leases & contracts

Question 1

Types of leases

Answer 1

There are different types of Lease arrangements the lessor and lessee can have. Such as a gross lease, net lease, lease option and a percentage lease.

Question 2

Gross lease

Answer 2

Gross lease is a rental agreement for the use of the property where the tenant pays a fixed amount which does not change as a result of changes in the various expenses of the property. The landlord pays for these expenses such as all repairs, taxes and operating expenses incurred through ownership. It is the opposite of a net lease in which these costs are incurred by the lessee.

Question 3

Net lease

Answer 3

A net lease where the responsibility to pay taxes, insurance, and maintenance are incurred by lessee in addition to the monthly lease payment. This is often referred to as a triple net lease.

Question 4

Percentage lease

Answer 4

A percentage lease is a rental that is based on a percentage of the monthly or annual gross sales made on the premises. Percentage leases are common with large retail stores, especially in shopping centers. An underlying concept of the percentage lease is that both the landlord and the tenant should share in the locational advantages of the leased premises.

Question 5

There are many types of percentage leases

Answer 5

the straight percentage of gross income, without minimum (uncommon);

the fixed minimum rent plus a percentage of the gross; the fixed minimum rent against a percentage of the gross, whichever is greater; and the fixed minimum rent plus a percentage of the gross, with a ceiling to the percentage rental (among others).

Question 6

Lease option

Answer 6

A lease option is a rental agreement indicating a tenant’s option to purchase a property during the term or at the end of the lease. The Owner of the property would be the optionor, the tenant would be the optionee.

Consideration is given to the optionor in order to secure the option for the optionee. The consideration can be monthly payments consisting not only of rent, but an overage, or it can be money up front that can be applied towards a down payment on an already established amount.

If the optionee exercises the option, title would revert back to the time the contract began, not when the option was exercised.

Question 7

Property management

Answer 7

A property manager has a general agency has a fiduciary relationship with the owner.

Question 8

Property Managers are in what type of relationship with owner

Answer 8

A property manager is a general agent of the owner because they are engaged in an ongoing business relationship.

Question 9

The duties of a property manager include:

Answer 9

• Preparing the budget
• Allocating the money for fixed expenses, operating expenses and reserve funds
• Selecting quality tenants which involves being familiar with the market rent versus the contract rent.
• Offering concessions to attract tenants.

Question 10

lease agreement should specify when the rent is due

Answer 10

If it doesn’t specify a date, rent is due the last day of the leasing period.