Chapter 7 - Lease & Leaseholds Flashcards
What is a lease?
What are the names of the parties?
Lessee has _____ estate.
Lessor has _____ estate.
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)
Reversionary interest
When tenant leaves and rights revert back to owner
4 types of leasehold estates
Estate for years
Periodic Tenancy
Tenancy at Will
Tenancy at Surfferance
Estate for Years Lease
A lease with a beginning and an end.
Specific time is listed.
No notice to terminate is required
Periodic Tenancy
A lease from one period to the next.
Automatically renews from period to period.
Ex. Month-to-month
Tenancy at Will
A lease with nothing in writing
Informal, no fixed terms
Tenant has permission to be on property
Tenancy at Sufferance
The tenant is there without permission (squatter)
Another word for Estate
Tenancy
Another word for Tenancy
Estate
Gross Lease
Lessor pays taxes, insurance and repairs
Lessee pays utilities and renter’s insurance.
Used with both residential and some commercial.
Net Lease
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.
Percentage Lease
Tenant pays monthly rent + percentage of gross sales
Used with commercial RETAIL properties.
Ground Lease
Also known as *
A LONG TERM lease (usually 50+ years) for ground only.
Farmer’s lease
Lease Option
A lease where the tenant has the option to purchase (unilateral)
Lease Purchase
Tenant leases property til closing.
Usually a part of each month’s rent is credited back to the tenant / buyer towards the purchase
(bilateral)
Sale Leaseback
When owner sells property and then leases from buyer.
Escalator Clause
INFLATION | Allows landlord to increase rents over time based on costs of living.
Index Lease
INFLATION | Rents could go up or down based on agreed upon index (factor)
Graduated Lease
INFLATION | Pre-determined increases in rent payments over time.
3 types of things that help landlords with inflation
1) Escalator Clause
2) Index Lease
3) Graduated Lease
Two ways to transfer rights in a lease to someone else
1) Assignment
2) Subleasing
Assignment
Original tenant (assignor) and new tenant (assignee) are liable to the landlord. All other ts& Cs apply unless spelled out
Subleasing
Other name for it *
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
Termination of Lease by:
- Both parties agree to terminate (mutual consent)
- The lease expires
- Condemnation
- Breach of contract
What are two breaches of contract when terminating a lease.
Constructive Eviction
Actual Eviction
Constructive Eviction
When landlord breaches the contract.
Actual Eviction
When lessee breaches contract.
Whose property is the leasehold estate (or leasehold tenancy)?
the lessee or tenant
Can the lessee improve or change the property
Only with WRITTEN permission from the landlord.
Residential tenants don’t normally do this.
Commercial tenants often do this.
A lease is a contract - so the critical elements of a contract are also part of a lease. What are two of these elements?
1) Competent parties (sound mind and legal age)
2) Offer and acceptance
