Chapter 11/12 Flashcards
A __________ is both an instrument of conveyance and a contract between principal parties to uphold certain covenants and obligations.
Lease
A leasehold is also called a “____________________”
Less-than-freehold estate
What are the two forms that can be used for temporary leasing arrangements during a real estate sale transaction called?
Seller’s Temporary Lease Agreement and a Buyer’s Temporary Lease Agreement
What is the maximum number of days a Seller’s Temporary Lease Agreement and a Buyer’s Temporary lease be used?
90 days before or 90 days after actual closing date
A lease for a period exceeding ___________ must be in writing and signed by both parties to be enforceable because of the Statute of Frauds.
One year
When tenants are entering into a lease agreement for more than one year and are contemplating an option-to-buy, an “_________________________” form must be given at the onset of negotiations.
Information about Brokerage Services
True or false: The Texas Apartment Association does recommend to those who own multiple-dwelling rental properties that common law states the necessity to disclose to all applicants that a sex-offender lives in the area.
True
Landlords must understand the fair housing laws, along with what they can say and do when selecting tenants. This includes:
1) How the landlord advertises a rental
2) The questions the landlord asks on a rental application or when interviewing potential tenants
3) The screening fee the landlord charges tenants
4) How the landlord deals with tenants who rent from him or her
The ____________________________ outlines design and construction requirements for covered multi-family dwellings for first occupancy after March 13, 1991.
Fair Housing Amendments Act of 1988
The _______________________, commonly referred to as “ADA”, deals with public accommodations and services operated by private entities.
Americans with Disabilities Act of 1990
The term “_______________________” means a building with an elevator and four or more dwelling units. It also means ground floor dwelling units in a building that has four or more dwelling units.
Covered multi-family dwellings
The ___________________________ applies to the public use areas, the common use areas, and the individual apartments at a housing facility, regardless of whether it is privately or publicly owned. This includes housing subsidized by the government or rented through Section 8 voucher assistance.
Fair Housing Amendments Act
What makes a lease a binding contract?
When each party accept the terms of the agreement and communicate their agreement to the other party. However, it’s always a good idea to have this in writing.
The term “_________________” refers to a lessee’s ownership of a temporary right to land or property.
Leasehold estate
The landlord cannot enter the property except under the conditions outlined in the lease agreement, and all other people are not allowed except through tenant invitation. This right to possession by the tenant is sometimes called a __________________.
Leasehold interest
The four basic types of leasehold estates are:
1) Estate for Years
2) Estate from Period to Period (Periodic estate)
3) Estate at Will
4) Estate at Sufferance
An ________________ is a lease that continues for a definite fixed period of time.
Estate for years
Estate for years lease agreements are typically used by _______________________.
Investors and lenders
There are some specific attributes unique with estate for years:
1) It has a definite beginning and ending date.
2) It is not necessary to give notice to the landlord to terminate.
3) There is NO automatic renewal. When this type of lease is over, it’s over.
4) This type of lease is commonly used with commercial leases and some apartment leases.
An _________________________ is more commonly referred to as a periodic tenancy, periodic lease, or month-to-month lease.
estate from period to period
The basic attributes of estate from period to period are:
1) Proper notice is required to terminate - 30 days, 60 days or whatever is agreed to in the lease.
2) There is no definite ending date. This type of lease renews itself for whatever period of time that was called for in the original lease or whatever is agreed upon in the actual lease.
An _____________ has no time limit. The possession is given with permission, but there is no agreement about the rent. The tenant is essentially staying for an indefinite amount of time.
Estate at will or tenancy at will
_________________ is created when a tenant takes legal possession of the property but then remains on the property without the owner’s consent after the lease terminates.
Estate at sufferance
A tenant who doesn’t leave when the lease expires is called a ________________.
Holdover tenant
What does the term “leaseholder estate” refer to?
It refers to a lessee or tenant’s ownership of a temporary right to land or property.
In both the Seller and Buyer Temporary Lease agreements, the __________ is responsible for all repairs and maintenance to the property.
Tenant
In the temporary lease agreements, the Default section says that if the tenant does not follow the terms of the contract, the tenant has ________ to remedy the situation or will be in default.
24 hrs
Texas Property Code requirements regarding security devices do not apply for leases under ____________. However, leases over ___________ require landlords to change the locks from the previous tenant.
