Chapter 8 - Deeds, Contracts, and Leases Flashcards
1
Q
“A written, legal instrument that conveys an estate or interest in real property when it is executed and delivered.” is the definition of?
A
deed
2
Q
The seller of a property is called the __________. (on Title document)
The buyer is called the _____________.
A
The seller of a property is called the grantor.
The buyer is called the grantee.
Title officially passes from one party to another when a deed is delivered by the grantor and accepted by the grantee.
3
Q
For Deed to be legally valid:
A
- The deed must be in writing
- The grantor and grantee must be clearly identified
- The grantor must be legally capable (for example, not a minor or legally incapacitated)
- The property must be adequately described
- There must be a legally acceptable grantee clause
- There must be a consideration (amount)
- The deed must be signed by the grantor
- The deed must be delivered to the grantee
NOTE: Although a deed must be notarized by a notary public to be recorded, most states do not require a deed to be notarized to be “valid.” However, to protect the interest of parties involved, it is always prudent to have a deed notarized so that it can be filed with the recorder of deeds in the county where the property is located.
4
Q
A grant deed is defined as
A
“A deed containing, or having implied by law, some but not all of the usual covenants of title; esp., a deed in which the grantor warrants that he or she (1) has not previously conveyed the estate being granted, (2) has not encumbered the property except as noted in the deed, and (3) will convey to the grantee any title to the property acquired after the date of the deed.”
With a grant deed, the grantor is guaranteeing that they haven’t sold the property to anyone else, and that it is clear of any liens or restrictions. However, they don’t necessarily guarantee that there aren’t any title issues remaining from previous owners.
5
Q
“Which deed is containing, or having implied by law, some but not all of the usual covenants of title?
A
Grant Deed
6
Q
A quitclaim deed is defined as
A
“A form of conveyance in which any interest the grantor possesses in the property described in the deed is conveyed to the grantee without warranty of title.”
7
Q
Which is the weakest form of deed?
A
Quitclaim Deed
8
Q
A bargain and sale deed is defined as
A
“A deed that conveys real estate from a seller to a buyer but does not guarantee clear title; used by court officials and fiduciaries to convey property they hold by force of law, but to which they do not hold title.”
9
Q
Which deed does not guarantee that there is a clear title, but at least the seller (grantor) implies that they do hold title to the property? An example of this might be a sheriff’s deed, which is given to the purchaser of a property at a court-ordered sale.
A
Bargain and Sale Deed
10
Q
A tax deed is defined as
A
“A deed that conveys title to a property purchased at a tax sale; may or may not convey absolute title, free of all prior claims and liens, depending on state law.”
This is essentially a bargain and sale deed, but is used specifically for tax sales where properties have been taken over for non-payment of real estate taxes.
11
Q
What deed is essentially a bargain and sale deed, but is used specifically for tax sales where properties have been taken over for non-payment of real estate taxes.
A
Tax Deed
12
Q
A warranty deed is defined as
A
“A deed that conveys to the grantee title to the property free and clear of all encumbrances, except those specifically set forth in the document.”
13
Q
Which deed is the best and most powerful type of deed? The grantor warrants or guarantees that the title being conveyed is free and clear of all encumbrances. If, at a later date, a cloud on the title appears or someone else makes a claim against the title, the grantor must make it right.
A
Warranty Deed
14
Q
A deed of trust, or trust deed, is defined as
A
“A legal instrument similar to a mortgage document, except that three parties are involved in securing the debt: the borrower, a lender, and a trustee who holds property title when the deed of trust is executed and delivered. The trustee transfers title to the lender if the borrower defaults and to the borrower if the note is repaid.”
15
Q
Which deed is similar to a mortgage? It is the method used in some states to encumber properties in lieu of recording a mortgage. Title is vested in a third party, the trustee, until the mortgage lien is satisfied.
