Real Estate Interests - Part 2 - Chapters 5-6

Question 1

Identify the different types of tenant improvements

Answer 1

Tenant improvements are improvements made to leased property to meet the needs of the occupying tenant.

The landlord’s right to improvements added to the property or paid for by the tenant depend upon whether:

• the tenant improvements are permanent (built in) or temporary (free-standing)
• the lease agreement requires the tenant to remove improvements and restore the premises.

All improvements attached to the building become a part of the real estate, except for trade fixtures.

Examples of improvements that become a part of real estate include:

• built-ins (for example central air conditioning and heating, cabinets and stairwells)
• fixtures (for example electrical and plumbing)
• walls, doors and drop ceilings and
• attached flooring (for example carpeting tile or linoleum)

Question 2

Understand the landlord’s rights regarding tenant improvements on the termination of a lease

Answer 2

The landlord’s right to tenant improvements depends upon whether the tenant improvements are a fixture or a trade fixture, and whether the further improvements provision in the lease agreement requires the tenant to remove improvements and restore the premises.

Question 3

Determine the landlord or tenant’s obligations to complete or pay for the construction of tenant improvements.

Answer 3

A tenant or landlord liability for failing to construct or pay for tenant Improvement depends on whether the tenant improvements are mandatory or permissive.

Question 4

tenant improvements

Answer 4

Tenant improvements are improvements made to leased property to meet the needs of the occupying tenant

Question 5

fixture

Answer 5

Fixtures are personal property permanently attached to real estate and conveyed with it. Improvements made by a tenant that are permanently affixed to the real estate are called fixtures, and become part of the real estate. Fixtures remain with the property on expiration of the tenancy, unless the lease agreement explicitly State the tenant is to remove the tenant improvements and the property restored to its original condition on vacating.

Question 6

further-improvements provision

Answer 6

A further improvements provision is a commercial lease provision which allows a landlord to retain tenant improvements or require the restoration of the property to its original condition upon expiration of the lease.

Question 7

mandatory improvement

Answer 7

A MANDATORY IMPROVEMENT is an improvement required to be made by the tenant under the terms of the rental or lease agreement. Lease agreement provisions may obligate a tenant to construct or install Improvement on the rented property, whether improved or unimproved. The time period for commencement and completion needs to be provided for in the lease agreement. When not agreed to, a reasonable period of time is allowed.

Question 8

permissive improvement

Answer 8

PERMISSIVE IMPROVEMENTS are non-mandatory improvements the tenant is authorized to complete without further landlord consent. Some lease agreement Provisions allow a tenant to make necessary improvements without the landlord’s further consent. These improvements are not specifically mandated, or required to be completed in exchange for a reduction in rent. This non-mandatory type of improvement is called a permissive Improvement.

Question 9

reversion

Answer 9

A REVERSION is the conveyance of fixtures from a tenant to landlord on expiration of a lease. When the lease expires, fixtures become the landlord property. The landlord takes possession of the fixtures as part of the real estate forfeited or surrender to the landlord, unless the lease agreement provides for the restoration or permits removal by the tenant. The conveyance of fixtures from tenant to landlord on expiration of the lease is called reversion.

Question 10

trade fixtures

Answer 10

TRADE FIXTURES are fixtures used to render services or make products in the trade or business of a tenant. Conversely to reversion, trade fixtures do not revert to the landlord on expiration of the lease. A trade fixture is an improvement the tenant attaches to the real estate that is unique to the operation of the tenants business, not the use of the building.

Question 11

mechanic’s lien

Answer 11

A MECHANIC’S LIEN is a lien entitling a contractor or subcontractor to foreclose on a job site property to recover the amount due and unpaid for labor and materials they provided. A mechanic’s lien by a contractor for non-payment initially attaches to the tenants leasehold interest in the property. However, the mechanics lien for unpaid labor and materials may also attached to the fee simple interest held by the landlord when the landlord or the landlord’s property manager:

• acquires knowledge the construction is taking place and
• fails to post and record a notice of non-responsibility

Question 12

notice of NON-responsibility

Answer 12

A NOTICE OF NONRESPONSIBILITY is a notice used by a landlord to declare that they are not responsible for any claim arising out of the improvements the tenant is constructing on their property. A notice of non-responsibility is a written notice which needs to be:

• posted in a conspicuous place on the premises within 10 days after the landlord or their property manager first-hand knowledge of the construction
• recorded with the county office within the same 10 day.

Note a landlord who becomes aware of the construction and fails to post and record the notice of non-responsibility is not personally liable to the contractor. Rather, the contractor may only lien the landlord interest in the real estate and foreclose on their mechanics lien to collect for unpaid labor and materials delivered to improve the property under contract with the tenant.

Question 13

Differentiate between the four distinct possessory types of tenancies.

Answer 13

A fixed term tenancy is the result of an agreement between the landlord and the Tenant for a fixed rental period.

A periodic tenancy automatically continues for equal, successive periods of time, such as a week or a month.

In a tenancy at will, possession is delivered to the tenant with the landlord’s knowledge and consent for an indefinite and unspecified period, usually without requiring rent.

A holdover tenancy retains possession of the premises without any contractual right to do so.