90 days
State contract laws determine the requirements for a valid lease and the information required on all lease forms. These laws generally require the following conditions:
1) Parties
2) Property description
3) Exclusive possession
4) Legal and permitted use
5) Consideration
6) Offer and acceptance
7) Signatures
8) Oral versus written form (over one year has to be written)
The following eight covenants are common in most leases:
1) Capacity to contract
2) Demising clause
3) Description of the premises
4) Clear statement of term
5) Specification of rent and how it is to be paid
6) In writing
7) Signatures
8) Delivery
The _________________ covenant means the principal parties must be legally able to enter into the agreement; i.e., meet certain age, sanity, and other requirements. If not, the lease can be voided.
Capacity to Contract
The ________________ talks about how the landlord is leasing the property and the tenant is taking possession of the property.
Demising Clause
The __________________ refers to how long the lease will last, usually written in annual terms.
Clear Statement of Term
True or false: The landlord must sign the lease to convey the leasehold interest. A tenant is not required to sign the lease, but it would be best to do so in order to enforce the terms of the lease.
True
True or false: The landlord must deliver the lease to the tenant and each party must have duplicate originals.
True
An _____________ is a lease provision that gives the tenant the right to extend the lease for an additional period of time and sets forth the terms for the renewed lease.
Option to renew
What does it mean if there are no limitations on the use of the property written into the lease?
If no limitations are written into the lease, the tenant may use the property for any lawful purpose, providing the tenant does not violate any deed restrictions.
A ____________, or full service lease, requires the landlord to pay the property’s operating expenses, including utilities, repairs, and maintenance, while the tenant pays only rent
Gross lease
In a ______________, the tenant pays not only the rent for occupancy, but also pays maintenance and operating expenses such as taxes, insurance, utilities and repairs.
Net lease
In a ____________, the tenant pays maintenance and taxes only.
Net lease
In a __________________, the tenant pays some, but not all, of the maintenance, insurance and taxes.
Net-net lease
In a _______________________, the tenant agrees to pay all taxes, insurance, maintenance and repairs.
Net-net-net lease or triple net lease
Commercial or industrial leases and long-term leases are typically ___________.
Net leases
In a _______________, the rent payments start at a fixed amount but increase as the lease term matures. The increase could be based on the increased value of the property as determined by periodic appraisals.
Graduated lease
In a _______________, the owner grants the tenant a leasehold interest in the land only, in exchange for rent.
Ground or land lease
Ground leases are primarily used in three circumstances:
1) An owner wishes to lease raw land to an agricultural or mining interest
2) Unimproved property is to be developed and either the owner wants to retain ownership of the land, or the developer or future users of the property do not want to own the land
3) The owner of an improved property wishes to sell an interest in the improvements while retaining ownership of the underlying land
An ____________ provides for the adjustment of rent according to changes in a price index. The most commonly used indexes are the consumer price index and the wholesale price index.
Index lease
A _________________ is a lease whose rental is based on a percentage of the monthly or annual gross sales made on the site. There is usually a minimum rent required in addition to the percentage of the gross.
Percentage lease
A percentage lease may also include a ________________, which indicates that if the tenant does not obtain the desired gross sales, the owner has the right to terminate the lease.
Recapture clause
A _______________ may be a net lease or a gross lease. Usually it is a form of gross lease in which the landlord pays all property expenses except the tenant’s utilities and water.
Residential lease
A _________________ may be a net, gross, or percentage lease if the tenant is a retail business.
Commercial lease
Some important features of commercial leases are:
1) long term, ranging up to 25 years
2) require tenant improvements to meet particular usage needs
3) virtually all lease clauses are negotiable due to the financial magnitude of the transaction
4) default can have serious financial consequences; therefore, lease clauses must express all points of agreement and be very precise
A _________________ conveys a leasehold interest to an owner of a cooperative.
Proprietary lease
How are residential leases different from commercial leases?
1) The terms are normally shorter than commercial leases
2) The clauses are fairly standard from one property to the next
3) The clauses are generally not negotiable
If a tenant is in default, the landlord may file a suit for eviction. If successful in this suit, the landlord can repossess the property and evict the tenant. This is known as ________________.
Actual eviction
If a tenant is in default, the landlord may file a ___________________, also called a suit for eviction.
Suit for possession
In Texas, the process for a suit for possession is in the ___________________________.
Texas Property Code, Section 24
True or false: If rent is delinquent, Texas state law provides that a landlord may change the locks on the rental property to attempt to collect the rent. This can only occur once a payment period; locks cannot be changed when the tenant is in the dwelling.
