KRS 56.806: Terms of lease -- Calculation of rent -- Option to purchase -- Lease-

purchase agreement -- Right to cancel lease.

(1) Except when another lease term is approved by the secretary of the Finance and

Administration Cabinet, the terms of all leases entered into pursuant to KRS 56.803

or 56.805 may provide for an initial lease term beginning on a date stated and

ending on June 30 in each year in which the General Assembly has convened in an

even-numbered-year regular session and appropriated funds f or the operation of the

state government during the next ensuing biennium. The leases may grant the state

successive options for the automatic renewal of the lease upon the same terms and

conditions for additional renewal periods of twenty -four (24) months each, not to

exceed three (3) automatic renewal periods. Any lease containing provision for the

automatic renewal of the lease after the expiration of the initial lease term shall also

provide that the state may, upon written notice given to the lessor on or before April

15 of the year in which the initial or any automatic renewal term expires, elect not

to exercise its option for the automatic renewal of the lease term. Subject to the

agreement of the lessor, a lease in which the final automatic renewal p eriod has

expired, or will expire as of the end of the then current term, may be renewed upon

the same terms and conditions, provisions of KRS 56.803 to the contrary

notwithstanding.

(2) The Department for Facilities Management shall comply with the provis ions of this

subsection when calculating rentable area for the purposes of a lease.

(a) If the Commonwealth is the only tenant on a single floor of a multistory

building, the rentable area shall be the entire area described by measuring to

the inside finis hed surface of the dominant portion of the permanent outer

building walls, excluding any major vertical penetrations of the floor which

shall include but not be limited to stairways, elevator shafts, pipe chases,

vertical air ducts, and the enclosing wall of all such excluded areas.

Restrooms, corridors, and utility rooms which exclusively serve the floor

occupied by the Commonwealth shall be included as part of the rentable area.

(b) If the Commonwealth is the only tenant in a one (1) story or multistory

building, rentable area shall be calculated pursuant to paragraph (a) of this

subsection except that those areas excluded pursuant to paragraph (a) of this

subsection shall be included as part of the rentable area.

(c) If the Commonwealth shares a floor wit h one (1) or more other tenants, the

rentable area shall be calculated by measuring from the inside finished surface

of the dominant portion of the permanent outer building walls to the office

side of every corridor wall or other wall separating the Common wealth's

leased space from other adjacent rentable areas which shall include, but not be

limited to, space under the control of another tenant, public corridors,

restrooms, all common service and utility areas, stairways, elevator shafts,

vertical pipe chases, and air ducts.

(d) The Commonwealth's rentable area determined pursuant to paragraphs (a),

(b), and (c) of this subsection shall include columns and projections necessary

to the building.

(3) The Finance and Administration Cabinet may include in a lea se an option to

purchase the leased property or a lease-purchase of the leased property.

(4) If the Finance and Administration Cabinet exercises an option to purchase leased

property, the option price shall not exceed the fair market value of the leased

property as of the time the lessor and the Commonwealth enter into the option. Two

(2) competent and qualified real property appraisers shall each determine the fair

market value. Each real property appraiser shall be selected by the Finance and

Administration Cabinet and shall employ an accepted appraisal technique.

(5) (a) Except as provided in paragraph (b) of this subsection, if the Finance and

Administration Cabinet includes in a lease the lease -purchase of the leased

property, two (2) competent and qual ified real property appraisers shall each

determine the fair market value of the leased property as of the time the lessor

and the Commonwealth enter into the lease. Each appraiser shall be selected

by the Finance and Administration Cabinet and shall emplo y an accepted

appraisal technique. The lease shall provide for an initial lease term ending

June 30 of the second year of the then current fiscal biennium of the

Commonwealth, with the option of the Commonwealth, as lessee, to extend

the term of the lease for a term of two (2) years from the expiration of each

extended term of the lease, until the original term of the lease has been

extended for a total number of years agreed upon by the parties. The agreed

rental paid for the original term and for each of the full number of years for

which the term of the lease may be extended shall amortize the fair market

value of the leased property as of the time the lessor and the Commonwealth

entered into the lease. The lease shall provide that the Commonwealth may, a t

the expiration of the original or any extended term, purchase the leased

property at a stated price, which shall be the balance of the fair market value

of the leased property as of the time the lease was entered into which has not

been amortized by the payments of rent previously made by the

Commonwealth.

(b) If the Finance and Administration Cabinet includes lease -purchase of the

leased property in a lease with the federal government, the terms of the lease -

purchase shall be determined through negotiations between the

Commonwealth and the federal government.

(6) Except when a lease incorporates a lease-purchase pursuant to subsection (5) of this

section, the Commonwealth shall reserve the right to cancel a lease upon written

notice within thirty (30) days.