Property Management & Leasing Flashcards
A _______ _______ is a person who manages property for an owner as an agent. Like the real estate broker, the property
manager’s role is a _________ one, that is, he owes a special obligation of trust, accountability and loyalty to the person employing him.
property manager
fiduciary
The basic functions of a property manager are:
1. To produce the best possible ___ _________ ______. As an agent this is accomplished by maintaining a favorable balance of income over expenditures, either by increasing the property’s gross
income or by reducing the costs of maintenance and operation.
2. To ________ and ________ the value of the principal’s investment. This involves not only maintaining the property but also establishing rent schedules that will provide a maximum return on the
owner’s investment.
net operating income
maintain and increase
There are three types of properties that require management:
1. ___________
2. ______ and __________
3. __________
- Residential
- Retail and Commercial
- Industrial
________ of a ________ _______
1. Show and lease space.
2. Solicit and qualify potential tenants.
Qualifying potential tenants refers to finding out their ability to pay rent.
3. Collect rent.
4. Hire, train and supervise employees to operate and maintain the property.
5. Maintain tenant relations and mediate complaints.
6. Provide maintenance for the property.
7. Provide for tenant security.
8. Maintain adequate insurance.
9. Maintain adequate records.
10. Audit and pay bills.
11. Must abide by the Fair Housing Laws in all activities.
Activities of a Property Manager
The __________ _________
The management contract is the basis of the manager-owner agreement. It is the first step in taking over the management of a property. This agreement creates an agency relationship between the owner of the property and the property manager. A property manager is said to be a _______ _____. The management contract should be in writing and should contain the following:
1. Parties to the contract and starting date.
2. Description of the property to be managed.
3. The term or time period of the agreement.
4. Method of termination of agreement.
5. Agent’s fee.
6. Extent of agent’s authority.
7. Agent’s covenants (promises).
8. Owner’s covenants.
9. Disposition of security deposits by agent (to be placed in escrow account).
10. Signatures of all parties.
The Management Agreement
General Agent
A _____ is both a contract and an instrument of conveyance. The Lessee contracts to pay rent to the lessor, and the lessor conveys an interest in the property to the lessee. A _____ of more than one year’s term must be in writing. For terms of a year or less, oral leases are
permitted. In most states, including Louisiana, the lessee does not need to sign the lease in order for it to be valid.
lease
The _____ must be delivered by the lessor to the lessee and accepted by the lessee.
Acceptance of the _____ is signified by:
1. possession of the _____,
2. payment of rent, or
3. occupying the premises.
lease
While not usually required, leases of long duration, especially commercial leases of three years or longer, should be recorded. Recording gives ____________ ______ of the lessee’s interest in the property
constructive notice
The lessor has a ___________ ________ in the rights he leases. That is, whatever he grants to the lessee, he will recover in the future.
Reversionary Interest
In some leasing agreements, the lessor retains the _____ of __-_____. This means
that if the lessee breaches the agreement in certain ways, or if exceptional circumstances require it, such as maintenance emergencies, the lessor may enter without the lessee’s consent.
Right of re-entry
The lessor also has the _____ to _____________, that is, the right to collect rent from the lessee as agreed upon in the lease. The lessee’s failure to pay rent constitutes a breach of the lease. When a lessee falls behind in his rent, the lessor must first serve notice for remedy of the default. If no corrective action is taken, the lessor may then take the lessee to court to recover damages.
right to consideration
______ to ________. In general, when the conditions of a lease are breached by the lessee, the lessor may recover possession of the premises through court-ordered eviction
Right to eviction
_____ to _________. There is, however, an alternative to eviction. If the property manager thinks that there is a possibility of recovering unpaid rent, he or she can file for _____________ of property. It is defined as the removal of property from the owner of the property until the problem is resolved, i.e., the rent paid plus the renter must pay for the charges for filing the order of _____________. The court will require that the property be held by the landlord in an approved location. Also, the total value of the property removed must be in line with the amount of money owed. As soon as the outstanding rent balance is paid, the property is returned to its owner. The order to _________ is obtained by taking a copy of the lease and all records of unpaid rent, including late notices, to court for approval.
