

comfortable –

to bargain –

agreement -

viewpoint -

conditions –

main –

to revoke

Task 5. Choose the word that best completes the sentence.

1) A lease is a contractual arrangement calling for the lessee/lessor (user) to pay the lessor/lessee (owner) for use of an asset.

2) The narrower/broader term rental agreement can be used to describe a lease in which the asset is intangible/tangible property.

3) The lessee is the receiver/owner of the services or the assets under the lease contract and the lessor is the receiver/owner of the assets.

4) The principal benefit of long-term leasing is tax reduction/tax avoidance.

5) More equipment is financed today by [long-term]/short -term leases than by any other method of equipment financing.

Task 6. Give English equivalents from the text for the following word combinations:

1) відрядження –

2) брати в прокат автомобіль –

3) обладнання –

4) власність –

5) орендар –

6) орендодавець –

7) вести переговори –

8) умови договору -

9) кредит –

10) основні переваги –

11) незалежна лізингова компанія –

12) виробник –

13) періодичні виплати –

14) зниження податку –

15) вступати в силу –

Task 7. Complete the following word combinations with the correct prepositions from the box.

into in to for from on for for

1. Arrangements _____ the use of an asset;

2. The lease goes ______ effect;

3. ______ return the lessee makes periodic payments ______ the lessor;

4. Many advantages are claimed ______ long-term leasing;

5. ______ the lessee standpoint;

6. The lessee first decides ________ the asset needed;

7. To rent a car _______ a few days.

TEXT 2. TYPES OF LEASES

Task 1. Study the vocabulary:

fee	платня, внесок
real estate	нерухоме майно, нерухомість
capital lease	оренда з передачею права власності
tenant	наймач, орендар, наймач; тимчасовий власник
operating lease	експлуатація на основі оренди, операційна оренда
operator	промисловець
to recover cost	сплачувати вартість
residual value	кінцева вартість
cancellation option	можливість анулювання, припинення
expiration date	кінцевий термін дії
financial lease	фінансовий лізинг
12. lease-back	продаж обладнання з наступним поверненням його в оренду
leveraged lease	оренда активу, частково придбаного в кредит
to amortize	погашати в розстрочку (борг), амортизувати

Task 2. Read and translate the text:

TYPES OF LEASES

An agreement between two parties whereby one party allows the other to use his/her property - any tangible or intangible thing that is or may be owned by someone, for a certain period of time in exchange for a periodic fee. The property covered in a lease is usually real estate – a piece of land and whatever physical property is on it, or equipment such as an automobile or machinery. There are two main kinds of leases. A capital lease is long-term and ownership of the asset transfers to the lessee - a tenant, the person or entity entitled to possession under a lease, at the end of the lease. An operating lease, on the other hand, is short-term and the lessor - the owner of an asset who permits another party to use the asset under a lease, retains all rights of ownership at all times.

Operating Leases. Years ago, a lease where the lessee received an operator along with the equipment was called an operating lease. Though the operating lease defies an exact definition today, this form for leasing has several important characteristics.

1. Operating leases are usually not fully amortized. This means that the payments required under the terms of the lease are not enough to recover the full cost of the asset for the lessor. This occurs because the term or life of the operating lease is usually less than the economic life of the asset. Thus, the lessor must expect to recover the costs of the asset by renewing the lease or by selling the asset for its residual value. 2. Operating leases usually require the lessor to maintain and insure the leased assets. 3. Perhaps the most interesting feature of an operating lease is the cancellation option. This option gives the lessee the right to cancel the lease contract before the expiration date. If the option to cancel is exercised, the lessee must return the equipment to the lessor. The value of a cancellation clause depends on whether future technological and/or economic conditions are likely to make the value of the asset to the lessee less than the value of the future lease payments under the lease.

Financial Leases. Financial leases are the exact opposite of operating leases, as is seen from their important characteristics:

1. Financial leases do not provide for maintenance or service by the lessor. 2. Financial leases are fully amortized. 3. The lessee usually has a right to renew the lease on expiration. 4. Generally, financial leases cannot be canceled. In other words, the lessee must make all payments or face the risk of bankruptcy.