A
A deed of trust, or trust deed
16
Q
A reconveyance is defined as
A
- “Passing of title to real property back to the original owner; e.g., in a deed of trust arrangement, upon liquidation of the debt the property is reconveyed from a third-party trustee to the trustor (borrower).”*
- Example:* If a deed of trust is recorded and then the loan is paid off, the reconveyance document passes title back to the borrower.
17
Q
If a deed of trust is recorded and then the loan is paid off, the __________ document passes title back to the borrower.
A
reconveyance
18
Q
Deeds do/do not have to be recorded to be valid.
A
Deeds do not have to be recorded to be valid.
However, it is in the best interests of the parties to record the deed in the public records.
To be recorded in the public records, such as the office of a county clerk, recorder of deeds, or prothonotary, most states require an acknowledgement that the grantor’s signature on the deed is valid. This is usually accomplished by the signature and seal of a notary public or other designated official.
19
Q
“A legally binding agreement between two or more persons that represents their promise to do or not to do a particular thing.” is definition of ________
A
contract
20
Q
Contracts involving the ownership of real estate and commercial contracts for goods worth in excess of $_______ - these contracts need to be in writing in order to be enforceable.
A
$500
21
Q
Every state has a ____________ that requires certain documents to be in writing.
A
statute of frauds
22
Q
“A manifestation of willingness to enter into a bargain, which creates in the offeree the power of acceptance.” is definition of_________
A
offer
23
Q
Offers remain open until they are:
A
- Accepted
- Rejected
- Retracted prior to acceptance
- Countered
- Expired by their own terms
24
Q
An offer may be revoked at any time prior ___________ .
A
An offer may be revoked at any time prior to the communication of acceptance of the offer.
An offer may be also revoked by the maker of the offer, by giving notice of revocation to the person to whom the offer was made.
It could be also revoked by the lapse of time set forth in the offer. Perhaps it is stipulated that the offer is only good for 48 hours.
25
Once any offer is accepted in all the terms by another party, a contract is created and can be \_\_\_\_\_\_\_\_\_\_\_\_
**enforced.**
Any retractions at this point may lead to consequences under the law. Both parties are bound and neither can withdraw without liability.
26
*"A manifestation of willingness to be bound by the terms of an offer made in a manner invited or required by the offer." is definition of _________ ?*
**Acceptance**
All of the terms of the offer must be accepted without change or condition.
27
**Acceptance** may occur as an ____ act or an _______ act
**express** act or an **implied** act.
28
An ____________ ***contract*** is an agreement with clearly stated terms to which both parties are bound at the time it is formed.
**express**
An express contract may be either oral or written.
29
In an \_\_\_\_\_\_\_\_\_\_\_\_contract, the existence of the contract and its terms are inferred from the conduct of the parties. The contract is created by the actions of the parties who perform the terms of the contract.
**implied** contract
For example, if you sit down in a restaurant and order a meal, you imply a promise to pay for the food. The restaurant serves it to you on the basis of that promise.
30
A ___________ **contract** is one in which both parties have made promises to each other. One promise is in exchange for another.
A **bilateral contract**
A real estate sales contract is a bilateral agreement; Party A agrees to sell the property and Party B agrees to buy the property - under certain specified terms.
31
A _____________ **contract** is one in which one party makes a promise in order to induce another party to do something. The second party is not legally compelled to comply. However, if the second party accepts and performs, then the first party must keep the promise.
**unilateral contract**
A real estate option is a good example of a unilateral agreement. Party A agrees to sell his property to Party B for $200,000, anytime within the next six months. Party B is under no obligation to perform, that is, Party B can decide to exercise the option and buy the property or let the option expire without doing anything. If Party B decides to exercise the option, then Party A must sell.
32
What is the purpose of a state's statute of frauds?
* gives the FBI jurisdiction over state authorities in certain cases
* prohibits fraud in real estate transactions
* establishes penalties for all criminal activities
* requires certain documents to be in writing
requires certain documents to be in writing
33
An\_\_\_\_\_\_\_\_\_\_ contract is one that has been fully performed. The promises have been fulfilled according to the terms of the contract, and there is nothing left to be done.
