Chapter 7 - Lease & Leaseholds

Question 1

What is a lease?

What are the names of the parties?

Lessee has _____ estate.
Lessor has _____ estate.

Answer 1

Contract that grants one party the right to use another party’s property in return for consideration.

Person renting is lessee, Owner / landlord is lessor

Lessee = leasehold estate
- receive ‘quiet enjoyment’, peaceful use of property
Lessor = freehold estate
- right of reversion (rights revert back to tenant)

Question 2

Reversionary interest

Answer 2

When tenant leaves and rights revert back to owner

Question 3

4 types of leasehold estates

Answer 3

Estate for years
Periodic Tenancy
Tenancy at Will
Tenancy at Surfferance

Question 4

Estate for Years Lease

Answer 4

A lease with a beginning and an end.
Specific time is listed.
No notice to terminate is required

Question 5

Periodic Tenancy

Answer 5

A lease from one period to the next.
Automatically renews from period to period.
Ex. Month-to-month

Question 6

Tenancy at Will

Answer 6

A lease with nothing in writing
Informal, no fixed terms
Tenant has permission to be on property

Question 7

Tenancy at Sufferance

Answer 7

The tenant is there without permission (squatter)

Question 8

Another word for Estate

Answer 8

Tenancy

Question 9

Another word for Tenancy

Answer 9

Estate

Question 10

Gross Lease

Answer 10

Lessor pays taxes, insurance and repairs
Lessee pays utilities and renter’s insurance.
Used with both residential and some commercial.

Question 11

Net Lease

Answer 11

A commercial lease / property.
Lessee is responsible for operating costs like taxes, insurance and maintenance.
Rent paid is ‘net’ to the landlord
The landlord has other expenses.

Question 12

Percentage Lease

Answer 12

Tenant pays monthly rent + percentage of gross sales

Used with commercial RETAIL properties.

Question 13

Ground Lease

Also known as *

Answer 13

A LONG TERM lease (usually 50+ years) for ground only.

Farmer’s lease

Question 14

Lease Option

Answer 14

A lease where the tenant has the option to purchase (unilateral)

Question 15

Lease Purchase

Answer 15

Tenant leases property til closing.
Usually a part of each month’s rent is credited back to the tenant / buyer towards the purchase
(bilateral)

Question 16

Sale Leaseback

Answer 16

When owner sells property and then leases from buyer.

Question 17

Escalator Clause

Answer 17

INFLATION | Allows landlord to increase rents over time based on costs of living.

Question 18

Index Lease

Answer 18

INFLATION | Rents could go up or down based on agreed upon index (factor)

Question 19

Graduated Lease

Answer 19

INFLATION | Pre-determined increases in rent payments over time.

Question 20

3 types of things that help landlords with inflation

Answer 20

1) Escalator Clause
2) Index Lease
3) Graduated Lease

Question 21

Two ways to transfer rights in a lease to someone else

Answer 21

1) Assignment

2) Subleasing

Question 22

Assignment

Answer 22

Original tenant (assignor) and new tenant (assignee) are liable to the landlord. 
All other ts& Cs apply unless spelled out

Question 23

Subleasing

Other name for it *

Answer 23

The original tenant (lessee) is the only party liable to the landlord.
The new tenant is liable to the original tenant.
T’s & C’s remain.
* sandwich lease

Question 24

Termination of Lease by:

Answer 24

• Both parties agree to terminate (mutual consent)
• The lease expires
• Condemnation
• Breach of contract

Question 25

What are two breaches of contract when terminating a lease.

Answer 25

Constructive Eviction

Actual Eviction

Question 26

Constructive Eviction

Answer 26

When landlord breaches the contract.

Question 27

Actual Eviction

Answer 27

When lessee breaches contract.

Question 28

Whose property is the leasehold estate (or leasehold tenancy)?

Answer 28

the lessee or tenant

Question 29

Can the lessee improve or change the property

Answer 29

Only with WRITTEN permission from the landlord.
Residential tenants don’t normally do this.
Commercial tenants often do this.

Question 30

A lease is a contract - so the critical elements of a contract are also part of a lease. What are two of these elements?

Answer 30

1) Competent parties (sound mind and legal age)

2) Offer and acceptance