Because of the above characteristics, particularly the 2nd, this lease provides an alternative method of financing to purchase. Hence, its name is a sensible one.

Two special types of financial leases are the sale and lease-back arrangement and the leveraged lease.

Task 3. Read the statements. Are they true or false?

1. Both tangible and intangible property may be subject to lease.

a) True; b) False

2. A capital lease is long-term while an operating lease is short-term.

a) True; b) False

3. Under the terms of an operating lease the lessor retains all rights of ownwership at all times.

a) True; b) False

4. Operating leases are usually fully amortized.

a) True; b) False

5. Operating leases don’t usually require the lessor to maintain and insure the leased assets.

a) True; b) False

6. Under the terms of an operating lease the lessee can’t cancel the lease contract before the expiration date.

a) True; b)False

7. Financial leases absolutely differ from operating leases.

a) True; b) False

8. Financial leases cannot be canceled.

a) True; b) False

9. Financial leases provide an alternative method of financing to purchase.

a) True; b) False

10. Financial leases are fully amortized.

a) True; b) False

Task 4. Match the terms with their definitions:

1) lease	c) a legal status of a person or other entity that cannot repay the debts it owes to creditors
2) lessor	e) a company, person, etc. who has the right to use a building or a piece of land according to the arrangements in a lease
3) lessee	a) any item of economic value owned by an individual or corporation, especially that which could be converted to cash.
4) amortization	h) period over which an asset is expected to be usable, with normal repairs and maintenance, for the purpose it was acquired, rented, or leased
5) expiration date	b) the owner of an asset that is leased under an agreement to the lessee
6) fee	d) the paying off of debt in regular installments over a period of time.
7) bankruptcy	f) a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset
8) economic life	g) the price one pays as remuneration for services
9) leaseholder	j) the date on which a lease contract is no longer valid or in effect
10) asset	i) user or renter of the leased asset or property

Task 5 .Make up sentences from the words.

1. Lease/the current/on/ 31 March/expires.

2. For any repairs/you are liable/ under the terms/ of the lease,/ of the building.

3. All our/equipment/photocopy/ lease/ we.

4. Parts/tenants/leased out/are/to/ of the building.

5. For 40 years/has agreed/ to lease/ the trust /the property/ back to them.

6. On its factories / used /a leaseback / the firm / it needed / the cash/ to raise.

Task 6. Match the following English terms with their Ukrainian equivalents:

1) equipment leasing	податковий лізинг
2) leasing agreement	видача обладнання на прокат для експлуатації
3) leasing application	черговий внесок за оренду
4) operating leasing	лізингова угода
5) full-service leasing	оренда нерухомого майна
6) leasing instalment	заявка на оренду
7) second-hand leasing	оренда обладнання, що вже було у використанні
8) tax leasing	довгострокова оренда обладнання
9) leasing of real estate	повна оренда

TEXT 3. TAXES, the IRS, and LEASES

Task 1. Study the vocabulary:

interested parties	зацікавлені сторони
to deduct payments	зменшувати виплати
income tax	податок на прибуток
the Internal Revenue Service	податкове управління
tax shields	податковий захист
economic viability	економічна ефективність
lease transaction	лізингова операція
conditional sale	умовний продаж
to acquire	придбати, купити
fair market value	реальна ринкова вартість
bargain	угода
residual scrap value	залишкова вартість
to imply	мати на увазі, припускати
tax rate	податкова ставка
schedule of payments	графік виплат
offer	пропозиція
evidence	докази
legitimate	законний, допустимий; виправданий, обґрунтований
rate of return	норма прибутку
tax benefits	податкові привілеї
renewal	пролонгація, продовження дії (угоди)
depreciation expense	амортизаційні відрахування
accelerated depreciation	прискорене зниження вартості
tax avoidance	ухиляння від сплати податку
balloon payment	платіж "повітряна куля":великий разовий платіж для сплати основної суми кредиту або оренди в кінці встановленого терміну
straight-line depreciation	прямолінійна амортизація (рівномірне нарахування зносу)

Task 2 . Read and translate the text:

TAXES, the IRS , and LEASES

The lessee can deduct lease payments for income tax purposes if the lease is qualified by the Internal Revenue Service (the IRS ). Because tax shields are critical to the economic viability of any lease, all interested parties generally obtain an opinion from the IRS before agreeing to a major lease transaction. The opinion of the IRS will reflect the following guidelines:

1. The term of the lease must be less than 30 years. If the term is greater than 30 years, the transaction will be regarded as a conditional sale.