An **executed contract**
An example would be a real offer to purchase after all contingencies have been met and the closing has occurred.
34
An\_\_\_\_\_\_\_\_\_\_\_ **contract** is one that is not been fully performed or completed. Something is still left to be done.
**Executory contract**
A good example of this is a listing contract. A real estate agent tries to sell the property during the term of the contract. A mortgage would also be considered an executory contract until it is finally paid off or satisfied.
35
A _________ **contract** is one that is binding and enforceable on all parties. It contains all the valid elements of a contract and is still in force.
A **valid contract**
That is akin to a real estate purchase transaction that has cleared all the contingencies but has not yet closed escrow.
36
A\_\_\_\_\_\_\_\_\_\_\_ **contract** is one that has no legal force or effect even though it contains the elements of a valid contract.
**void contract**
t could be "null and void" because it contains some illegal element that could not be enforced. For example, a contract could contain a clause that requires racial discrimination. Or, it could be for an illegal purpose such as to commit a crime or some act in violation of a legal use. Voiding a contract could also be the result of an act of God that is beyond the control of the parties; such as a fire or flood that destroys a property.
37
A __________ **contract** is one that results from the failure of the parties to meet some legal requirement.
**Voidable contract**
For example, if a minor signs a contract to purchase real estate, it usually is voidable within a reasonable time after the minor reaches legal age. However, the parties are _not required_ to void the contract. Most courts consider a voidable contract to become a valid contract if the eligible party does not act to disaffirm the agreement within a reasonable time.
38
An ___________ **contract** is one that appears to be valid but would not be enforceable in court.
**Unenforceable contract**
For example, if one party tries to enforce an otherwise valid contract after the statute of limitations has expired, that contract would be unenforceable.
Other examples would be contracts that are vague and poorly worded, or verbal contracts in situations where written ones are required, as in real estate. However, even though they may not be enforceable in court, unenforceable contracts may still be considered valid if both parties still wish to complete performance.
39
There are five essential ingredients in a valid contract for the purchase of a real property interest that would be binding and enforceable on all parties:
1. Competent parties
2. Mutual agreement
3. Consideration
4. Lawful objective
5. In writing and signed
40
Define **Competent Parties**
For a contract to be valid, the parties have **to have the capacity to enter into a contract**. Minors, for example, do not have the capacity to contract. The **legal age**, or age of majority, varies from state to state. Check your own state to determine the legal age.
The general rule is that the contract of a minor is voidable at the minor's option. The minor can hold an adult to a contract, but the adult cannot legally hold the minor to a contract.
Another consideration is the **mental capacity** of the parties. Under the *Restatement Second* of the Uniform Commercial Code (UCC), a contract is voidable if a party "by reason of mental illness or defect is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of this condition."
41
The general rule is that the contract of a minor is voidable at the ________ option.
is voidable at the minor's option
The minor can hold an adult to a contract, but the adult cannot legally hold the minor to a contract.
42
**Mutual Agreement**
For a contract to become binding, the parties must enter into it voluntarily and with a full understanding of the terms. There must be **mutual assent** and a "**meeting of the minds.**"
Lack of mutual agreement could be evidenced by such things as (5):
* Fraud
* Misrepresentation
* Mutual mistake
* Undue influence
* Duress
43
Contracts signed by a party under undue influence or duress are voidable by that party or a court.
Examples of Duress or Undue Influence:
**Undue Influence** might result if a party is elderly, sick, under great stress or under the influence of drugs or alcohol.
**Duress** was defined as:
"feebleness on one side, overpowering strength on the other."
"If a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim."
44
Define **Consideration** in cotract
An agreement must be based on good and valuable **consideration**; **something of value**. This could be:
* Money
* Property
* A promise of performance or a promise to pay
* Forbearance: a promise to refrain from doing something
The amount must be stated definitively, and should state it is payable in exchange for the right received. Consideration must arise in the context of a bargained for exchange.
