Lesson 4 - The Contract of Sales and Leases

Question 1

Essential Elements of a Contract

Answer 1

1) Consideration
2) Must be in writing
3) Must have competent parties

Question 2

Estate for Years

Answer 2

-A leasehold estate for any specific period of time. An estate for years is not automatically renewed.

Question 3

Express Contract

Answer 3

-A contract in which all elements of a contract are specifically stated (offer, acceptance, consideration).

Question 4

Attorney Review Clause

Answer 4

-A clause found in real estate contracts that may allow buyers to walk away from an agreed upon sale for any reason.

Question 5

Mortgage Contingency Clause

Answer 5

-A clause in a contract that states a mortgage must be obtained in order for the contract to be binding.

Question 6

Eviction

Answer 6

-A legal proceeding by a lessor landlord to recover possession of real property.

Question 7

Holdover Tenant

Answer 7

-A tenant who remains in possession of leased property after the expiration
of the lease term.

Question 8

Triple Net Lease

Answer 8

-A lease commonly found in a building with a single, long-term tenant.

Question 9

Who holds the deposit/down payment?

Answer 9

• Listing agent (seller’s broker)

- Seller’s attorney

Question 10

Earnest money deposit

Answer 10

-A deposit that a buyer makes at the time of submitting an offer to demonstrate the true intent of the purchase; also referred to as a binder, good faith deposit, and escrow deposit.

An earnest money deposit is usually binding.

Question 11

Proration

Answer 11

-The division of certain settlement costs between buyer and seller.
These items can include real estate taxes, fuel, a survey, water and sewer charges, rent, and security deposits.
Proration ensures fair apportionment of expenses between buyer and seller.

Question 12

Discharge of Contracts

Answer 12

-A contract may be discharged or terminated in the following ways:

1) Agreement of the parties
2) Full performance
3) Impossibility of performance
4) Operation of Law

Question 13

Novation

Answer 13

This is the act of either:

1) replacing an obligation to perform with a new obligation; or
2) adding an obligation to perform; or
3) replacing a party to an agreement with a new party.

Question 14

Contract Remedies

Answer 14

1) Specific performance
2) Compensatory
3) Liquidated damages
4) Reformation

Question 15

Use Provisions in a Lease

Answer 15

• The ‘use provisions’ is a clause in a lease that requires a tenant reasonably use the space for its intended use.
• For example, a tenant cannot continuously throw loud, late-night parties, which disturb the other tenants in the building.

Question 16

Assignment Lease

Answer 16

-In an assignment, the assignee is responsible for paying the rent directly to the landlord. The assignee takes responsibility of the lease.

Question 17

Sub-Lease

Answer 17

-In a sublease, the original tenant is still responsible to the landlord for the lease payments under the lease contract.
In a sublease arrangement, the sub-lessee pays the rent to the tenant (lessee) and the tenant pays the landlord.

Question 18

Actual Eviction

Answer 18

-Actual eviction occurs when the landlord removes the tenant from the property without aid or control of the court system.
Actual eviction is wrongful use of self-help.

Question 19

Constructive Eviction

Answer 19

-This occurs when the tenant is prevented from the quiet enjoyment of the property.
In other words, the landlord deliberately renders the property unfit or unsuitable to live in.
An example may be refusing to repair a broken toilet or bathtub