2. The lease should not have an option to acquire the asset at a price below its fair market value. This type of bargain option would give the lessee the asset's residual scrap value, implying an equity interest.

3. The lease should not have a schedule of payments that is very high at the start of the lease term and thereafter very low. Early balloon payments would be evidence that the lease was being used to avoid taxes and not for a legitimate business purpose.

4. The lease payments must provide the lessor with a fair market rate of return. The profit potential of the lease to the lessor should be apart from the deal's tax benefits.

5. The lease should not limit the lessee's right to issue debt or pay dividends while the lease is operative.

6. Renewal options must be reasonable and reflect the fair market value of the asset. This requirement can be met by granting the lessee the first option to meet a competing outside offer.

The reason the IRS is concerned about lease contracts is that many times they appear to be set up solely to avoid taxes. To see how this could happen, suppose that a firm plans to purchase a $1 million bus that has a five-year class life. Depreciation expense would be $200,000 per year, assuming straight-line depreciation. Now suppose that the firm can lease the bus for $500,000 per year for two years and buy the bus for $1 at the end of the two-year term. The present value of the tax benefits from acquiring the bus would clearly be less than if the bus were leased. The speedup of lease payments would greatly benefit the firm and de facto give it a form of accelerated depreciation. If the tax rates of the lessor and lessee are different, leasing can be a form of tax avoidance.

Task 3. Read the statements. Are they true or false?

1. The lessee can increase lease payments for income tax purposes.

a) True; b) False

2. Tax shields are critical to the economic vitality of any lease.

a) True; b) False

3. A conditional sale takes place if the term of the lease is greater than 30 years.

a)True; b) False

4. Very high payments at the start of the lease term can be evidence that the lease is being used for unlawful business purpose.

a)True; b) False

5. The lease should limit the lessee's right to issue debt or pay dividends while the lease is operative.

a)True; b) False

6. Lease contracts are often set up solely to avoid taxes.

a)True; b)False

7. If the tax rates of the lessor and lessee are different, leasing can be a form of tax evasion.

a)True; b) False

8. All interested parties generally get an opinion from the IRS before agreeing to a major lease transaction.

a)True; b) False

Task 4 .Complete the following word combinations with the correct prepositions from the box.

of at (x2) to (x2) about with for

1) critical _____ the economic viability; 2) agreeing _____ a major lease transaction; 3) to acquire the asset _____ a price below its fair market value; 4) a schedule _____ payments; 5) to provide the lessor _____ a fair market rate of return; 6) the IRS is concerned _____ lease contracts; 7) to lease the bus _____ $ 500,000 per year; 8) to buy the bus for $1 _____ the end of the two-year term.

Task 5. Match the financial terms with their definitions.

1) asset	a tax deduction that is granted in order to encourage a particular type of commercial activity
2) tax shields	an agreement between parties fixing obligations that each promises to carry out.
3) economic viability	the reduction in value of a fixed asset due to use, obsolescence (моральне зношування (обладнання)) , etc.
4) marker value	how much a fixed asset is worth at the end of its lease, or at the end of its useful life.
5) bargain	the reduction in income taxes that results from taking an allowable deduction from taxable income
6) transaction	something that is transacted, esp a business deal or negotiation
7) tax avoidance	reduction or minimization of tax liability by lawful methods)
8) tax benefits	any item of economic value owned by an individual or corporation, especially that which could be converted to cash
9) residual value	the price that a seller of real property can expect to receive from a buyer in a fair and open negotiation
10) depreciation	capability of developing and surviving as a relatively independent social, economic or political unit

Task 6 .Choose the words which best complete the sentences below.