45
The **parol evidence rule** states that
written contracts take precedence over oral agreements
46
The ___________ **rule** states that written contracts take precedence over oral agreements
**parol evidence**
47
Discharge of Contracts
Contracts can be terminated or discharged by (4):
* Agreement of the parties
* Performance of the contract
* Impossibility of performance
* Operation of law
48
* v. to give up a right as releasing one from his/her obligation to perform under a contract, or to relinquish a right to an interest in real property.*
* Is the definition of:*
**Release** of Contract
49
* the act of transferring an interest in property or some right (such as contract benefits) to another.*
* is definition of:*
**Assignment**
50
* n. agreement of parties to a contract to substitute a new contract for the old one. It extinguishes (cancels) the old agreement.*
* is definition of:*
***A novation -** is often used when the parties find that payments or performance cannot be made under the terms of the original agreement, or the debtor will be forced to default or go into bankruptcy unless the debt is restructured. While voluntary, a novation is often the only way any funds can be paid."*
51
A **Novation** is defined as
*n. agreement of parties to a contract to substitute a new contract for the old one. It extinguishes (cancels) the old agreement.*
52
The preferred and most common method of terminating contracts is full **performance** of all the terms. The contract is then said to be \_\_\_\_\_\_\_\_\_.
The contract is then said to be **executed**.
53
**Execute** is defined as
* "v. 1) to finish, complete or perform as required, as in fulfilling one's obligations under a contract or a court order.*
* 2) to sign and otherwise complete a document, such as acknowledging the signature if required to make the document valid."*
54
A **time is of the essence clause** is defined as
*"n. a phrase often used in contracts which in effect says: the specified time and dates in this agreement are vital and thus mandatory, and ‘we mean it.' Therefore any delay - reasonable or not, slight or not - will be grounds for canceling the agreement."*
55
An example of \_\_\_\_\_\_\_\_\_\_\_would be if a law changed after the contract was arranged but before the full performance of the contract.
I**mpossibility** of Performance
Suppose a contract was signed to drain lowland areas and since then it became declared as a protected wetland area. It would now be an illegal act, and the contract would be void.
56
The application of law may change the rights and liabilities of the parties, without their consent. Contracts can be terminated by __________ under:
* Bankruptcy
* Statute of limitations
* Alteration of contract
What do they mean?
**Operation of law**
A filing of a petition for **bankruptcy** under federal law terminates any contracts in existence as of that date.
If a party to a contract fails to bring action against a defaulting party within a specific time frame under the **Statute of Limitations**, the right of remedy is lost. Check your own particular state for the time periods under the Statute.
The intentional **alteration** of a contract without written consent of all parties effectively terminates the agreement. Of course, this may lead to liability.
57
**Which of these is NOT listed as a way that a contract can be terminated?**
* unilateral recission
* performance of the contract
* agreement of the partiesim
* possibility of performance
unilateral recission
58
**If the parties to a contract agree to substitute a new contract for the old one, this is called**
* release
* impossibility of performance
* assignment
* novation
**novation**
59
A ________ contract is binding and enforceable on all parties.
* unenforceable
* valid
* void
* voidable
valid
60
**The general rule of contracting with minors is that a contract with a minor is**
* illegal and unenforceable
* voidable at the minor's option
* null and void
* valid and fully enforceable in most states
voidable at the minor's option
61
**A(n) ________ contract is one that has not been fully performed or completed.**
* executory
* voidable
* bilateral
* executed
executory
62
**Breach of contract** (sometimes called **default)** is defined as
* “n. failing to perform any term of a contract, written or oral, without a legitimate legal excuse.*
* This may include not completing a job, not paying in full or on time, failure to deliver all the goods, substituting inferior or significantly different goods, not providing a bond when required, being late without excuse, or any act which shows the party will not complete the work ("anticipatory breach").*
63
A breach of contract does not relieve the obligations of the breaching party. The non-defaulting party has legal recourses which may be obtained by filing suit in a court of law. These remedies would include (9)
* Rescission
* Reformation
* Injunction
* Specific performance
* Compensatory damages
* Consequential damages
* Attorney fees and costs
* Liquidated damages
* Punitive damages
64
**Rescission** is defined as
*"n. the cancellation of a contract by mutual agreement of the parties."*
Rescission may be applied when the contract has not been performed and there is a breach by one party. After a suit, a court may order the parties placed back in their original position; as if the contract had never existed. Basically, the contract is canceled and both sides are excused from any further performance. Any deposit money is returned.
