A “rent step” is a series (one or more) of equal rental payments made once every payment period (Daily, Weekly, Monthly, Quarterly, Semiannually, Yearly, or One-Time). Many leases have only one rent step. Some start with a rent holiday (a period when no rent is due), which is treated as a separate rent step with a gross rent of 0. Each time the rent changes, a new rent step is listed. You may enter an unlimited number of rent steps.
Steps can be entered in any order, and automatically sort by step end date (with the start date calculated automatically). Steps are always entered on the last line of the table, even if they are to take place before another step.
Rent for renewal options must be included, whether or not the option is recognized as part of the minimum lease term. Rent for unrecognized options is not included in the Total rent payments tally. Rent for options cannot span an option end date or the expiration of the base lease term. You must enter the options before you can enter the applicable rent.
To delete an existing rent step, click on the blue box to the left of the row. The row is highlighted; press Delete on your keyboard to delete the row.
EZLease includes two methods of automatically generating a series of rent steps that change according to standard formulas.
Note: A lease cannot have a series of rent steps starting on the 31st of a month; the rent steps must begin on the 30th of a month, or the 1st day of the following month.
Required. Enter the gross rent due for each payment, per full payment period. Include any executory costs and non-lease components but exclude any variable lease payments.
For certain types of lease renegotiations and modifications, you may want to enter a negative rent. You can only do this if you have user-classified the lease, either finance or operating (because it can be impossible to accurately present value a rent stream that includes negative rents). You also cannot enter a negative rent if there is an Annual Land Rent Portion.
Optional. Enter any executory costs included in the Gross Rent. Executory costs are costs such as insurance, maintenance, and taxes; since they are considered distinct from the value of the asset, they are excluded from the present value of the rent stream for purposes of the 7(d) (90% present value) test and from the finance rents if the lease is classified finance. Do not include, in either this field or the Gross Rent field, executory costs which you pay directly to a third party, rather than through your rent. Note that normally sales taxes should not be considered executory costs; if you usually capitalize sales tax charged on purchased assets, then sales tax on a lease should be capitalized (if the lease is finance) by excluding it from executory costs and including the sales tax in the Fair Value of the equipment.
You may choose to combine all executory costs into a single amount or keep up to five different executory costs. You can set the title for each type of executory cost, and set how many types to display, in System Options, Text tab.
If the Gross Rent is negative, any executory costs must also be negative.
A lease that begins before the ASC 842/IFRS 16/GASB 87 implementation date continues to report executory costs, not non-lease components, even after the transition, unless the lease is modified. A lease that begins after the implementation date must use non-lease components only, not executory costs.
ASC 842/IFRS 16/GASB 87 only: Non-lease components are amounts included in the rent paid to the Lessor which transfer to the Lessee a good or service separate from the underlying leased asset. Examples include service contracts, common area maintenance in multi-tenant buildings, and consumable supplies.
Reimbursement of payment of the Lessor's costs, such as taxes and insurance (in a gross lease) do not qualify as non-lease components, because they do not transfer a good or service separate from the right to use the underlying asset. This differs from the definition of executory costs under FAS 13/IAS 17.
A lease that begins before the ASC 842/IFRS 16/GASB 87 implementation date continues to report executory costs, not non-lease components, even after the transition, unless the lease is modified. If a lease is modified after transition to the new standard, all future rent must be reported using non-lease components rather than executory costs.
Up to five different types of non-lease components may be entered separately. You may choose how many types are displayed, and set titles for each type, in System Options, Text tab. Specify whether non-lease components are displayed at all in System Options, New Standard tab. Enter amounts in each type column; the total of non-lease components is calculated and displayed automatically.
EZLease calculates automatically the net rent after subtracting executory costs or non-lease components. This is the rent that is capitalized for a finance or ASC 842 operating lease.
This is calculated automatically by EZLease; it is the day after the previous step end, or the begin date of the lease for the first rent step.
Required. Enter the date this rent step ends. Rents are automatically sorted in ascending date order by step end. The length of time from the Step Start to the Step End (inclusive) must be a whole multiple of the Payment Frequency. So, for instance, a Weekly rent step that starts on a Sunday must end on a Saturday. A Monthly or longer rent step must end on the same day of the month as the prior rent step (the last day of the month matches the last day of every other month for this purpose, even though months have different lengths). A One-Time step can have any length.
Required. Select how often the rent payments are made. The default is Monthly. Options are Daily, Weekly, Monthly, Quarterly, Semiannually, Yearly, and One-Time. The rent is paid as many times as needed according to the frequency length to cover the period of time from the step start to the step end.
A One-Time payment is made at the beginning or end of the date range indicated (depending on the value of Payments in Advance), with no payments for the rest of the period.
If this box is checked, the Notice Dates report will display a notice when this rent step is scheduled to start (assuming that you have set the System Option to display rent changes in the report). This is not meaningful for the first rent step for a lease, because that is not a change in rent.