Deducts, tax shields, economic viability, marker value, tax avoidance, tax benefits, depreciation, residual value, bargain; transaction.

1. The lessor owns the leased asset and _______its depreciation from taxable income.

2. What are those ______ worth?

3. We identify a model for managing operating assets based on ______, tax efficiency and investment attractiveness.

4. The current _____of Polymetal shares is $6.3 per share, while the previous maximum price had been $8 per share.

5. In order to reduce the opportunities for ______by legal entities, eligible individual entrepreneurs should sell goods and services to physical persons only.

6. For example, _______ and unusual motives have led cooperatives to expand even when overall industry conditions were poor.

7. Fixed assets are recorded at their cost less accumulated _______.

8. These planes were written down straight-line over 16 years to a________of $0.2 million each.

9. I fulfilled my part of the ________!

10. The price of the ________ has not been disclosed.

TEXT 4. LEASES IN THE USA

Task 1. Study the vocabulary:

fraction	частина
liability	зобов'язання
balance sheet	бухгалтерський баланс
capitalization	перетворення в капітал, капіталізація
debt	борг
cash flow	рух готівки
discounting	надання знижки
interest rate	відсоткова ставка
secured debt	забезпечений борг
intuitive appeal	інтуїтивна привабливість
debt capacity	здатність погасити борг
outflow	витік, витрата
tax bracket	податкова група
shift	переміна; зміна

Task 2. Read and translate the text:

LEASES IN THE USA

A large fraction of America’s equipment is leased rather than purchased.

1. Leases can be separated into two polar types. Though operating leases allow the lessee to use the equipment, ownership remains with the lessor. Although the lessor in a financial lease legally owns the equipment, the lessee maintains effective ownership because financial leases are fully amortized.

2. When a firm purchases an asset with debt, both the asset and the liability appear on the firm’s balance sheet. If a lease meets at least one of the number of criteria, it must be capitalized. This means that the present value of the lease appears as both an asset and a liability. A lease escapes capitalization if it is does not meet any of these criteria .Leases not meeting the criteria are called operating leases, though the accountant’s definition differs somewhat from the practitioner’s definition. Operating leases do not appear on the balance sheet. For cosmetic reasons, many firms prefer that an asset be called operating.

3. Firms generally lease for tax purposes. To protect its interests the IRS allows financial arrangements to be classified as leases only if a number of criteria are met.

4. Risk-free cash flows should be discounted at the after-tax risk-free rate. Because both lease payments and depreciation tax shields are nearly riskless , all relevant cash flows in the lease-buy decisions should be discounted at a rate near this after tax rate. We use the real-world convention of discounting at the after-tax interest rate on the lessee’s secured debt.

5. Though this method is simple, it lacks certain intuitive appeal. Relative to a lease, a purchase generates debt capacity. This increase in debt capacity can be calculated by discounting the difference between the cash flows of the purchase and the cash flows of the lease by the after-tax interest rate. The increase in debt capacity from a purchase is compared to the extra outflow at year 0 from a purchase.

6. If the lessor is in the same tax bracket as the lessee, the cash flows to the lessor are exactly the opposite of the cash flows to the lessee. Thus, the sum of the value of the lease to the lessee plus the value of the lease to the lessor must be zero. While this suggests that leases can never fly, there are actually at the least three good reasons for leasing:

a. Differences in tax brackets between lessor and lessee.

b. Shift of risk-bearing to the lessor.

c. Minimization of transaction costs.

But there is a number of bad reasons for leasing.

Task 3. Read the statements. Are they true or false?

1. Americans more frequently buy equipment than lease it.

a) True; b) False

2. Under the terms of the operating lease, the lessee owns the equipment.

a) True; b) False

3. Financial leases are fully amortized.

a)True; b) False

4. When a firm purchases an asset with debt, both the asset and the liability appear on the firm’s balance sheet.

a)True; b) False

5. Operating leases appear on the balance sheet.

a)True; b) False

6. Firms generally lease for tax purposes.

a)True; b)False

7. Relative to a lease, a purchase produces debt capacity.

a)True; b) False

8. There are both good and bad reasons for leasing.

Task 4. Match the financial terms with their definitions.