65
\_\_\_\_\_\_\_\_\_\_\_\_\_may be applied when the contract has not been performed and there is a breach by one party. After a suit, a court may order the parties placed back in their original position; as if the contract had never existed. Basically, the contract is canceled and both sides are excused from any further performance. Any deposit money is returned.
**Rescission**
66
**Reformation** is defined as
* n. the correction or change of an existing document by court order upon petition of one of the parties to the document.*
* Reformation will be ordered if there is proof that the parties did not intend the language as written or there was an omission due to mistake or misunderstanding.*
* Quite often a party petitions for reformation when one or both parties realize the effect of the document as written is different from what was expected but it has already been recorded or filed with a governmental agency.”*
This may have even occurred from a clerical error.
67
*Quite often a party petitions for ___________ when one or both parties realize the effect of the document as written is different from what was expected but it has already been recorded or filed with a governmental agency.*
*reformation*
68
**Injunction** is defined as
*“n. a writ (order) issued by a court ordering someone to do something or prohibiting some act after a court hearing.*
The procedure is for someone who has been or is in danger of being harmed, or needs some help (relief) or his/her attorney,
to a) petition for the injunction to protect his/her rights;
to b) get an ‘order to show cause’ from the judge telling the other party to show why the injunction should not be issued;
c) serve (personally delivered) the order to show cause on the party whom he/she wishes to have ordered to act or be restrained (‘enjoined’); partake in a hearing in which both sides attempt to convince the judge why the injunction should or should not be granted.
If there is danger of immediate irreparable harm at the time the petition is filed, a judge may issue a temporary injunction which goes into effect upon it being served (deliver or have delivered) to the other party. ……. A final and continuing injunction is called a permanent injunction.
**Examples of injunctions** include prohibitions against cutting trees, creating nuisances, polluting a stream, or removing funds from a bank account pending determination of ownership. So-called ‘mandatory’ injunctions which require acts to be performed, may include return of property, keeping a gate to a road unlocked, clearing off tree limbs from a right-of-way, turning on electricity or heat in an apartment building, or depositing disputed funds with the court.”
69
Examples of __________ include court ordered prohibitions against cutting trees, creating nuisances, polluting a stream, or removing funds from a bank account pending determination of ownership.
**injunctions**
70
**Specific performance** is defined as
*"*
*n. the right of a party to a contract to demand that the defendant (the party who it is claimed breached the contract) be ordered in the judgment to perform the contract.*
Specific performance may be ordered instead of (or in addition to) a judgment for money if the contract can still be performed and money cannot sufficiently reward the plaintiff.
An example could be when a defendant was to sell a property and did not, a judge may order the defendant to actually complete the sale.
71
\_\_\_\_\_\_\_\_\_\_\_\_ may be ordered instead of (or in addition to) a judgment for money if the contract can still be performed and money cannot sufficiently reward the plaintiff.
Specific performance
72
**Compensatory damages** are defined as
*"n. damages recovered in payment for **actual** injury or economic loss,.*
73
**\_\_\_\_\_\_\_\_\_\_\_\_ damages** are defined as
*"n. damages recovered in payment for actual injury or economic loss, which does not include punitive damages (as added damages due to malicious or grossly negligent action)."*
**Compensatory damages**
74
**Consequential damages** are defined as
*n. damages claimed and/or awarded in a lawsuit which were caused as a direct foreseeable result of wrongdoing."*
## Footnote
Foreseeable means that each side should have reasonably known at the time of the contract that there would be potential losses in the event of a breach.