True
True or false: The landlord must provide a notice on the door stating how much rent is due and a 24 hour phone number in which the landlord can be reached.
True
True or false: If a tenant abandons a leased property and demonstrates no intention of fulfilling the obligations of the lease, the landlord may re-take possession and pursue legal recourses for default.
True
If a tenant abandons a leased property and demonstrates no intention of fulfilling the obligations of the lease,
True
True or false: the tenant remains liable for payment of rent.
True
If a tenant abandons a leased property and demonstrates no intention of fulfilling the obligations of the lease, the landlord has the option of terminating the lease, which releases the tenant from responsibility for rent. However, the landlord may be able to sue for damages and at the same time re-let the property.
True
The most common form of landlord default is ______________________________.
Failure to provide services and maintain the property condition.
In an instance where the landlord’s negligence or disruptive action has rendered the property unoccupiable, a tenant may vacate the premises and declare that the lease is cancelled by default. This action, called ________________, can nullify the tenant’s lease obligations if the claim succeeds in court.
Constructive eviction
In order to obtain a constructive eviction judgment, the tenant must _________________________.
Vacate the premises
In Texas, when a landlord terminates a lease and plans to evict a tenant, it must be handled through a _______________________.
Justice of the Peace Court
In the event of a lease default, the damaged party may pursue court action, including suing for:
1) damages
2) cancellation of the lease
3) specific performance
A successful suit for _______________ compels the defaulting party to perform the contract obligation that was breached.
Specific performance
True or false: Any tenant who is 62 years old or older can terminate a lease if he or she has been accepted into an adult care facility, a residential health care facility or a housing unit that receives subsidies for housing senior citizens. He or she could also cancel the lease if moving to a relatives’ home for health care reasons. In any of these cases, the tenant should give the landlord 30 days notice and a copy of the document that shows admission to the new facility.
True
What happens to the lease if the tenant dies?
The lease does not terminate. It becomes part of the tenant’s estate, which is bound by the terms of the lease.
The Fair Housing Amendment Act of 1988 outlines design and construction requirements for covered multi-family dwellings for first occupancy after what date?
March 13, 1991
Jim signed a six months lease. What type of lease did Jim sign?
Estate for years
What is the most common type of periodic tenancy?
Month-to-month
What law does Texas have regarding the disclosure of sex offenders living near the area of a property?
No law regarding sex offenders
An ______________ is an enforceable contract in which a potential seller, the optionor, grants a potential buyer, the optionee, the right to purchase a property before a stated time for a stated price and terms. In exchange for the option right, the optionee pays the optionor valuable consideration.
Option to buy
An option to buy is a _______________ agreement since they buyer is under no obligation to purchase the property however, the seller must perform under the terms of the contract if the buyer exercises the option
Unilateral
Once the buyer exercises the option of a unilateral option to buy contract, a ______________ sale contract is created.
Bilateral
A ___________________ is different from an option. It is the right of a person to have the first opportunity to purchase or lease a property.
Right of first refusal
True or false: In a right of first refusal, the holder of the right has no right to purchase until the seller actually offers the property for sale or as an offer on the property from a third party.
True
A good option agreement will include:
1) the option price
2) the option term
3) land description
4) incorporate all of the wording of the purchase contract that will become effective if the option is exercised.
A common provision of an option contract is “how to deliver notice of option execution”. What does this clause clarify?
How to execute the option, exactly when the process must be completed, and any additional terms required, such as an earnest money deposit.
A common provision of an option contract is “forfeiture terms”. What does this clause clarify?
That the optionor is entitled to the consideration if the option term expires.
A common provision of an option contract is “property and title condition warranties”. What does this section clarify?
The optionor warrants that the property will be maintained in a certain condition and that title will be marketable and insurable.
A common provision of an option contract is “how option consideration will be credited”. What does this clause clarify?
How the optionor will apply the option consideration toward the purchase price if the option is executed.
How is the option approach valuable to developers?
1) delays the interest costs of financing
2) allows time for important analysis and required paperwork to be completed before ownership changes hands.
3) gives them security over land while deciding if the land will work for a particular project.
A type of option agreement is a _____________________ which allows progressively smaller portions of the option price to be counted toward the purchase, as the option period increases. Options sometimes allow for a steadily increasing land price as the option period is extended.
Declining credit options
A type of option agreement is a _____________________ which allows the optionee to add specific new parcels to the option contract as parcels already included in the contract are purchased.
