PSI-Chapter 18 - Leases

Question 1

A Lease is a contract between who?

Answer 1

A LESSOR (the owner) of real estate, or landlord) and a LEASEE (tenant).

Question 2

The statute of frauds in most states requires lease agreements for more than_______ to be in writing to be enforceable.

Answer 2

ONE YEAR.

In general, oral leases for one year or less that can be performed within a year of their making are enforceable

Question 3

What is an ESTATE FOR YEARS?

Answer 3

An estate (tenancy) for years is a leasehold estate that continues for a DEFINITE period. (sometimes called an estate for term - and always has specific starting and ending dates.

Question 4

No notice is requires to terminate the ESTATE FOR YEARS lease because….

Answer 4

the lease agreement states a specific expiration date. when the date comes, the lease expires, and the tenant’s rights are extinguished.

Question 5

What is an ESTATE FROM PERIOD TO PERIOD?

Answer 5

An estate (tenancy) from period to period, (or periodic tenancy) is created when the landlord and tenant enter into an agreement for a INDEFINITE TIME - that is, the lease does not contain a specific expiration date. 
Note:  such a tenancy is created initially to run for a definite amount of time - for instance, month to month, week to week, or year to year -but the tenancy continues indefinitely until proper notice of termination is given.

Question 6

A PERIODIC TENANCY (period to period) is characterized by…

Answer 6

CONTINUITY because it is automatically renewable under the original terms of the agreement until one of the parties gives notice to terminate.

Question 7

An ESTATE FROM PERIOD TO PERIOD also might be created when a tenant with an ESTATE FOR YEARS remains….

Answer 7

in possession, or holds over, after the lease term expires. If no new lease agreement has been made a HOLDOVER TENANCY is created.

Question 8

What is an ESTATE AT WILL?

Answer 8

An estate (tenancy) at will gives the tenant the right to possess property with the landlord's consent for an UNSPECIFIED or UNCERTAIN term.  
An estate a will is a tenancy of indefinite duration; it continues until it is terminated by either party giving proper notice.  
Note:  An estate at will is automatically terminated by the death of either the landlord or the tenant.

Question 9

What is an ESTATE AT SUFFERANCE?

Answer 9

An estate (tenancy) at sufferance arrises when a tenant who lawfully took possession of real property continues in possession of the premises without the landlord's consent after the right of possession has expired.  
This estate can arise when a TENANT FOR YEARS fails to surrender possession at the lease's expiration.

Question 10

What are the REQUIREMENTS OF A VALID LEASE?

Answer 10

(These are essentially the same as in any other contract)

1. CAPACITY TO CONTRACT - legal age and sound mind.
2. LEGAL OBJECTIVE - the objective of the lease must be legal.
3. OFFER AND ACCEPTANCE - the parties must reach a mutual agreement on all the terms of the contract.
4. CONSIDERATION - the lease must be supported by and exchange of promises.

Question 11

What is ACCESSIBILITY?

Answer 11

The FHA (Fair Housing Act) makes it illegal to discriminate against a prospective tenant of the basis of the tenant's REAL or PERCEIVED DISABILITY.  A tenant with a disability must be permitted to make reasonable modifications to a property at the tenant's own expense.  The landlord may require that is be restored to original condition at the end of the lease term.  
Note:  The ADA (Americans with Disabilities Act) will also affect a landlord's obligations when a commercial property or place of public accommodation is being leased.

Question 12

What is MAINTENANCE OF PREMISES?

Answer 12

Residential tenants do not have to make any repairs, but they must return the premises in the same condition they were received, with allowances for ordinary wear and tear.

Question 13

What are the basic three TYPES OF LEASES?

Answer 13

1. GROSS LEASE - the tenant pays a fixed rent and some or all of the utility expenses, while the landlord pays all taxes, insurance, repairs, any other utility expenses, and maintenance connected with the property (property charges or operating expenses).
   Note: Residential and commercial office leases are most often gross leases.
2. NET LEASE - the tenant pays all or most of the property expenses, such as hazard insurance, property taxes, and/or common area maintenance (CAM) charges, in addition to the rent.
3. PERCENTAGE LEASE - either a gross lease or a net lease may be a percentage lease. This type of lease is generally used for retail business leases. The rent is based on a minimum fixed rental fee plus a percentage of the gross income received by the tenant doing business on the leased property. The percentage charged is negotiable and varies depending on the nature of the business, location of the property, and general economic conditions.

Question 14

A VARIABLE LEASE….

Answer 14

A lease that may allow for increases in the rental charges during the lease term.

Question 15

A GRADUATED LEASE…

Answer 15

A lease that provides for specified rent increases at set future dates.

Question 16

An INDEX LEASE…

Answer 16

Allows rent to be increased or decreased periodically based on changes in the consumer price index or some other indicator.

Question 17

What is a GROUND LEASE?

Answer 17

When a landowner leases unimproved land to a tenant who agrees to erect a building on the land, the lease is usually called a ground lease. It is most often used in commercial and industrial property development.

Question 18

GROUND LEASES are generally…

Answer 18

NET LEASES (triple net)… the lessee must pay rent on the ground, as well as real estate taxes, insurance, upkeep, utilities, and repairs. At the end of the the lease term, any tenant-build structures on the property usually become the property of the landlord.

Question 19

What is an OIL AND GAS LEASE?

Answer 19

A special lease agreement must be negotiated when an oil company leases land to explore for oil and gas.

Question 20

What is a LEASE PURCHASE?

Answer 20

A lease purchase is used when a tenant wants to purchase the property but is not yet able to do so (maybe can obtain financing etc).
A down payment is paid, which may or may not be refundable, and part of the periodic rent may be applied toward the purchase price of the property.

Question 21

What is a SALE AND LEASEBACK?

Answer 21

In a sale and leaseback, the property owners sell the property and ten lease it back for an agreed period and rental.

Question 22

What is SUIT FOR POSSESSION - ACTUAL EVICTION?

Answer 22

When a tenant breaches a lease or improperly retains leased premises, the landlord may regain possession through a legal process known as actual eviction. The landlord must serve notice on the tenant before commencing the lawsuit. Most lease terms require at least a 10-day notice in the case of default.

Question 23

What is TENANTS’ REMEDIES - CONSTRUCTIVE EVICTION?

Answer 23

If a landlord breaches any clause of a lease agreement, the tenant has the right to sue and recover damages against the landlord. If the leased premises become unusable for the purpose stated in the lease, the tenant may have the right to abandon them. This action is called CONSTRUCTION EVICTION, terminates the lease agreement.