75
**\_\_\_\_\_\_\_\_\_\_\_\_ damages** are defined as *"n. damages claimed and/or awarded in a lawsuit which were caused as a direct foreseeable result of wrongdoing." Foreseeable means that each side should have reasonably known at the time of the contract that there would be potential losses in the event of a breach."*
**Consequential damages**
76
**Attorney's fees and costs** are only recoverable if \_\_\_\_\_\_\_\_\_\_\_
they are expressly provided for in the contract. They would have had to have been specifically stated as a remedy in the event of a breach.
77
**Liquidated damages** are defined as
*“n. an amount of money agreed upon by both parties to a contract which one will pay to the other upon breaching (breaking or backing out of) the agreement or if a lawsuit arises due to the breach.*
Sometimes the liquidated damages are the amount of a deposit or a down payment, or are based on a formula (such as 10% of the contract amount). The non-defaulting party may obtain a judgment for the amount of liquidated damages, often based on a stipulation (clear statement) contained in the contract, unless the party who has breached the contract can make a strong showing that the amount of liquidated damages was so ‘unconscionable’ (far too high under the circumstances) that it appears there was fraud, misunderstanding or basic unfairness.”
78
**\_\_\_\_\_\_\_\_\_\_\_\_\_ damages** are defined as
*“n. an amount of money agreed upon by both parties to a contract which one will pay to the other upon breaching (breaking or backing out of) the agreement or if a lawsuit arises due to the breach.*
**Liquidated**
*Sometimes the liquidated damages are the amount of a deposit or a down payment, or are based on a formula (such as 10% of the contract amount).*
79
**Punitive damages** are defined as
*“damages awarded in a lawsuit as a punishment and example to others for malicious, evil or particularly fraudulent acts.”*
80
**\_\_\_\_\_\_\_\_\_\_\_ damages** are defined as
*“damages awarded in a lawsuit as a punishment and example to others for malicious, evil or particularly fraudulent acts.”*
**Punitive damages**
81
If a **seller** defaults, a **buyer** may (3)
1. **Rescind** the contract and recover the earnest **money** deposit
2. File a suit calling for **specific performance**, to force the seller to sell the property
3. Sue the seller for **compensatory damages**
82
If a **buyer** defaults, a **seller** may (4)
1. Declare the contract **forfeited***.*The right to forfeit is usually provided in the terms of the contract and the seller generally is entitled to retain the earnest money and any payments received from the buyer.
2. **Rescind** the contract
3. Sue for **specific performance** (this may require the seller to offer a valid deed to show **readiness to perform**)
4. Sue for **compensatory damages**
83
* "When the value opinion to be developed is market value, an appraiser must, if such information is available to the appraiser in the normal course of business:*
* (a) analyze all ________________ of the subject property current as of the effective date of the appraisal;"1*
*agreements of sale, options, and listings*
84
What are **Sales Concessions**?
Sales concessions are sometimes employed as a marketing tool when the market is slow or extremely competitive. They can include such items as
* Paying closing costs
* Buying down the interest rate of the purchaser's mortgage
* Offering private financing at a favorable rate
* Making repairs
* Offering rebates
85
A **lease** is defined as
*“A contract in which the rights to use and occupy land, space, or structures are transferred by the owner to another for a specified period of time in return for a specified rent.”*
86
*two-year lease at $500.00 per month or $6,000 annually. is example of\_\_\_\_\_\_\_\_\_\_\_*
Flat Rental Lease
87
A **flat rental lease** is defined as
*"a lease with a specified level of rent that continues throughout the lease term*."
This is the easy kind, such as a two-year lease at $500.00 per month or $6,000 annually. In periods of stability, this is the most common type of lease. However, because the rental amount is locked in and the economy can change, many landlords only want to use flat rental leases for short-term situations.
