Use and Lease of Non-University Real Estate
- The University requires a written agreement for the use of non-University real estate by a University unit when a payment to the owner of the real estate is required, even if the payment is not called rent, or when the owner of the real estate requires evidence of University insurance coverage.
- If the owner of the real estate does not require a payment from the University or evidence of University insurance coverage or a written agreement, consult with the Real Estate Office to determine if a written rental agreement would be recommended. The University may want a written agreement due to the intended use of the premises, planned modifications to the premises for the University's use, etc.
- A hotel room reserved by a University employee traveling on University business (or a University unit reserving a hotel room in conjunction with recruitment activities, etc.) does not require a written agreement. The employee will pay for the use of the hotel room pursuant to the University's travel and travel-related policies.
- The Real Estate Office manages all leases providing for a University unit's on-going use of non-University real estate, including payment of rent due. A purchase order is not used for payments by the University on a real estate lease or use agreement.
- Visiting faculty should enter into their own housing agreements. If the University department has agreed to pay for housing for visiting faculty, the payment should occur as part of the visiting faculty member's salary package and be documented in the offer letter to the visiting faculty member. In certain circumstances, the University will enter into an agreement with the owner of the real estate, and a housing/occupancy agreement with the visiting faculty member.
Leases are generally used for the on-going, continuous use of real estate, typically more than 7 days in length, as well as recurring, non-continuous uses over more than a one-year period.
Process for Leases
- For University units on the Twin Cities Campus in need of building space, contact the Office of Space Management (OSM) for the determination/confirmation of the department's space needs. For the lease of space by a System Campus unit and leases of non-University real estate other than building space, contact the Real Estate Office.
400 Donhowe Building
319 15th Ave. SE
Minneapolis, MN 55455
- OSM will provide a Minnesota Facilities Model (MFM) analysis to determine the amount and type of space the department needs and whether the University currently has on-campus space available. If OSM has determined that the space the department needs is not available on-campus, contact the Real Estate Office. If a lease of off-campus space is needed, such leases should generally be limited to:
- University uses which are not continuing, long-term uses;
- University uses that do not need to be accommodated on the campus proper (such as storage of records accessed infrequently and back office-functions); and/or
- University uses which are best located for programmatic reasons adjacent to an off-campus facility.
- The Leasing Manager will assist the department in its search for off-campus space, or the department can search for the needed rental space on its own. If necessary, a real estate broker can be used to assist with the search for the needed space. Contact the Leasing Manager if the services of a real estate broker are desired. The University does not typically pay for brokers to search for and/or lease space. Brokerage agreements must be in writing and require the approval of the Real Estate Office.
- Once the department has selected one or more options, the Real Estate Office assembles one or more of the following documents for each option:
- Market analysis
- Building code evaluation
- Environmental assessment
- Fair market rent appraisal
- The Real Estate Office will negotiate the lease terms and conditions with the landlord or landlord’s agent for the selected location, in consultation with the Office of General Counsel (OGC) on legal issues, Risk Management and Insurance on insurance issues, the University department to occupy or use the real estate to be leased on business issues, and other University units as appropriate, such as Environmental Health and Safety. The University prefers a gross (all-inclusive) lease which requires the property owner to assume all expenses of the leased property such as utilities, custodial services, maintenance and repairs, taxes, and building insurance.
- The University prefers to use one of its standard leases, but if that is not possible, the proposed lease must be reviewed and approved by the Office of General Counsel.
- The Real Estate Office approves the final lease as to business terms. The final lease requires the Legal Approval of the Office of General Counsel.
The size/length/purpose of the lease determines any additional administrative approvals that will be required. If the gross rent is over $1,250,000 present value (PV) during the initial term, the lease will require a two month review and approval process by the Board of Regents.
- The final lease is then signed by the appropriate University signatory pursuant to the Delegations of Authority Library.
The University signatory for leases requiring Board of Regents approval is the Vice President and CFO.
The University department/user of the space must approve the plans and specifications for any modifications within the leased space (including the location of required electrical outlets and telecommunications outlets) to be completed prior to lease commencement and typically detailed in an exhibit to the final lease. The University unit to occupy the space (or parent department, college, etc.) is also responsible for costs related to any required restoration of the leased premises at lease end.
The landlord executes the lease last. The landlord (or designated payee) must complete and sign a W-9 - Taxpayer Identification Form which provides federal and state identification numbers (social security numbers for individuals) and UM 1679 - Vendor Authorization Form necessary for University issuance of income tax documents at the end of each calendar year.