1) ownership	a) a condensed statement that shows the financial position of an entity on a specified date
2) amortization	b) conversion of an operating lease into a capital lease by classifying the leased asset as a purchased asset, and showing the lease obligations as loan on the books of the lessee firm
3) liability	c) the difference in amount of cash available at the beginning of a period and the amount at the end of that period
4) balance sheet	d). the ultimate and exclusive right conferred by a lawful claim or title, and subject to certain restrictions to enjoy, occupy, possess, rent, sell, use, give away, or even destroy an item of property
5) capitalization	e) gradual repayment of a loan in equal (or nearly equal) installments which include portions of interest and principal amounts.
6) accountant	f) assessment of the amount of debt an individual or firm can repay in a timely manner
7) cash flow	g) a claim against the assets, or legal obligations of a person or organization, arising out of past or current transactions or actions.
8) secured debt	h) category or range of income subject to a particular tax rate
9) debt capacity	i) qualified person who is trained in bookkeeping and in preparation, auditing and analysis of accounts.
10) tax bracket	j) loan amount for which the borrower pledges one or more assets of equal or greater liquidation-value as a security which may be forfeited in case of a default

Task 5. Choose the word that best completes the sentence.

1. A large fraction of America’s equipment is leased/purchased rather than leased/purchased.

2. Though operating leases allow the lessee/lessor to use the equipment, ownership remains with the lessee/lessor.

3. When a firm purchases/leases an asset with debt, both the asset and the liability appear on the firm’s current account/balance sheet.

4. Operating/financial leases do not appear on the balance sheet.

5. Firms generally lease for tax/benefit purposes.

6. If the lessor is in the different/same tax bracket as the lessee, the cash flows to the lessor are exactly the opposite of the cash flows to the lessee.

Task 6. Give the English equivalents from the text for the following word combinations:

1. Операційна оренда –

2. Орендар –

3. Орендодавець–

4. Власність –

5. Бухгалтерський баланс –

6. Поточна вартість –

7. Активи –

8. Рух готівки –

9. Податкова група –

10. Забезпечений борг –

11. Відсоткова ставка –

12. Операційні витрати –

TEXT 5. THE REASONS FOR NATIONAL AND INTERNATIONAL LEASING

Task 1. Study the vocabulary:

fiscal	фіскальний; фінансовий
acquisition	придбання (дія); що-небудь придбане
upfront payment	попередня сплата
a steady return	стабільний прибуток
reliable credit history	надійна кредитна історія
collateral	застава, додаткове забезпечення

Task 2. Read and translate the text:

THE REASONS FOR NATIONAL AND INTERNATIONAL LEASING

There are many tax-related and non-fiscal reasons for leasing. The main function of a leasing transaction is to provide the lessee with the use of an object, without the need that it pays the cost of its acquisition upfront. Simultaneously, it gives the lessor a steady return on its investment. Additionally, the lessor retains the ownership of the leased object. Accordingly, the legal position of the lessor is safeguarded. For that reason it is faced with less economic unpredictability, which, in turn, will lead to lower interest rates. In many states with emerging capital markets leasing is the only source of financing the acquisition or use of capital goods on reasonable conditions. Particularly, leasing gives major cash flow advantages to new companies that have not been able to built-up a stable and reliable credit history. In addition, leasing provides smaller companies with the opportunity to borrow money, without the requirement of collateral. In general, leasing expenses are lower than the costs of the traditional banking devices. Furthermore, leasing can generate funds up to 100% of the financing needs. The total value of world leasing industry increased more than ten-times over the last twenty-five years. The leasing market expanded most in North America, Europe and Asia.

Task 3. Read the statements. Are they true or false?