88
A **gross lease** is defined as
*“A lease in which the landlord receives stipulated rent and is obligated to pay all of the property’s operating and fixed expenses; also called **full-service lease**.”*
Example: A two-year lease at $500.00 per month plus utilities, as compared to a two-year lease for $600 per month that includes all utilities. The lease that requires the tenant to pay the utilities is likely more attractive from the standpoint of the landlord - even though it specifies less monthly rent - because the landlord is shielded from having to absorb the cost of any increases in utility rates.
89
A ___________ lease is defined as
*“A lease in which the landlord receives stipulated rent and is obligated to pay all of the property’s operating and fixed expenses; also called **full-service lease**.”*
**gross lease**
90
A **net lease** is defined as
*“A lease in which the landlord passes on all expenses to the tenant.*”
Often the terms net lease, net/net lease, net/net/net lease, or triple-net lease are used. These terms indicate the extent to which the tenant and landlord are dividing the expenses of utilities, taxes and insurance. The meanings of these net terms may vary regionally, so it is important for you to know exactly who is responsible for what expenses in the subject lease, as well as in comparable leases to which the subject is being compared.
91
A _________ **lease** is defined as
*“A lease in which the landlord passes on all expenses to the tenant.*”
**net lease**
92
A **graduated rental lease** is defined as
*“A lease that provides for specified changes in rent at one or more points during the lease term, e.g., step-up and step-down leases, or leases with a set percentage adjustment."*
They are sometimes called "step-up" or "step-down" leases, depending on the direction of movement of the rental payment. A step-up lease allows a landlord to anticipate increasing future expenses to be offset by a corresponding increase in future income. It works great if your crystal ball is working clearly the day the lease is executed.
The step-up lease may also be advantageous to the tenant, as it allows lower payments in the beginning while a business is being established. It also just makes common sense. We said earlier in this course that there is a relationship between income and value. Property values are usually expected to increase, and higher values should be reflected in higher rents.
Step-down leases are somewhat less co
93
A ____________ **lease** is defined as
*“A lease that provides for specified changes in rent at one or more points during the lease term, e.g., step-up and step-down leases, or leases with a set percentage adjustment."*
**graduated rental lease**
94
An **index lease** is defined as
*“A lease, usually for a long term, that provides for periodic rent adjustments based on the change in an economic index.”*
The consumer price index (CPI) is most often the index to which the lease is tied, but it could be any recognized index. The CPI reflects the basic rate of inflation. Adjustments in the rent usually are made annually, but could be in any frequency that is negotiated. This usually seems to be fair and reasonable for both sides, as they are offered some protection against the inevitable fluctuations in the economy and purchasing power.
95
An _________ **lease** is defined as
*“A lease, usually for a long term, that provides for periodic rent adjustments based on the change in an economic index.”*
**index lease**
96
A **revaluation lease** is defined as
*“A lease that provides for periodic rent adjustments based on the market rental rate of the space.”*
Conditions for revaluation are indicated in the lease but usually mean an opportunity for an appraisal to be done! Revaluation leases are usually long term, but also may be cast as a series of short-term leases with renewal options. The renewals, if exercised, would be at the rate indicated by a revaluation at the time of renewal. If the parties cannot agree as to the terms, it may require additional appraisals or arbitration.
97
A ___________ **lease** is defined as
*“A lease that provides for periodic rent adjustments based on the market rental rate of the space.”*
**Revaluation lease**
98
An ***escalator lease*** is defined as:
*“ lease that allows for the lessor to seek reimbursement of operating expenses after specific criteria have been met, e.g., the lessor is required to pay expenses for the first year but the lessee will pay any necessary increases in expenses as additional rent over the subsequent years of the lease."*
99
An ____________ ***lease*** is defined as:
*“A lease that allows for the lessor to seek reimbursement of operating expenses after specific criteria have been met, e.g., the lessor is required to pay expenses for the first year but the lessee will pay any necessary increases in expenses as additional rent over the subsequent years of the lease."*
***escalator***
100
A **percentage lease** is defined as:
*“A lease in which the rent or some portion of the rent represents a specified percentage of the volume of business, productivity, or use achieved by the tenant*.”