Right to sequester
sequestration
sequester
. The lessor has the _____ to ____, ________ or otherwise ________ his ______ in the leased property without the consent of the lessee. Generally, the new owner acquires the property subject to the conditions of the existing lease. He assumes all the responsibilities of the original lessor toward the lessee, as well as all his rights.
Right to Sell, mortgage or transfer his interest
The lessor also has the _____ to ______ ____________ made on the premises by the lessee, with the exception of trade fixtures, which the lessee may remove prior to the termination of the lease.
right to retain improvements
______ of __________, ___ and _____ _________. The lessor assigns the right of possession for the term of the lease. The right of possession is limited by the reversionary interest of the lessor. The lessee
may not do anything to damage the property, commit waste, or alter the property without the permission of the lessor, even if the improvements increase the property’s value.
Rights of possession, use and quiet enjoyment
_____ to ______ or ______. Unless otherwise stated in the lease, the lessee may transfer his leasehold interest to another party, either by assignment or subletting. To assign a leasehold interest means to
transfer it totally, for the duration of its term, to another party. Although all of the interests of the assignor, (the original lessee), transfer to the assignee, the landlord can still hold the assignor responsible for unpaid rent should the assignee default.
Right to assign or sublet
__________ involves a similar transferring of leasehold interest, but with the lessee retaining some reversionary interest in the leasehold. Typically, in a __________ arrangement, a third party, the sublessee,
takes over the lease for only a portion of the remaining term. The responsibilities of the sublessee are toward the original lessee, who himself remains the responsible tenant of the lessor. The original lessee thus functions in a double capacity: he is lessor to the sublessee, and lessee to the original lessor. An
arrangement of this type is known as a ________ _____.
Subletting
sandwich lease
_____ to ________. A lessee may also transfer his leasehold interest in a business property by mortgage, that is, by conveying it as security on a loan. In some cases, the person receiving the leasehold, the mortgagee, acts as assignee and pays rent to the lessor. Usually, however, he assumes the role of a sublessee with the original lessee remaining personally liable for payment of rent.
Right to mortgage
This is the most common type of leasehold interest. A _______ for _____ is a leasehold that runs for a determinate length of time, up to a specified date of
expiration. The definite term is absolutely necessary for the creation of this type of tenancy. Despite its name, a _______ for _____ may be of any specified length - a day, month, year, ten years, or whatever the lessor and lessee agree upon. The tenancy for years automatically terminates upon the expiration of the
lease, so neither the lessor nor the lessee need give notice prior to its termination. No renewal of the tenancy occurs without the completion of a new lease. This type of lease is used for hotel rooms.
Tenancy (or estate) for years
Like the tenancy for years, the ________ _______, also known as estate from period to period, is a leasehold of determinate length, of so many days, months, or years.
Unlike the tenancy for years, however, the ________ _______ renews automatically when it expires for another term of equal length, unless the lessor or the lessee acts to terminate it. They terminate only when one party has given sufficient notice to the other. Sufficient notice may mean anything from a week to three months, depending upon individual state law and the term of the tenancy involved. ________ _______ automatically ______ unless action is taken to terminate it. Whereas the tenancy for years automatically _________ at a given time unless a new lease is drawn.
Periodic tenancy (or estate)
renews
terminates
Periodic tenancies occasionally arise when the lessee in a tenancy for years remains on the premises after his lease expires, without having signed a new lease. Such a lessee is known as a ________ ______.
If the lessee continues to pay rent, and the lessor accepts his rent payment, a periodic tenancy is created. The new tenancy is considered to have the same length as the original tenancy for years, and will be
renewed automatically at the end of its term, as long as neither party acts to terminate it.
holdover tenant
The _______ at ____ is a leasehold that runs indefinitely. It has no determinate period in days, months, or years, nor any specific date of termination. The will of the parties
is the basis of the _______ at ____. So long as lessor and lessee agree to it, the tenancy continues to exist. In some states, _______ at ____ can be terminated by either party without notice. Most states, however, require that sufficient notice, usually the length of a rent-paying period, be given. _______ at ____ also terminate upon the death of either the lessor or the lessee.