1. Companies lease both for tax and non-fiscal purposes.

b) True; b) False

2. The lessee doesn’t need to pay the cost of acquisition upfront.

b) True; b) False

3. As a rule, the lessor doesn’t get a steady return on its investment.

b) True; b) False

4. The legal position of the lender is safeguarded.

b) True; b) False

5. In many countries with emerging capital markets leasing is the only source of financing the acquisition.

b) True; b) False

6. In general, leasing expenses are higher than the costs of the traditional banking services.

b) True; b)False

7. Leasing can produce funds up to 100% of the financial needs.

b) True; b) False

8. Leasing industry has increased significantly over the last years.

b) True; b) False

Task 4. Complete the text using the words from the box.

purchase loans payments buyer renting lender interest rate security

Leasing or hire 1.______(HP) agreements have higher interest rates than bank 2.________ and overdrafts. These are when a consumer makes a series of monthly 3._______ to buy durable goods (e.g. a car, furniture). Until the goods are paid for, the 4.________ is only hiring or 5.________ them, and they belong to the 6.________. The 7.________ is high as there is little 8._______ for the lender: the goods could easily become damaged.

Task 5. Give the English equivalents from the text for the following word combinations:

1. Лізингова операція –

2. Інвестиція –

3. Стабільний прибуток –

4. Економічна непередбачуваність –

5. Джерело фінансування –

6. Потік готівки –

7. Кредитна історія –

8. Лізинговий ринок –

9. Витрати –

10. Предмет оренди –

Task 6. Match each term with its definition.

1) expiry date	a) the purchase of materials, machines, property, securities, etc. in order to produce income or profits
2) fiscal	b) current assets less current liabilities
3) installment	c) the process of repaying a debt by instalments
4) loan capital	d) a fixed sum of money, lent for a fixed period, on which interest is paid
5) revenue	e) anything that acts as a security or a guarantee for a loan
6) working capital	f) the final date on which a document is valid
7) amortization	g) a portion of a loan paid at regular intervals
8) bank loan	h) capital which is raised through borrowings
9) cash flow	i) a company’s ability to earn cash; the amount of cash made during a specific period which can be used for investment
10) collateral	j) income generated by providing goods or services
11) investment	k) connected t tax

TEXT 6. TYPES OF COMMERCIAL LEASES

Task 1. Study the vocabulary:

double net lease	нетто-оренда
insurance	страхування
fully serviced lease	оренда з повним обслуговуванням
janitorial service	обслуговування приміщень та споруд (послуги, прибирання)
trash collection	вивіз сміття
utilities	комунальні послуги
property tax	податок на нерухомість
landlord	домовласник, який здає квартири
tenant	наймач, орендар, наймач; тимчасовий власник
gross lease	валова оренда
sewer	забезпечувати каналізацією
net lease	чиста оренда
triple net lease	абсолютно чиста оренда
maintenance	уримання
percentage lease	відсоткова оренда
sublease	піднаймання; суборенда
sublessee	суборендар
sublessor	суборендодавець

Task 2. Read and translate the text:

TYPES OF COMMERCIAL LEASES

Types of leases typically offered in commercial leasing include:

Double Net lease is a type of net lease in which the lessee (tenant) pays all or part of taxes and insurance associated with use of the property. These fees are paid in addition to monthly rent for use of the actual space.

The term "Fully Serviced Lease" refers to a lease in which the monthly rent includes the cost of certain types of services, which may include janitorial services, trash collection, utilities, water and sewer charges, property taxes, etc.

Instead of the tenant opening their own service or utility accounts and directly paying for these costs, the landlord pays for the expenses, but includes an amount in the monthly rent to help off-set these costs.

A Gross Lease is a type of commercial lease that generally favors the tenant (lessee) because the landlord (lessor) pays all "usual costs" that are associated with owning and maintaining the rented space. In a gross lease the landlord may cover costs including utilities, water and sewer, repairs, insurance, and/or taxes.

A Net Lease is a type of commercial real estate lease in which the lessee (tenant) pays for their space, as well as for part or all of certain “Usual Costs” (expenses associated with operating, maintenance and use of the property) that the landlord pays.

Expenses incorporated into net leases may include taxes, utilities, janitorial services, property insurance, property management fees, sewer, water, and trash collection. Net leases almost always favor the lessor (landlord) and should be negotiated to include caps, or, the maximum amount a landlord can increase fees each year.

Usual Costs that are added into net leases are generally broken down into three categories of expenses: maintenance, insurance, and taxes. A Double Net Lease requires the lessee to pay all taxes and insurance; and a Triple Net Lease requires the lessee to pay all three types of “Usual Costs.”

