The lease of the project from the Commission back to the institution is in the nature of a net lease placing all responsibility for operation, maintenance, repair and insurance, and the payment of all expenses and charges connected therewith, on the institution. The lease rental must, of course, be adequate to pay principal and interest on the bonds. The lease may also temporarily require additional amounts to build up a reserve for the payment of principal and interest and, possibly, for maintenance and repair of the project, if such reserves are required by the trust agreement and are not funded from the bond proceeds.
The lease terms would be at least for the life of the bond issue. Provision will, however, be made for the institution to acquire full title and ownership of the project and its site when the bonds have been retired or earlier provision made for their retirement. This will likely be done by way of an option to the institution that may be exercised upon bond retirement by notice of payment of an amount adequate to retire the bonds. Under the lease, provision will be made to permit inspection of the project by a representative of the Commission, and for annual reports by the institution to the Commission, to assure compliance with the lease terms.