Tenancy (or estate) at will
The _______ at __________ is an interest formed by a tenant’s occupying a premises without the landlord’s consent. It is the lowest estate interest recognized by law. In a _______ at __________, the tenant’s interest is solely possessory. He has no rights deriving from any existing agreement with the landlord.
tenancy at sufferance
A _______ at _________ may arise in several ways:
a. by a tenant for years staying beyond the term of his lease.
b. by a periodic tenant or a tenant at will refusing to vacate upon notice.
c. by a person, on the basis of some prior interest, occupying the premises without
present agreement.
In each instance, the tenant occupies the premises without legal right, and without the landlord’s permission.
tenancy at sufferance
In dealing with a ______ at __________, the landlord can do one of three things.
1. He can evict the tenant, either summarily, or as some states require, with due notice given.
2. He can conclude a new leasing agreement with the tenant, thereby changing the nature of the tenancy,
or
3. He can accept the tenant’s rent without acknowledging his right to occupy the premises. However, this can result in a periodic tenancy being created, since the acceptance of rent is generally taken to imply consent to the fact of the tenant’s possession.
tenant at sufferance
The renewal period of leases depends on the state where the property is located. ____ ______ are valid for up to one year. Beyond one year they must be in writing.
Oral leases
- Names of lessor and lessee.
- Description of lease property.
- Term of lease with beginning and ending dates.
- Amount of rent.
- Purposes for which the premises may be used.
- Mutual consent.
- Legal objective.
- Signatures of all parties.
Other provisions which may be included are:
Options to renew
Lessor’s right of re-entry
Payment of additional charges by lessee
Lessee’s right of sublease or assignment
Alterations and improvements
Lease Agreement
_____ _____ - Also known as the fixed lease, straight lease, and the flat lease, it requires rent payment in fixed amounts at specified intervals throughout the lease’s term. Changing tax rates, maintenance costs, insurance or mortgage expenses do not affect the fixed rate of the lease. The
lessee pays the same amount periodically for the duration of the term. The lessor uses the lessee’s rent for property expenditures and personally absorbs the burden of fluctuation costs. Because inflation can adversely affect the lessor’s rate of return on fixed rate rentals, straight leases are usually negotiated for
short periods of time. They are the most common type of lease for short-term apartment rentals. An __________ ______ may be added to cover increases in expenses.
Gross Lease
escalation clause
The ___ _____ is similar in some ways to the gross lease. In a ___ _____, the lessee agrees to pay a fixed amount of rent, plus a share or all of the property’s operating expenses, that is, taxes, maintenance, insurance, etc. The lessor is freed from management and maintenance responsibilities, as well as from the burden of inflationary operating costs. ___ _____ are widely used for commercial and
industrial renting. They are the most common type of long-term lease.
net lease
Sometimes in leases for offices and industrial properties, an _________ or _____________ ______ is included in the lease. This allows the landlord to make the tenant pay, for example, for increases in utility charges, maintenance, and property taxes along with the base rent. This type of arrangement is called a ______ ___ _____. If the tenant pays for only two of these charges, it is a ______ ___ ____.
escalator or participation clause
triple net lease
double net lease
An _______ ____ _________ may be included which limits the amount by which property expenses may increase. A ceiling to property expense increases must be specified in the provision.
expense stop provision
This is a type of variable rent lease. It is used mostly with retail businesses. The
__________ _____ bases its rental upon a percentage of the business’s gross income, or on a flat rate charge - the base rent plus a percentage of the business gross.
percentage lease
The __________, _______, or step-up _____ provides for the rent to be increased at set dates in the future. These leases often provide favorable leasing terms for new
businesses. At the outset of the term, when the business is least secure financially, the rent is lowest. Later, as the business establishes itself, the rent increases. These leases are also attractive to the lessor, since they protect him against the profit-draining effects of inflation.
graduated or stepped lease
In an _____ _____, the rent is tied to some external standard, usually the government
cost-of-living index, the consumer price index, or the prime lending rate. As the index standard rises or falls, rent will be adjusted accordingly.
index lease
In a ___________ _____, the property is actually reappraised periodically and the
rental rate is adjusted, in other words, increased or decreased, according to the amount of the appraisal.