- The landlord must complete or contract for all leasehold improvements (modification of the space) prior to or during occupancy. The University's standard lease provides that improvements become part of the leased premises and are owned and insured by the landlord with no University restoration obligation at lease end. Any work prior to or during occupancy must have a "cost not to exceed" provided by the landlord, be approved by University department occupying the space, and be authorized by the Leasing Manager.
- The department/user is responsible for making all telecommunications (phone, data) arrangements with the Office of Information Technology or other selected telecommunications provider (depending on location of the premises to be leased), and moving arrangements with the moving company selected by the department/user.
- Facilities Management does not perform work in building space leased to the University. All work impacting the leased premises during the lease that the University department/user of the space wants or needs completed, such as hanging shelves, must be completed by the landlord or a contractor hired by the landlord.
- The Real Estate Office manages the lease, including payment of rent, ensuring the required certificate of insurance is provided to the landlord, tracking options to renew the lease, lease of additional space, and early termination, etc.
Use agreements are used for the short-term use of real estate, e.g. for conferences at hotels. Use agreements are also used for continuous uses of real estate lasting up to 7 days as well as recurring, non-continuous uses over not more than a one-year period. Use agreements include hotel agreements, use/license agreements, and facility license agreements.
Process for Use Agreements
Many facilities, including hotels, retreat centers, and public schools, accept a standard University form when renting hotel space or other real estate to the University. To determine if an acceptable use agreement exists, check the Standard Contracts Library.
- If the facility or landlord accepts a standard University use agreement, determine the total estimated cost of the contract (including food and beverages, etc.), and then follow the appropriate steps below.
- If the facility or landlord does not accept a standard University use agreement, skip to the appropriate step 2 below.
- If multiple facilities or locations are required, contact the Senior Real Estate Specialist (Leasing Specialist, if hotel contracts).
For Short Term Agreements Not Exceeding $10,000
- Complete the appropriate University standard use agreements with the facility or landlord. If no changes are made to the agreement, proceed to step 3. If the facility or landlord has its own contract, or changes are made to the University's contract, proceed to step 2.
- Send the agreement to the Office of the General Counsel (OGC) for approval with a copy to the Real Estate Office before signing. After OGC approval, proceed to step 3.
- Have the use agreement signed by the authorized University signatory pursuant to the Delegations of Authority Library.
- Obtain execution of the agreement by the landlord. The University unit to use the hotel or other non-University real estate for its conference, etc. manages the use agreement (payments required, ensuring required certificate of insurance provided to the facility or landlord, etc.).
- After the event or conclusion of use, furnish the Senior Real Estate Specialist (or Leasing Specialist, if a hotel contract) with a copy of the fully-executed use agreement with the appropriate EFS account number and total final amount of facility-related costs (excluding food and beverages) written on the top of the use agreement.
For Short Term Agreements Exceeding $10,000
- Complete one of the University's standard use agreements with the facility or landlord, but do not sign it.
- Send the Senior Real Estate Specialist (Leasing Specialist if a hotel contract) the agreement for review.
- After the Real Estate Office reviews and approves the contract (and obtains any additional approvals required), an Approval Authority memo and the contract will be returned to the University department contact for initialing of any changes and signature by the delegated signatory pursuant to the Delegations of Authority library.
If Board of Regents approval is required, the contract will be signed on behalf of the University by the Vice President and CFO following Board approval. The landlord then signs the use agreement.
- After execution by the landlord, furnish the Real Estate Office with a copy of the fully-executed use agreement with the appropriate EFS account number and the total final amount of facility-related costs (excluding food and beverages) written on the top of the use agreement.
Approval Authority for Leases and Use Agreements
All lease transactions and those use agreement transactions with a value exceeding $10,000 (i.e. the value of a single agreement if all facilities and services for an event are described in one agreement; otherwise, the value of all agreements covering facilities and services for an event) require the Approval Authority of the Real Estate Office, which will coordinate all additional required approvals (e.g. Legal Authority, Funding Authority, Board of Regents Approval if required.) The Approval Authority for use agreements not exceeding $10,000 has been delegated to the signature authority.
All leases and use agreements are entered into the University's on-line lease inventory available at the Real Estate Office website and included in the annual fiscal year lease report produced by the Real Estate Office.