Section 108
| 108.01 | |
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| 108.01A | |
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Requirements
You must analyze all aspects of each Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… and the tenants. Tenant refers to each tenant, grantee, or other beneficiary of the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other….
If Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… approval is required by the terms of Part II, Chapter 1: Attributes and Characteristics, Section 108.01B: Lease Approval you must:
- prepare a written summary of the material terms of the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other…; and
- keep a copy of your summary in your Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. .
Guidance
As you analyze the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other…, you should consider the following questions:
- Does each tenant have the ability to fulfill its financial and other performance obligations under the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other…?
- Are the insurance provisions of the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… consistent with the insurance requirements in the applicable Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. or otherwise prescribed by Fannie Mae?
- Is each tenant required to obtain the Lender'sLender'sPerson approved by Fannie Mae to sell or service Mortgage Loans. consent before making any assignment, sublease, subcontracting, or other transfer of the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other…?
- Does the tenant have early termination clauses and if so, what are the conditions under which the tenant can terminate? For example,
- if there is a material casualty or condemnation, or
- if the landlord cannot substantially restore the premises in a reasonable period of time following a casualty or condemnation.
| 108.01B | |
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Requirements
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Material Commercial Lease Type |
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Lease with Property Assessed Clean Energy (PACE) Financing |
You must not approve any Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… that includes PACE financing. |
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Other Material Commercial Leases |
You must only approve other Material Commercial LeasesMaterial Commercial LeasesLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… if they comply with Part II, Chapter 1: Attributes and Characteristics, Section 108: Commercial Leases. |
Guidance
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Material Commercial Lease Type |
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Solar Power or Other Power Generation Lease |
You may underwrite and approve a solar power, thermal power generation, or co-power generation Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… and any related power purchase agreement. |
| 108.01C | |
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Requirements
As you review each Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… modification, you must consider the following questions:
- Does it violate any of the requirements of this Section?
- Does it contain terms that are inconsistent with the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. ?
- Does it present risks that are inappropriate for the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. ?
If the answer to any of these questions is “yes”, then you must:
- require the BorrowerBorrowerPerson who is the obligor per the Note. to modify the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… appropriately; or
- address the items in the Tenant Estoppel Certificate (Form 6413) and/or the Subordination, Non-Disturbance, and Attornment Agreement (Form 6415).
| 108.01D | |
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Requirements
You must obtain a Tenant Estoppel Certificate (Form 6413) for each Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other….
Requirements
You must:
- evaluate whether an SNDASNDASubordination, Non-Disturbance and Attornment Agreement (Form 6415) is necessary to provide for subordination and attornment or would be beneficial for other reasons; and
- use Form 6415 if the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… contains provisions for the BorrowerBorrowerPerson who is the obligor per the Note. to assume liability or other risks as landlord that would not be acceptable to the LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans. in case of a Foreclosure EventForeclosure EventAny of the following: Foreclosure under the Security Instrument; any other exercise by the Lender of rights and remedies (whether under the Security Instrument or under applicable law, including Insolvency Laws) as holder of the Mortgage Loan and/or the Security Instrument, as a result of….
You must ensure that each Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… (including any renewal or extension):
- is subordinate to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. ; and
- requires the tenant to attorn to the LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans. under the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. .
Requirements
You must make reasonable efforts to get a Form 6413 for each non-Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other…, other than leases relating only to equipment or maintenance services.
If a non-Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property’s annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… has terms that are inconsistent with the terms of the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. or present inappropriate risks for the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. , then you must:
Requirements
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Non-Material Commercial Lease Type |
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Telecommunications and Cell Tower Leases |
You must review any telecommunications and cell tower lease to ensure that it does not:
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| Communications Service Agreement |
You do not need to subordinate the service agreement to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. if:
If a communications service agreement is accompanied by a lease or easement, then the lease or easement must end automatically when the service agreement expires, unless the service agreement is subordinated to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. . |
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Mineral Rights; Oil and Natural Gas Leases |
You must review each agreement or lease of mineral rights or rights relating to subsurface oil and natural gas to ensure that it does not:
The BorrowerBorrowerPerson who is the obligor per the Note. must execute Form 6262 if a lease or deed reservation of rights allows for the subsurface exploration of oil, natural gas, or minerals, but no evidence of active or planned exploration or drilling exists on the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). . |
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Laundry Lease |
You do not need to subordinate the lease to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. if you confirm that the lease:
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Equipment or Related Maintenance Services Lease |
You must ensure that the lease:
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Guidance
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Non-Material Commercial Lease Type |
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Storage Unit Lease |
You do not need to subordinate the lease to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. if you determine that the unit is being leased pursuant to a residential LeaseLeaseWritten agreement between an owner and the tenant of a Property stipulating the conditions for possession and use of real estate for a specified period of time and rent. . |
| 108.03 | |
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Requirements
You must ensure that:
- the residential nature of any PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code).
with units available for STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… is maintained, even though any LeaseLeaseWritten agreement between an owner and the tenant of a Property stipulating the conditions for possession and use of real estate for a specified period of time and rent.
of an STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… unit will be
- classified as a commercial lease, and
- subject to the space and income limitations per Form 4660Form 4660Multifamily Underwriting Standards identifying Pre-Review Mortgage Loans and containing the minimum underwriting requirements (e.g., debt service coverage ratio, loan to value ratio, interest only, underwriting floors, etc.) for all Mortgage Loans. ;
- no more than 5% of the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). ’s units (not counting recreational vehicle sites) are available for STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer…; and
- the Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis and the applicable products and features in Part III. accurately incorporates all STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… income.
You must include the following information in your underwriting analysis:
- a description of the STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… arrangement;
- length of time the STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… has been in place;
- BorrowerBorrowerPerson who is the obligor per the Note.
’s action plan for handling liability issues for
- STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… tenants at the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). , and
- safety concerns for non-STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… tenants;
- BorrowerBorrowerPerson who is the obligor per the Note. ’s strategy for implementing STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer…;
- whether the STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… units are furnished or unfurnished;
- confirmation that the STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… is legally permissible and in compliance with applicable laws and zoning;
- confirmation that the BorrowerBorrowerPerson who is the obligor per the Note. ’s or master tenant’s insurance covers any STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer…; and
- confirmation that the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). is residential in nature (i.e., not operated as a hotel or other single room occupancy arrangement).
Guidance
Examples of an STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… arrangement include an arrangement between the BorrowerBorrowerPerson who is the obligor per the Note. and:
- a tenant/master tenant, where the tenant/master tenant has an agreement with an STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… provider or platform (such as Airbnb, VRBO®, etc.); or
- an STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… provider or platform, where the BorrowerBorrowerPerson who is the obligor per the Note. ’s tenants may make their units available for STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer….
You should seek to establish a leasing history of at least 12 months for any STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… unit.