Real estate leases or rentals are contracts under which a lessee/tenant/renter agrees to pay for the use of real estate for a specific period of time, including properties that are:
- Outside of the historic and Stanford Redwood City campuses; or
- Otherwise not owned and/or controlled by Stanford (e.g., ground leased property in the Stanford Research Park that the university is planning to sublease from the ground lessee)
For more information on purchasing real estate, refer to the Real Estate department of Land, Buildings & Real Estate (LBRE). For information on renting lodging related to business travel, refer to Topic Overview: Lodging.
Administrative Guide Policy 5.2.5: Real Estate Leases and Stanford Real Estate Guidelines and Policies contains university policy on real estate leases or rentals. The oversight of Stanford’s leases and rentals is a shared responsibility among a number of different units including:
- Schools/Units/Departments: Should be familiar with the Administrative Guide Policy 5.2.5: Real Estate Leases and have a general understanding of what a lease is and the basic types of leases. Departments are responsible for negotiating the business terms for their own leases.
- Land, Building & Real Estate (LBRE): Off Campus Lease Requisition and Off Campus Lease Approval forms are submitted to LBRE for review and processing of approval signatures. LBRE can source the leasing agent and provide referrals to third-party attorneys to assist in negotiating the lease. LBRE can also review lease terms and offer comments for consideration.
- Financial Management Services (FMS) comprises a number of units, including Financial Reporting (FAIR or FR), Real Estate Accounting, Capital Accounting, Procurement Services (Procurement) and the Office of the Treasurer (OOT). These units collaborate to review and approve lease transactions submitted in the university’s financial system, compile financial statement disclosures, ensure compliance with university policies and assess the impact of finance leases on the university’s debt capacity.
Schools or units must complete the following requirements to initiate, submit, and manage a real estate lease:
Schools and units should determine the type of real estate lease being entered into using the table below.
| Type of Real Estate Lease | Definition |
|---|---|
| Gross/Full Service Lease | The tenant pays a fixed rent, and the landlord covers all operating expenses (property taxes, insurance, maintenance, utilities, etc.). This is the simplest lease type for tenants. |
| Net Lease | The tenant pays a base rent plus a portion of the operating expenses. There are three main types of net leases:
|
| Percentage | The tenant pays a base rent plus a percentage of their gross business sales, this is common for retail tenants such as the cafe operators on campus. |
Identify the funding source(s) for the contracted term of the lease before proceeding to the next steps of the process.
The total funding will need to be included in the contract request, which includes:
- The base rent over the entire term of the lease (e.g. $1,000 per month for 36 months = $36,000)
- Separate funding lines added to the contract request for any additional non-lease components that will be paid to the landlord. (e.g., parking fees if parking is not included but controlled by the landlord) .
- Non-lease components, such as internet service, that are not paid directly to the landlord require a separate PO payable to the utility provider.
Clearly define the business terms of the lease and determine renewal options that are reasonably certain to be exercised, including:
- What is the lease term? (e.g., how many months or years?)
- Does the lease include the option to extend or renew?
- If yes, does the school or unit currently intend to extend or renew?
- If yes, how many months would the lease be extended?
- What is the process for potential early exit from the lease?
- Who is the school or unit contact for questions regarding this lease?
All real estate leases must be included as a capital request. An approval for a lease can be requested as part of the Capital Planning Process, which is managed by the Vice President for Land, Buildings & Real Estate (LBRE) and occurs in conjunction with the university’s annual budgeting process. Additional financial approval may be required depending on the financial commitment.
Submit an Off-Campus Lease Requisition Form to LBRE and send a copy of the completed form to the Office of the Treasurer (OOT). For lease extensions or renewals, submit an Off Campus Lease Approval form to LBRE and send a copy of the completed form to the OOT.
Real estate leases must be finalized through the contracts process. Include an LBRE Approved copy of the Off-Campus Lease Requisition Form with a copy of the lease document reviewed and approved by LBRE. After Procurement Services marks the contract request as “Accepted” in SmartMart Contracts, a funding requisition is automatically created in iProcurement.
After the purchase requisition is created in iProcurement, the school or unit must complete the purchase requisition with the correct funding information and submit it for financial approval.
Lease and Expenditure Types
Departments must select and approve the correct PTA and expenditure types for real estate leases when submitting a lease requisition:
- Expenditures: Choose from the expenditure types from the table below.
- Base Rent: Add only the base rent for the term of the lease; do not include non-lease components (e.g., property taxes, insurance, utilities, repair and maintenance costs). To enter non-lease components, a separate requisition should be created under the same purchase order with the appropriate expenditure type.
- Excluded Items: These items are excluded and not classified as leases: linen services, water/coffee services and indoor plant services.
| Code | Name | Examples |
|---|---|---|
| 52810 | RE LEASED SPACE > 1 YEAR | Lease of building or office space with signed agreement greater than 1 year (or less than 1 year with an option and intent to renew beyond 1 year)* |
| 52830 | RE LEASED SPACE 1 MO TO 1 YEAR | Lease of space with a term greater than 1 month but less than 1 year with no intent to renew* |
| 52992 | RENT OTHER | Off-campus document storage, miscellaneous materials (tables, chairs, etc.) |
* Charge service and facility fees, and miscellaneous rentals to 52992.
When there are changes to the terms of a lease (i.e., additional space, duration of the lease or total cost of lease), submit a request to “Amend / Change a contract” for the lease agreement. Include an LBRE approved copy of the Off Campus Lease Approval form and a copy of any extension documents reviewed and approved by LBRE. Send copies of any Amend/Change requests that require Board of Trustee final approval to the Office of the Treasurer.
