Chapter 11/12

Question 1

A __________ is both an instrument of conveyance and a contract between principal parties to uphold certain covenants and obligations.

Answer 1

Lease

Question 2

A leasehold is also called a “____________________”

Answer 2

Less-than-freehold estate

Question 3

What are the two forms that can be used for temporary leasing arrangements during a real estate sale transaction called?

Answer 3

Seller’s Temporary Lease Agreement and a Buyer’s Temporary Lease Agreement

Question 4

What is the maximum number of days a Seller’s Temporary Lease Agreement and a Buyer’s Temporary lease be used?

Answer 4

90 days before or 90 days after actual closing date

Question 5

A lease for a period exceeding ___________ must be in writing and signed by both parties to be enforceable because of the Statute of Frauds.

Answer 5

One year

Question 6

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.

Answer 6

Information about Brokerage Services

Question 7

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.

Answer 7

True

Question 8

Landlords must understand the fair housing laws, along with what they can say and do when selecting tenants. This includes:

Answer 8

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

Question 9

The ____________________________ outlines design and construction requirements for covered multi-family dwellings for first occupancy after March 13, 1991.

Answer 9

Fair Housing Amendments Act of 1988

Question 10

The _______________________, commonly referred to as “ADA”, deals with public accommodations and services operated by private entities.

Answer 10

Americans with Disabilities Act of 1990

Question 11

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.

Answer 11

Covered multi-family dwellings

Question 12

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.

Answer 12

Fair Housing Amendments Act

Question 13

What makes a lease a binding contract?

Answer 13

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.

Question 14

The term “_________________” refers to a lessee’s ownership of a temporary right to land or property.

Answer 14

Leasehold estate

Question 15

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 __________________.

Answer 15

Leasehold interest

Question 16

The four basic types of leasehold estates are:

Answer 16

1) Estate for Years
2) Estate from Period to Period (Periodic estate)
3) Estate at Will
4) Estate at Sufferance

Question 17

An ________________ is a lease that continues for a definite fixed period of time.

Answer 17

Estate for years

Question 18

Estate for years lease agreements are typically used by _______________________.

Answer 18

Investors and lenders

Question 19

There are some specific attributes unique with estate for years:

Answer 19

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.

Question 20

An _________________________ is more commonly referred to as a periodic tenancy, periodic lease, or month-to-month lease.

Answer 20

estate from period to period

Question 21

The basic attributes of estate from period to period are:

Answer 21

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.

Question 22

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.

Answer 22

Estate at will or tenancy at will

Question 23

_________________ 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.

Answer 23

Estate at sufferance

Question 24

A tenant who doesn’t leave when the lease expires is called a ________________.

Answer 24

Holdover tenant

Question 25

What does the term “leaseholder estate” refer to?

Answer 25

It refers to a lessee or tenant’s ownership of a temporary right to land or property.

Question 26

In both the Seller and Buyer Temporary Lease agreements, the __________ is responsible for all repairs and maintenance to the property.

Answer 26

Tenant

Question 27

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.

Answer 27

24 hrs

Question 28

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.

Answer 28

90 days

Question 29

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:

Answer 29

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)

Question 30

The following eight covenants are common in most leases:

Answer 30

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

Question 31

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.

Answer 31

Capacity to Contract

Question 32

The ________________ talks about how the landlord is leasing the property and the tenant is taking possession of the property.

Answer 32

Demising Clause

Question 33

The __________________ refers to how long the lease will last, usually written in annual terms.

Answer 33

Clear Statement of Term

Question 34

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.

Answer 34

True

Question 35

True or false: The landlord must deliver the lease to the tenant and each party must have duplicate originals.

Answer 35

True

Question 36

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.

Answer 36

Option to renew

Question 37

What does it mean if there are no limitations on the use of the property written into the lease?

Answer 37

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.

Question 38

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

Answer 38

Gross lease

Question 39

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.

Answer 39

Net lease

Question 40

In a ____________, the tenant pays maintenance and taxes only.

Answer 40

Net lease

Question 41

In a __________________, the tenant pays some, but not all, of the maintenance, insurance and taxes.

Answer 41

Net-net lease

Question 42

In a _______________________, the tenant agrees to pay all taxes, insurance, maintenance and repairs.

Answer 42

Net-net-net lease or triple net lease

Question 43

Commercial or industrial leases and long-term leases are typically ___________.

Answer 43

Net leases

Question 44

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.

Answer 44

Graduated lease

Question 45

In a _______________, the owner grants the tenant a leasehold interest in the land only, in exchange for rent.

Answer 45

Ground or land lease

Question 46

Ground leases are primarily used in three circumstances:

Answer 46

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

Question 47

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.

Answer 47

Index lease

Question 48

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.

Answer 48

Percentage lease

Question 49

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.

Answer 49

Recapture clause

Question 50

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.

Answer 50

Residential lease

Question 51

A _________________ may be a net, gross, or percentage lease if the tenant is a retail business.

Answer 51

Commercial lease

Question 52

Some important features of commercial leases are:

Answer 52

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

Question 53

A _________________ conveys a leasehold interest to an owner of a cooperative.

Answer 53

Proprietary lease

Question 54

How are residential leases different from commercial leases?

Answer 54

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

Question 55

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 ________________.

Answer 55

Actual eviction

Question 56

If a tenant is in default, the landlord may file a ___________________, also called a suit for eviction.

Answer 56

Suit for possession

Question 57

In Texas, the process for a suit for possession is in the ___________________________.

Answer 57

Texas Property Code, Section 24

Question 58

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.

