Real Property / Costs / Cost Administrator

Straight-Line Rent Reporting for Free Rent

When landlords provide incentives by giving an initial period of free rent, this must be reflected in financial reporting.

For the following example:

  • The lease agreement includes an incentive for the first three months of free rent starting June 7, 2010. The first payment date for the lease is September 7, 2010.
  • The lease base rent is $80,000. USD per month over three years (36 payments - 3 months free rent = 33 payments).
  • The straight-line rent adjusts the total amount paid over the lease term to show payments that include the three months of free rent reflected over 36 payments.

The following table shows the calculations for this free rent incentive:

A Base Rent $80,000.per month
B No. of payments 33 months
C No. of Free Rent Months 3 months
Formula
D Adjusted Number of Payments 36 payments (B + C)
E Free Rent Adjustment Factor 91.667% (B / D) %
F Straight-Line Rent (monthly value) $73,333,33 per month (A * E)

Lease Start Date -- First Payment - Sept -07-2010

Lease End Date - Jun-07-2013

Straight Line Rent - Start Date - June 7, 2010

Straight Line Rent - End Date - June 7, 2013

For the first three (3) monthly payments: Jun-07-2010, Jul-07-2010, Aug-07-2010:

  • Base rent payment = $ 0.00 (FREE)
  • and Straight Line Rent = $73,333.33

Base Rent Cumulative Totals

  • $2,640,000 per lease term
  • ( A * B )
  • ( $ 80,000.00 x 33 )

Straight-Line Rent Cumulative Totals

  • $2,640,000 per lease term
  • ( D * F )
  • ( $ 73,333.33 x 36 )