LEASES Flashcards
Lease
A written conveyance of possession but not ownership of real estate for a specific period of time
estoppel certificate
often used to confirm the lease when the property is sold.
- prevents fraud
- Used when loans are sold, verbal agency agreements created
Doctorine of Estoppel
States that once you cause another to rely on your words, you cannot go back on your promises
Assigning
The transfer of all the remaining interest to a third party
Novation
Cancelation of the lease contract, and a transfer of remaining portion to a third party
Subleasing
transferring a portion of one’s rental interest to a third party
Performance
way of terminating a lease
leases automatically terminated at the end of term
Surrender
way of terminating a lease
Cancelation of the lease prior to expiration
Action of Law
way to terminate lease
Eminent domain taking, tax sale, bankruptcy
Destruction
way of terminating lease
Property is destroyed
Foreclosure
way of terminating lease
Banks have right to terminate a lease in the event of foreclosure, depending on the type of lease, occurs when borrower is unable to make their payments
Protecting Tenants at Foreclosure Act
Allows residential leases to survive foreclosure meaning a tenant is allowed to stay until the end of the lease or 90days notice if they are month to month
Actual eviction
when tenant breaches lease
Constructive evictions
Landlord violates lease called the covenant of quiet enjoyment
Covenant of Quiet Enjoyment
A tenants right to undisturbed enjoyment of the leased property
Examples of violations:
- Landlord trespassing on the leased premises
- landlords failure to maintain the premises fit and suitable for occupancy as defined by the sanitary
- landlords failure to provide services promised in the lease
- No legal requirement for there to be 24hours notice
Property managers = general managers
obtain a separate property management license (not required)
-don’t need real estate licenses
Gross Lease
a lease where tenant pays a fixed amount of rent, and the landlords pays operating expenses of the building
sublease (sandwich lease)
a lease between a sub-letter and the original tenant
Modified Gross Lease
A lease where the tenant pays a fixed rental amount for year one, and any increases in operating expenses that is paid by landlord is paid for by the tenant
Net Lease
Tenant pays some or all of lease operating expenses (taxes, maintenance costs, management fees, etc.) on top of their normal rent - landlord receives net income
Percentage lease
most of the rent is paid as a percentage of the tenant’s receipts (sales) or profits. Given to anchor tenants (commercial stores)
Ground Lease
tenant rents land, and can build whatever they want on it
when lease expires landlord owns any improvements built by the tenant.
Seen with fast food franchises, cell towers
-Typically a 99-year lease
Graduated Lease
A lease whose rent increases on some pre-agreed-upon schedule. An escalator clause increases or decreases the rent
Reappraisal Lease
Rent is based on an appraiser’s opinion of the rent, rather than negotation between tenant and landlord
Sales-Leaseback
- property owner sells their property to an investor and simultaneously rents it back (usually for long term)
- Provides seller with: favorable tax treatment, capital, relief from debt service
Privity of Estate
- A legal relationship between two people with interests in the same property
- Longest lease legally can be 99 yrs
- Leases up to 7 years must be recorder
Lessor
Landlord
Lessee
Tenant, retains a reversionary interest under the lease
Reversionary Interest
the right to regain possession after the lease is over
Tenants at Sufferance
Tenants who stay past their lease and must be evicted
Rentable Square Footage
Includes the leased premises and any common areas maintained by the lessor and used by the lessee
Build out
In commercial leases, landlord or tenant may need to make modifications for a particular business. Part of the lease negotiation vary from lease to lease sometimes paid by tenant, or landlord, or split
Usable Square footage
the actual space he lessee can occupy
What does “Leases Run With the land” mean?
Meaning if the lessor sells the leased premises before the lease ends the new owner is responsible for the lease and must honor it.
Common area load
ranges from 5-15% of usable square fottage
Novation
Cancellation of the lease contract
What are the was leases can be terminated?
Performance Surrender Action of Law Destruction Foreclosure Actual Eviction Constructive Eviction
MA Landlord Regulations
Tenants can amend the lease start date within 15 days - document any damages previously done
Security deposit must be held in a trust or escrow account, must be deposited but if not then 5% is mandatory to be paid by landlord
Privity of Estate
A lease establishing a legal relations between two people with interest in the same property