reappraisal lease
A ______ _____ is similar in form to a long-term net lease. The lessee pays rent at a
fixed rate, plus property expenses. In a ______ _____, however, the lessee rents only an unimproved parcel of land from the lessor, generally with the stipulation that he, the lessee, erect a building or make
some other value-enhancing improvement on the property. Different types of ______ ______ are used in
different leasing circumstances. An agricultural ______ _____, for example, generally requires that the lessee produce crops, raise livestock, etc. on the lease property, with a specific share of the stock or produce going to the lessor. Similarly, an oil and gas ______ _____ will require that the lessee pay the lessor a percentage of the profits to be derived from oil or gas extraction. Most commercial ______ ______ run fifty years or more. Such lengthy terms are necessary if the lessee is to realize a satisfactory return on
his investment.
ground lease
The ____-_________ is both a species of lease agreement and a form of property
financing. Most ____-_________ agreements involve commercial and industrial properties of high investment value. In a ____-_________ agreement, an owner, frequently a business or corporation, sells
his property to a buyer, who then agrees to lease it back to the selling owner. The seller-lessee thus retains use of the property while freeing his capital for investment and expansion, generally to the benefit of the leased property. At the same time, the buyer-lessor gains a secure, long-term investment, a reliable
tenant and significant tax advantages.
sale-leaseback
___________ _____ – A lease given by the corporation that owns a cooperative apartment building to the shareholder for the shareholder’s right as a tenant to an individual apartment.
Proprietary lease
Straight Lease Who Pays What?
Basic Rent
Property Expenses
Lessee
Lessor
Net Lease Who Pays What?
Flat Rate & Property Expenses
Nothing
Lessee
Lessor
Percentage Who Pays what?
Lease Flat Rate + % of Income
All, Some or none of Property Expenses
Lessee
Lessor
Ground Lease Who Pays What?
Flat Rate + Property Expenses & Improvements
Nothing
Lessee
Lessor
Graduated Lease Who Pays What?
Rent Rate Adjusted at Set Dates in Future
Nothing
Lessee
Lessor
Index Lease Who Pays What?
Rent Rate Dependent on External Index
Property Expenses
Lessee
Lessor
Leases may be terminated in a variety of ways. The following are the most important ways in which leases are terminated:
1. Expiration of the lease term.
2. Agreement of the parties.
3. Breach of conditions. - e.g., non-payment of rent, unlawful use of premises, etc.
4. Condemnation - that is, the property is acquired by the government.
5. Notice - applies to periodic tenancies and tenancies at will
6. Destruction of the Property.
7. Bankruptcy of the lessee.
8. Foreclosure of the lessor’s mortgage.
9. Eviction.
Termination of Leases
______ ________- dispossession resulting from the direct, intentional action of the lessor.
actual eviction
____________ ________ - dispossession resulting from the lessor’s failure to maintain his part of the lease agreement.
constructive eviction
The basic functions of a property manager are:
a. to collect rents
b. take care of repairs
c. produce income and maintain the value of the property
d. handle difficult tenants
c. produce income and maintain the value of the property
The most common type of leasehold interest is:
a. tenancy (or estate) for years
b. periodic tenancy
c. tenancy at will
d. tenancy at sufferance
tenancy (or estate) for years
A lease is a:
a. freehold estate
b. non-freehold estate
c. fee simple estate
d. none of the above
b. non-freehold estate
A lease in which the lessee pays a fixed amount of rent plus a share of the operating expenses is a:
a. gross lease
b. percentage lease
c. net lease
d. index lease
c. net lease
A lease in which the rent is a percentage of the business’s gross income is a:
a. percentage lease
b. net lease
c. escalated lease
d. gross lease
a. percentage lease
A property management agreement would be an example of a:
a. specific contract
b. lease contract
c. general agency contract
d. service contract
general agency contract
Dispossession resulting from the lessor’s failure to maintain his part of the lease agreement is:
a. actual eviction
b. constructive eviction
c. default eviction
d. direct eviction
b. constructive eviction
Which of the following are ways of terminating a lease?
a. eviction
b. destruction of the property
c. expiration of the lease term
d. all of the above
d. all of the above