Rolling options
A legal aspect of options is ___________________. The optionee enjoys an equitable interest in the property because the option creates the right to obtain legal title. However, the option does not in itself convey an interest in real property, only a right to do something governed by contract law.
Equitable interest
True or false: An option should be recorded, because the equitable interest it creates can affect the marketability of title.
True
True or false: An option-to-buy is assignable unless the contract expressly prohibits assignment.
True
An __________________ is a bilateral agreement between a seller, the vendor, and a buyer, the vendee, in which the vendor defers receipt of some or the entire purchase price of a property over a specified period of time.
Installment sales contract
A _______________ offers a means for a marginally qualified buyer to acquire property. In essence, the seller acts as a lender, allowing the buyer to take possession and pay off the purchase price over time.
Contract for deed (CFD)
Benefits to a the buyer in a contract for deed include:
1) home ownership
2) easy qualification
3) tax benefit of ownership
4) right to improve property
5) chance to improve credit
6) time to complete the purchase
7) right to pre-pay
Benefits to a seller in a contract for deed include:
1) large pool of buyers
2) quick sale
3) buyer is responsible for repairs
4) buyer typically pays taxes and insurance
5) seller receives tax benefits
6) higher sales price
7) higher payments
8) easy cancellation
True or false: During the contract period, the seller is allowed to mortgage the property, sell or assign whatever interests he or she owns in the property to another party, and incur judgment liens against the property.
True
True or false: During the contract period, the buyer may occupy, use, enjoy, and profit from the property, subject to the provisions of the written agreement. The vendee must make periodic payments of principal and interest and maintain the property. In addition, a vendee may have to pay property taxes and hazard insurance.
True
In a contract for deed, when does the buyer receive full title?
The buyer receives title when he or she pays the final payment specified in the agreement.
_________________________ can be described as a “wraparound mortgage” in that the seller may be carrying equity in the property over and above an underlying 1st mortgage still in their name.
An AITD and a contract for deed
In a contract for deed, the ___________ shall provide the purchaser with an annual statement in January of each year for the term of the executory contract.
Seller
A _____________________, also called a rent-to-own purchase or lease-to-own purchase, is a lease agreement that allows, and sometimes obligates, the renter to purchase the property within a specified period, usually between 1-3 years, at an agreed upon price.
Lease purchase agreement, rent-to-own purchase, or lease-to-own purchase
In a ___________________, a portion of each monthly rent payment is set aside and credited toward the tenant/buyer’s down payment.
Lease purchase agreement
Benefits of a lease purchase agreement to the tenant-buyer include:
1) live in a house before buying it
2) the tenant can walk away and choose not to buy the home only losing the consideration fee and rental fee set aside for the purchase.
3) build income and credit
In a lease purchase agreement, the benefits to the seller include:
1) ability to pay existing mortgage
2) lock in rent and purchase price
3) security through option payment and rent premium (even if tenant does not end up buying the property, the landlord keeps the consideration fee and rent premium)
4) care of property (renters are more likely to take care of property if they truly want to own the property)
Disadvantages of lease purchase agreements to the tenant-buyer include:
1) late payment consequences are costly
2) trust seller is paying the mortgage
Disadvantages of lease purchase agreements to the landlord-seller include:
1) choosing an honest tenant
2) cannot accept other offers
3) unqualified tenant-buyer when the lease expires
What is a rent credit?
It’s an agreed upon percentage or fixed amount of the monthly rental payment that will go towards closing costs and a down payment when the house is purchased. If the tenant does not purchase the house, the landlord usually keeps the rent credit.
What is a lease purchase agreement?
It is a lease agreement that allows, and sometimes obligates, the renter to purchase the property within a specified period, usually between 1-3 years, at an agreed upon price.
An ____________ is an enforceable contract in which a potential seller, the optionor, grants a potential buyer, the optionee, the right to purchase a property before a stated time for a stated price and terms.
Option to buy
A ______________, also called an installment sales contract, is a bilateral agreement between a seller, the vendor, and a buyer, the vendee, in which the vendor defers receipt of some or the entire purchase price of a property over a specified period of time.
Contract for deed
A ___________________ is a non-refundable deposit for the right to purchase the property at a later date.
Consideration fee
In a contract for deed the seller acts as a __________________.
Lender
A contract for deed is also called a _______________.
Land contract
A lease with purchase agreement is a __________________.
Landlord/tenant relationship
An unused option to buy _________________.
Terminates at the expiration date