A tenant’s possessory interest in real estate can shift from one type of tenancy to another based on conduct of the landlord.

The type of notice required to terminate occupancy depends on the period of the tenancy or occupancy, the period of the occupancy, the property type and location.

Question 14

Understand the rights held under each type of tenancy

Answer 14

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Question 15

Determine how a tenancy is established or change.

Answer 15

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Question 16

Serve the proper notice required to terminate a tenancy.

Answer 16

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Question 17

trespasser

Answer 17

A TRESPASSER is a person who occupies a property without the owner’s transfer of the right to occupy. To initially establish a tenancy, a landlord needs to convey to the tenant the right to occupy the real estate. The right is conveyed orally, in writing or by the landlords conduct, called the grant. When the landlord does not transfer the right to occupy, the person who takes possession as the occupant is a trespasser.

Question 18

unlawful detainer

Answer 18

An UNLAWFUL DETAINER is the unlawful possession of a property. A holdover tenancy occurs when a tenant unlawfully continues in the possession of the property after their right to occupy has expired. This unlawful possession of the property without contractual right is called unlawful detainer (UD). A landlord needs to file a UD action in court to evict a holdover tenant.

Question 19

fixed term tenancy

Answer 19

A FIXED TERM TENANCY is a leasehold interest which lasts for the specific lease period set forth in a lease agreement. A lease agreement has a commencement date and an expiration date.

A fixed term tenancy automatically terminates at the end of the lease period. A fixed term tenancy is also called a lease or estate for years.

Question 20

lease agreement

Answer 20

A lease agreement is the written document which sets the terms of a fixed term tenancy.

Question 21

periodic tenancy

Answer 21

A periodic tenancy is a leasehold interest which lasts for automatic successive rental periods of the same length of time terminating upon notice from either party. The length of each successive. Of time is determined by the interval between scheduled rental payments. A periodic tenancy is intentionally created by a landlord and tenant entering into a rental agreement. A rental agreement sets the terms and conditions to be met during a periodic tenancy

Question 22

rental agreement

Answer 22

A RENTAL AGREEMENT is the written document which sets the terms and conditions of a periodic tenancy.

To terminate a periodic tenancy the notice period needs to be at least as long as the interval between scheduled rental payments. The periods need not exceed 30 days, with the exception of the 60-day notice needed to terminate a residential periodic tenancy when the tenant has occupied the property for more than 12 months.

Question 23

holdover tenant

Answer 23

A HOLDOVER TENANT is a tenant who retains possession of the rented premises after the right of possession has been terminated, call the TENANT AT SUFFERANCE. If retains possession of the premises without any contractual right to do so. They’re tenancy has previously been terminated. Thus, the landlord is not required to provide a holdover tenant with any additional notice prior to commencing eviction proceedings.

Question 24

holdover rent

Answer 24

HOLDOVER RENT is rent owed by a holdover tenant for the tenants unlawful detainer of the rented premises as a tenant at sufferance. A holdover tenant no longer owes rent under the expired lease or terminated rental agreement since they no longer have the right of possession. However the rental or lease agreement usually includes a holdover rent provision which calls for a penalty rate of daily rent owed for each day the tenant holds over. If a lease agreement does not contain a holdover rent provision the tenant owes the landlord the reasonable rental value of the property which is usually the daily rate owed for each day the tenant holds. Holdover rent is due and payable after the tenant vacates or is he evicted. At the time the landlord recovers possession, a hold over period is known. Only then can the amount owed be determined and demand it. If it is not paid on demand, it may be collected by obtaining a money judgment.

Question 25

transient occupancy

Answer 25

TRANSIENT OCCUPANCY is the occupancy of a vacation property, hotel, motel, Inn, boarding house, lodging house, terrorist home or similar sleeping accommodation for a period of 30 days or less. This type of occupant is classified as a guest, also called a transient occupant. a transient occupancy occupied property known as lodging, accommodation or unit, not space or premises. The property is not called a rental. The term rental implies a landlord tenant relationship exists. Significantly, landlord tenant law does not control transient occupants. a guest occupancy is labeled a stay, not possession.

Question 26

guest occupancy agreement

Answer 26

A GUEST OCCUPANCY AGREEMENT is the written document which sets the terms of a transient occupancy. The contract entered into for lodging is usually called a guest occupancy agreement, but never a rental agreement or lease agreement. Guess pay a daily rate, not a daily or weekly rent. They check in and they check out. Unlike a tenant, a guest does not vacate the premises, again they check-in or check-out.

When a guest fails to depart at the schedule check out hour on the date agreed, no holdover tenancy is created. Thus, an unlawful detainer does not exist as with a tenancy conveyed by a rental or lease agreement. A unlawful detainer action or Court involvement is not required to remove a guess. To remove a guest who fails to timely depart the manager May intervene to remove the guest, a solution called SELF-HELP. If the managers intervention might cause a breach of the peace, the manager may call the police. The police or the sheriff’s assist, without the need for a court order, to remove the guest and prevent a danger to persons or property during the re-keying, removal of possessions and clean up for arrival of the next guest. Transient occupancy include all occupancies that are taxed as such by local city or county ordinances.