Answer 58

True

Question 59

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.

Answer 59

True

Question 60

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.

Answer 60

True

Question 61

If a tenant abandons a leased property and demonstrates no intention of fulfilling the obligations of the lease,

Answer 61

True

Question 62

True or false: the tenant remains liable for payment of rent.

Answer 62

True

Question 63

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.

Answer 63

True

Question 64

The most common form of landlord default is ______________________________.

Answer 64

Failure to provide services and maintain the property condition.

Question 65

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.

Answer 65

Constructive eviction

Question 66

In order to obtain a constructive eviction judgment, the tenant must _________________________.

Answer 66

Vacate the premises

Question 67

In Texas, when a landlord terminates a lease and plans to evict a tenant, it must be handled through a _______________________.

Answer 67

Justice of the Peace Court

Question 68

In the event of a lease default, the damaged party may pursue court action, including suing for:

Answer 68

1) damages
2) cancellation of the lease
3) specific performance

Question 69

A successful suit for _______________ compels the defaulting party to perform the contract obligation that was breached.

Answer 69

Specific performance

Question 70

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.

Answer 70

True

Question 71

What happens to the lease if the tenant dies?

Answer 71

The lease does not terminate. It becomes part of the tenant’s estate, which is bound by the terms of the lease.

Question 72

The Fair Housing Amendment Act of 1988 outlines design and construction requirements for covered multi-family dwellings for first occupancy after what date?

Answer 72

March 13, 1991

Question 73

Jim signed a six months lease. What type of lease did Jim sign?

Answer 73

Estate for years

Question 74

What is the most common type of periodic tenancy?

Answer 74

Month-to-month

Question 75

What law does Texas have regarding the disclosure of sex offenders living near the area of a property?

Answer 75

No law regarding sex offenders

Question 76

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.

Answer 76

Option to buy

Question 77

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

Answer 77

Unilateral

Question 78

Once the buyer exercises the option of a unilateral option to buy contract, a ______________ sale contract is created.

Answer 78

Bilateral

Question 79

A ___________________ is different from an option. It is the right of a person to have the first opportunity to purchase or lease a property.

Answer 79

Right of first refusal

Question 80

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.

Answer 80

True

Question 81

A good option agreement will include:

Answer 81

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.

Question 82

A common provision of an option contract is “how to deliver notice of option execution”. What does this clause clarify?

Answer 82

How to execute the option, exactly when the process must be completed, and any additional terms required, such as an earnest money deposit.

Question 83

A common provision of an option contract is “forfeiture terms”. What does this clause clarify?

Answer 83

That the optionor is entitled to the consideration if the option term expires.

Question 84

A common provision of an option contract is “property and title condition warranties”. What does this section clarify?

Answer 84

The optionor warrants that the property will be maintained in a certain condition and that title will be marketable and insurable.

Question 85

A common provision of an option contract is “how option consideration will be credited”. What does this clause clarify?

Answer 85

How the optionor will apply the option consideration toward the purchase price if the option is executed.

Question 86

How is the option approach valuable to developers?

Answer 86

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.

Question 87

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.

Answer 87

Declining credit options

Question 88

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.

Answer 88

Rolling options

Question 89

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.

Answer 89

Equitable interest

Question 90

True or false: An option should be recorded, because the equitable interest it creates can affect the marketability of title.

Answer 90

True

Question 91

True or false: An option-to-buy is assignable unless the contract expressly prohibits assignment.

Answer 91

True

Question 92

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.

Answer 92

Installment sales contract

Question 93

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.

Answer 93

Contract for deed (CFD)

Question 94

Benefits to a the buyer in a contract for deed include:

Answer 94

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

Question 95

Benefits to a seller in a contract for deed include:

Answer 95

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

Question 96

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.

Answer 96

True

Question 97

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.

Answer 97

True

Question 98

In a contract for deed, when does the buyer receive full title?

Answer 98

The buyer receives title when he or she pays the final payment specified in the agreement.

Question 99

_________________________ 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.

Answer 99

An AITD and a contract for deed

Question 100

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.

Answer 100

Seller

Question 101

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.

Answer 101

Lease purchase agreement, rent-to-own purchase, or lease-to-own purchase

Question 102

In a ___________________, a portion of each monthly rent payment is set aside and credited toward the tenant/buyer’s down payment.

Answer 102

Lease purchase agreement

Question 103

Benefits of a lease purchase agreement to the tenant-buyer include:

Answer 103

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

Question 104

In a lease purchase agreement, the benefits to the seller include:

Answer 104

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)

Question 105

Disadvantages of lease purchase agreements to the tenant-buyer include:

Answer 105

1) late payment consequences are costly

2) trust seller is paying the mortgage

Question 106

Disadvantages of lease purchase agreements to the landlord-seller include:

Answer 106

1) choosing an honest tenant
2) cannot accept other offers
3) unqualified tenant-buyer when the lease expires

Question 107

What is a rent credit?

Answer 107

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.

Question 108

What is a lease purchase agreement?

Answer 108

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.

Question 109

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.

Answer 109

Option to buy

Question 110

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.

Answer 110

Contract for deed

Question 111

A ___________________ is a non-refundable deposit for the right to purchase the property at a later date.

Answer 111

Consideration fee

Question 112

In a contract for deed the seller acts as a __________________.

Answer 112

Lender

Question 113

A contract for deed is also called a _______________.

Answer 113

Land contract

Question 114

A lease with purchase agreement is a __________________.

Answer 114

Landlord/tenant relationship

Question 115

An unused option to buy _________________.

Answer 115

Terminates at the expiration date