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Percentage Leases: <br />• Minimum Rent: The minimum rent component for a new percentage lease shall be set at no <br />less than eighty percent (80%) of the fair market rent as defined above. In certain cases, a <br />portion of the minimum rent may be abated for new construction or redevelopment on the <br />leasehold. The minimum rent shall be adjusted upward throughout the duration of the lease at <br />intervals of not more than every five (5) years to reflect no less than eighty percent (80%) of the <br />average annual rent actually paid or accrued during the three (3) years preceding the <br />adjustment. In no event shall the adjusted minimum rent be less than the minimum rent in <br />existence immediately preceding the adjustment. <br />• Percentage Rates: Percentage leases shall provide for adjustment of percentages rates every <br />ten (10) years to current fair market rates. For the purposes of determining fair market rent <br />percentage rates, the City shall adopt and publish a schedule of benchmark percentage rates <br />that will be updated to current market rates on a-0 e rio'd i cbasis by appraisal. The appraisal will <br />be guided by prevailing market percentage rates -for similar operations primarily within the <br />Southern California area. <br />Rent Arbitration: Leases shall provide for binding {bitration when the City, and lessee cannot agree <br />on the new rent for a rental period under review. The City and lessee shall each select a professional <br />independent real estate appraiser who n -turn will selecta thirdindependent real estate appraiser to <br />determine the fair market rent. If the two selected appraisers fail to mutually select a third appraiser, <br />then the third appraiser shall be determined in•accorance with'the rules of the American Arbitration <br />Association. The City and lessee shall pay the,cosf . <br />.cost of,its own selected, appraiser and equally share the <br />cost of the third appraiser: <br />Appraisal Assumptions:, City leases shall include a definition of the fair market value to be used to set <br />rent and identify the premise for that value. In establishing the fair market value of leased property, <br />any appraisal shall consider the property s'a.fee simple absolute estate and as vacant and available <br />for lease or•sale-forthe authorized purposes of the lease at the commencement of the rental period <br />under review. Rates established for purposes'of.periodic percentage rental adjustments shall not <br />consider any abatement as may be appropriate in a "new' development of vacant land. It shall also be <br />assumed that all"re�quired regulatory approvals to permit the use authorized in the lease have been <br />obtained. \ <br />Lease Term: i <br />• Short -Term Lease: %,The City Manager shall have the authority, without advertising, notice, or <br />competitive bidding, and'upon such terms as he or she may deem proper, to lease any City <br />property for a term of up to three (3) years (short-term lease). The City Council will be notified <br />of a short-term lease not later than fifteen (15) days following its execution. A short-term lease <br />may not be renewed without approval of the City Council. The City Manager may also execute <br />rental agreements covering month-to-month tenant occupancy of City -owned residential <br />housing. <br />• Long -Term Lease:_A lease in excess of three (3) years requires a resolution passed by a majority <br />vote of all members of the City Council. The length of lease term shall be based on the level of <br />capital improvements to be made by the lessee and the economic life expectancy of the <br />development. These factors can be determined utilizing cost estimating and economic life <br />A' <br />8 <br />60A-12 <br />