A Percentage Lease typically requires a tenant to pay "Base Rent" and then on top of that amount, the tenant also pays a percentage based on monthly sales volumes. Percentage leases are commonly executed in retail mall outlets and other commercial retail leases.

Percentage leases should not take a percentage of all sales made, but should include a percentage paid to the landlord (lessor) only when a tenant has made a certain amount in any given month. For example, a percentage lease might require a tenant to pay 5% of all sales that exceed more than $25,000 in any given month.

Sublease in commercial real estate is a lease (rental agreement) between a tenant who already holds a lease to a commercial space or property and someone (the sublessee) who wants to use part or all of the tenant's space. In a sublease, the tenant assigns certain rights that they already hold to the leased property, to the sublessee.

Sublessees pay rent directly to the rightful tenant (sublessor) to either share the space with the sublessor or take over the entire space from the sublessor.

A sublessor cannot legally assign rights in a sublessee that the sublessor does not also have rights to in their own lease. Additionally, a sublessor cannot sublease unless they are permitted to do so in their own lease.

Triple Net Lease is also known as Net Net Net Lease or NNN Lease. This is a type of net lease in which the tenant pays all or part of the taxes, insurance, and maintenance associated with use of the property. These fees are paid in addition to the tenant's regular monthly rent.

Triple Net leases almost always favor the landlord and should be carefully negotiated to limit how much the landlord can increase NNN fees each year.

Task 3. Are these statements true or false?

1. Under the terms of a double net lease the landlord pays all or part of taxes and insurance associated with the use of the property.

a) True; b) False

2. A gross lease is a type of operating lease.

a) True; b) False

3. In a gross lease the lessee pays all “usual cost” that are associated with owning the rented place.

a)True; b) False

4. Net leases almost always favor the landlord.

a)True; b) False

5. Usual cost added into net leases include maintenance, insurance, and taxes .

a)True; b) False

6. A double net lease require the lessee to pay all taxed and insurance.

a)True; b)False

7. A triple net lease requires the lessee to pay all three types of “usual costs”. a)True; b) False

8. In a sublease the tenant assigns certain rights that they already hold to the leased property.

a)True; b) False

9. Sublessees pay rent directly t the rightful landlord.

a)True; b) False

10. Triple net leases almost always favor the tenant.

a)True; b) False

Task 4. Match the following terms with their definitions:

1) landlord	a) property consisting of land or buildings
2) tenant	m). discussion aimed at reaching an agreement
3) net lease	n) the money that something costs you or that you need to spend in order to do something
4) insurance	e) a person who holds a sublease
5) sublessee	h) a lease in which the lessee pays the operating costs on the asset.
6) sublessor	c) a tax levied directly on property
7) real estate	f) a man (in legal use also a woman) who rents out land, a building, or accommodation
8) negotiation	j) someone who pays rent for the place they live in, or for land or buildings that they use
9) expense	k) an arrangement in which you pay money to a company, and they pay money to you if something unpleasant happens to you, for example if your property is stolen or damaged
1). property tax	g) a person who grants a sublease

Task 5. Read the text again and write down English equivalents for the following words and word combinations.

1. Щомісячна плата за оренду –

2. Бути прихильним, сприяти –

3. Покривати видатки –

4. Утримання майна -

5. Страхування майна –

6. Збільшувати платню –

7. Обговорювати умови -

8. Відсоткова оренда -

9. Нерухоме майно -

10. Передавати права –

Task 6. Make up sentences from the words.

1. To do so/ in their own/ cannot sublease/ unless/ they are permitted/ a sublessor.

2. Are commonly executed/ and other commercial retail leases/ in retail mall outlets/ percentage leases.

3. Almost always/ net leases/ negotiated/ and should be/ the landlord/ favor.

4. Refers to a lease/ the term/ in which/ “Fully Serviced Lease”/ includes/ the monthly rent/ the cost of/ certain types of services.

5. Are generally/ net leases/ usual costs/ broken down into/ that are added into/ three categories of expenses.

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