CH. 5 & 7- Deeds and Leases

Question 0

Lease

Answer 0

Written document that grants the right to use real estate for a specified purpose.

Question 1

Deeds

Answer 1

Written document that transfers title to real estate.

Question 2

Necessary Elements for a Deed

Answer 2

• Designation of the parties [Grantor/Grantee]
• Consideration given by grantee [$10]
• Legal description
• Specific interest conveyed [Fee Simple, etc.]
• Signature of grantor and witnesses

Question 3

Types of Deeds

Answer 3

• General Warranty Deed [guarantee]
• Special Warranty Deed [only during GO’s term]
• Quitclaim Deed [releases implied claim; no guarantee]

Question 4

Requirements of a Valid Lease

Answer 4

• Names of the lessor and lessee
• Conveyance of the premises
• Description of the premises
• Term and duration of the lease
• Amount of rent and manner and payment
• Duties and obligations of parties
• Signature of the parties

Question 5

Classifications of Leases

Answer 5

Duration of the term:

• Tenancy for stated period- conveys the property to the tenant for a stated period of time.
• Tenancy from period-to-period- indefinite duration [notice given].
• Tenancy at Will- may be terminated by either party at any time.
• Tenancy at Sufferance- provides the least protection.

Question 6

Ground Lease

Answer 6

Lease involving unimproved land

• Usually Long-Term, greater than 10 years
• Lease often corresponds with improvement life
• Tax Advantages [Lease Payments Deductible]
• Overall Reduction in Needed Capital

Question 7

Methods of Rental Income Payment

Answer 7

• Fixed-Rent Lease
• Graduated-Rent Lease [Step Lease]
• Reappraisal Lease
• Percentage Lease [Overage]
• Index Lease [CPI index, Porter’s wage index]

Question 8

Fixed-Rent Lease

Answer 8

A lease contract that stipulates a fixed rent amount for the period of the lease.

Question 9

Graduated-Rent Lease (Step Lease)

Answer 9

A lease contract that stipulates scheduled rent increases over the period of the lease. Rent is increased by percentage at graduated intervals.

Question 10

Reappraisal Lease

Answer 10

A lease that stipulates that the rent will be adjusted periodically as the value of the building changes, as determined by an appraisal.

Question 11

Percentage Lease

Answer 11

A lease for a property used for commercial purposes under which the rental payments are based on some percentage of sales made on the premises.

Question 12

Index Lease [CPI index, Porter’s wage index]

Answer 12

A lease in which rent payments are adjusted based on changes in the cost of living.

Question 13

Gross Lease

Answer 13

A lease contract stipulating that the landlord will pay all operating expenses, taxes, and insurance for the property during the period of the lease.

Question 14

Expense Stop [Base Stop]

Answer 14

A limit on the amount of operating costs to be borne by the landlord in a commercial lease agreement.

Question 15

Net Lease

Answer 15

A lease that stipulates that the lessee will pay operating expenses for a property during the lease period. [Shifts inflation risk]- usually variable expenses.

Question 16

Modified Net Lease [Net-Net Lease]

Answer 16

A lease that stipulates that the lessee will pay operating expenses and insurance for the property during the lease period. Tenant pays some mix of fixed and variable expenses.

Question 17

Triple Net Lease [Net-Net-Net Lease]

Answer 17

A lease that stipulates that the lessee will pay operating expenses, insurance, and property taxes for the property during the lease period. Tenant pays all expenses to the property [AKA Absolute Net].

Question 18

The Rights and Obligations of Landlord

Answer 18

• Convenance of Quiet Enjoyment [No other owners or tenants have claim]
• Implied Warranty of Habitability
• Maintenance of Common Areas
• Protection against Criminal Acts
• Renewal Clause
  - Negative Renewal Clause [automatic- w/out notice]
  - Positive Renewal Clause [with notice]

Question 19

Covenant of Quiet Enjoyment

Answer 19

An assurance made by the grantor that no other party will disturb the grantee claiming to own the property or to have a lien on it; a promise from the lessor that the tenant has the right of exclusive possession of the property during the term of the lease.

Question 20

[Implied] Warranty of Habitability

Answer 20

An assurance made by a lessor that the property is fit for its intended use.

Question 21

Renewal Option [Clause]

Answer 21

A clause in the lease agreement that defines the parties’ agreement regarding renewal of the lease upon termination.

Question 22

Negative Renewal Clause

Answer 22

A clause in a lease contract that automatically renews the lease in the event neither party desires to terminate the agreement. [Automatic- without notice]

Question 23

Positive Renewal Clause

Answer 23

A clause on a lease that states that if no notice of renewal is given properly, normally one to two months prior to the expiration of the lease, the lease terminates at the end of the lease period. [With notice]

Question 24

General Warranty Deed

Answer 24

The deed that offers the most protection to the grantee, complete with all relevant covenants and warranties. [Guarantee]

Question 25

Special Warranty Deed

Answer 25

Similar to a general warranty deed, except the covenants and warranties apply only to events that occurred during the grantor’s period of ownership. [Only during GO’s term]

Question 26

Quitclaim Deed

Answer 26

A deed used to transfer any interest a grantor may or may not have in a property, without implying that the grantor has a valid interest to convey. [Releases implied claim; No guarantees]