Leasing and Property Management Flashcards
Estate at sufferance
The tenant stays after the right to possess has terminated. The tenant is known
as a holdover tenant.
Estate at will
The lease’s duration is unknown when it’s created.
The lease terminates automatically when the specified period (day, week, month,
year, etc.) ends.
Estate for years
Periodic estate
The lease automatically renews at the end of each period specified in the lease
A net lease
Lease in which the tenant pays some or all of the property’s costs in addition to rent. Net leases are often used for large commercial and industrial leases. These leases tend to favor the landlord’s interests because property costs fall on the tenant.
Triple net lease.
When the tenant is paying for property taxes, insurance, and maintenance along with the rent, the lease is generally referred to as a triple net lease (NNN).
Absolute net lease
A triple net lease in which the tenant is also responsible for all building expenses and repairs, including roofing and structural repairs.
Gross lease
Landlord pays all expenses related to the property, such as taxes, repairs, insurance, utilities, maintenance) while the tenant pays a fixed rent. These are sometimes called full-service leases. Gross leases are often used for office space.
Percentage Lease
Tenant pays a base rent plus an additional charge that’s a percentage of the tenant’s gross sales once a specific ‘breakpoint’ is met. The landlord usually pays all the property’s costs (as seen in a gross lease), but this may not always be the case. Percentage leases are often used for retail businesses and malls.
graduated lease
Allows specific rent increases at future dates. It’s a type of variable lease that permits an increase/decrease in rent during the lease period. The increase can be based on a number of factors, such as changes to appraised value, index, or time.
Graduated leases are often used for longer terms than other common lease types. Tenants may be able to get into a lease at a lower cost that gradually increases over time. This can be beneficial for new businesses. The lease also provides protection to property owners, who can increase rent as property values or costs increase over time.
Ground lease
One party owns the land and a different party owns the improvements. Land is leased
on a long-term basis, often 50-99 years. The lessee builds and owns an improvement, such as an office
building, on the leased land. The rent paid is referred to as ground rent. At the conclusion of the ground
lease, the improvements become the lessor’s property
Loft lease
Provides for rental of floor space of wide-open loft spaces. The tenant may divide the space
but can’t make structural changes.
Lease purchase
When a tenant wants to buy a property but can’t (either due to financing, title, or tax
issues), a lease purchase may be an option. There’s both a purchase and lease component to this
arrangement. The tenant makes rental payments, and a portion of that payment is applied to the
property’s purchase price. This continues until the tenant can purchase the property outright.
Sale and leaseback
The owner of a building sells the building (usually to an investor) and then leases
the building back. Owners will usually do this as a way to raise extra capital. The original owner gains
access to the equity, and the new owner has a reliable source of rental income.
Sub-surface leasing rights
Often used for minerals, oil, or gas, a company will enter into a lease agreement with the landowner. The company explores the land, looking for minerals, oil, or gas in exchange for a cash payment to the landowner. If the company finds the item, the landowner usually gets a percentage of the item’s value. If nothing is found, the lease expires.
Uniform Residential Landlord Tenant Act (URLTA)
A sample law that states may follow in enacting their
own landlord-tenant legislation. The purpose of this act is to base landlord-tenant law on contract law instead of common law, thereby providing more specific guidance to both landlords and tenants.
Many states have patterned their landlord-tenant regulations after URLTA’s provisions.
Three types of eviction
Actual eviction: This is the legal process used to physically remove the tenant.
Constructive eviction: The tenant is prohibited from quiet enjoyment of the premises and
vacates prior to termination of the lease agreement.
Self-help eviction: The landlord takes matters into his
Property duty managers (old car)
Obedience, loyalty, disclosure, confidentiality, account, reasonable care.
What is a trust account
Same as escrow
Property Manager reports … four
1 - Operating budget: income and expenses
2 - Cash flow report: funds in and out
3 - Profit and loss statement
4 - Budget comparison statement: compares actual profit and loss statement to oper budget
Exemptions to protected classes in leasing
Senior homes - some limits on children/families
Private club may rent only to members
Religious orgs rent only to members
Mrs. Murphy Exemption: 4 or fewer units and owner lives on one. No exemption for realtors.
What federal office enforces fair housing and ADA compliance
HUD’s Office of Fair Housing and Equality Opportunity (OFHEO)
ADA standards for accessible design (SAD) apply to
new construction and remodeling of public
accommodations and commercial buildings.
How long do aggrieved parties have to file a fair housing complaint with OFEHO?
Aggrieved parties, including licensees, can file fair housing complaints through FHEO for up to one year
following the time the alleged discrimination occurred. Licensees may not file on behalf of another
aggrieved party.
OFHEO complaint process
Filed with HUD OFHEO
HUD reviews determines if a potential violation exists, and, if so, files a formal complaint.
May referred complaint to to a local or state agency, or may be investigated by FHEO after
HUD assigns investigators.
The investigation involves notifying the alleged violator and gathering evidence needed to determine
whether a violation did occur.
Penalties if found guilty by OFHEO of fair housing violation
If found guilty of federal fair housing violations, licensees may face lawsuits and payment of
compensatory damages, attorney fees, or civil penalties. Real estate licenses may also be subject to
license suspension or revocation.
Formula for operating budget
Projected income - Projected Expenses = Projected net operating income
Potential gross income
The income generated from all sources for the year, assuming the property is fully leased at market rents.
Effective gross income
The potential gross income minus the market allowance for vacancy rates and collection loss. This would be the income number used for the operating budget
Profit and Loss Statement
The profit and loss statement is very similar to the cash flow report. Both show income and expenses, however, the profit and loss statement won’t include the financial activities of the owner (such as the mortgage payment). Profit and loss statement may be produced monthly, but show the ongoing profit/loss over a longer period (such as a rolling 12-month period).
Formula for Return on Investment (ROI)
ROI = Annual cash flow ÷ Initial cash investment