They are typically used for retail properties, where the tenant might be a supermarket or department store. A straight percentage lease may have no minimum rent but most include a guaranteed **minimum rent** and an **overage rent**.
101
A ____________ **lease** is defined as:
*“A lease in which the rent or some portion of the rent represents a specified percentage of the volume of business, productivity, or use achieved by the tenant*.”
**percentage lease**
102
*“A lease in which the rent or some portion of the rent represents a specified percentage of the volume of business, productivity, or use achieved by the tenant*.”
They are typically used for retail properties, where the tenant might be a supermarket or department store. A straight percentage lease may have no minimum rent but most include a guaranteed ______________ and\_\_\_\_\_\_\_
**minimum rent**
**overage rent**.
103
**Overage rent** is defined as
*“The percentage rent paid over and above the guaranteed minimum rent or base rent; calculated as a percentage of sales in excess of a specified breakpoint sales volume.”*
104
**\_\_\_\_\_\_\_\_\_\_ rent** is defined as
*“The percentage rent paid over and above the guaranteed minimum rent or base rent; calculated as a percentage of sales in excess of a specified breakpoint sales volume.”*
**Overage rent**
105
**"The cancellation of a contract by mutual agreement of the parties" is the definition of**
* specific performance
* recission
* novation
* assignment
**recission**
106
**Standards Rule 1-5(a) of USPAP requires an appraiser to**
* analyze all current agreements of sale, options, or listings of the subject property
* develop the highest and best use of the subject property and comparable sales
* develop all three approaches to value for every assignment
* analyze the layout and functional utility of the subject property
**analyze all current agreements of sale, options, or listings of the subject property**
107
True or false? Punitive damages are commonly awarded in breach of contract cases.
**False**
108
**Breach of contract is also known as**
* default
* novation
* assumption
* specific performance
default
109
**If a buyer in a real estate transaction defaults on the contract, the seller may**
* rescind the contract
* declare the contract forfeited and keep the earnest money
* sue the buyer for specific performance
* any of these
any of these
110
A seller enters into an agreement to sell his property, but later changes his mind and decides not to complete the sale. The buyer sues the seller and a judge orders the seller to complete the sale. This is an example of
* rescission
* novation
* mutual assent
* specific performance
**specific performance**
111
All of the following are required ingredients of a valid contract EXCEPT
* competent parties
* mutual agreement
* legal description
* consideration
**legal description**
112
"The correction or change of an existing document by court order upon petition of one of the parties to the document" is the definition of
* rescission
* reformation
* injunction
* novation
reformation
113
"Feebleness on one side, overpowering strength on the other” is the definition of
* adversity
* duress
* incapacity
* incompetency
duress
114
A reconveyance may be employed if there is a
* grant deed
* deed of trust
* sheriff’s deed
* quitclaim deed
**deed of trust**
115
If a seller defaults in a real estate contract, the buyer may take all of these actions EXCEPT
* rescind the contract and recover the earnest money deposit
* file a suit calling for specific performance, to force the seller to sell the property
* sue the seller for compensatory damages
* sue the seller for punitive damages
sue the seller for punitive damages
116
A real estate contract is a(n)
* unilateral agreement
* implied agreement
* voidable agreement
* bilateral agreement
bilateral agreement
117
A(n) __________ contract is one that results from the failure of the parties to meet some legal requirement.
* void
* voidable
* implied
* executed
voidable
118
The ___________ rule states that written contracts take precedence over oral agreements.
* parol evidence
* parole
* parol
parol evidence
119
“A written, legal instrument that conveys an estate or interest in real property when it is executed and delivered” is the definition of a
* mortgage
* deed
* conveyance
* contract
deed
