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Real Estate 101 > Topic 10 > Flashcards

Topic 10 Flashcards

Property Management and Leasing

1
Q

a person who manages property for an owner as an agent.

A

property manager

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2
Q

Property manager’s role. Owing a special obligation of trust, accountability, and loyalty to the person employing him.

A

fiduciary role

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3
Q

The basic functions of a property manager are:

A
  1. ) To produce the best possible net operating income

2. ) To maintain and increase the value of the principal’s investment

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4
Q

3 types of properties that require management:

A
  1. ) Residential
  2. ) Retail and commercial
  3. ) Industrial
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5
Q

Activities of a property manager:

A
  1. ) Show and lease space
  2. ) Solicit and qualify potential tenants
  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
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6
Q

the basis of the manager-owner agreement. It’s the first step in taking over the management of a property. Creates an agency relationship b/t the owner of the property and the property manager.

A

The management agreement

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7
Q

The management agreement is considered a ____

A

service contract

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8
Q

A property manager is said to be a _____.

A

General Agent

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9
Q

The management contract should be in writing and should contain the following:

A
  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
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10
Q

Both a contract and an instrument of conveyance. A NON-FREEHOLD ESTATE

A

Lease

  • more than one year..in writing
  • less than, oral permitted
  • not usually required, long duration leases (3+ yrs.) should be recorded
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11
Q

Contracts to pay rent to the lessor

A

lessee

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12
Q

conveys an interest in the property to the lessee

A

lessor

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13
Q

In most states, including LA, does the lessee have to sign the lease in order for it to be valid?

A

No

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14
Q

The lease myst be delivered by the lessor to the lessee and accepted by the lessee. Acceptance of the lease is signified by:

A
  1. ) possession of the lease
  2. ) payment of rent
  3. ) occupying the premises
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15
Q

Rights of the lessor:

A
  1. ) Reversionary interest
  2. ) Right of re-entry
  3. ) Right to consideration
  4. ) Right to eviction
  5. ) Right to sequester
  6. ) Right to sell, mortgage, or transfer his interest
  7. ) Right to retain improvements
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16
Q

whatever the lessor grants to the lessee, he will recover in the future

A

reversionary interest

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17
Q

if the lessee breaches agreement in certain ways, or if exceptional circumstances require it, such as maintenance emergencies, the lessor may enter without the lessee’s consent

A

right of re-entry

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18
Q

the right to collect rent from the lessee as agreed upon in the lease. The lessee’s failure to pay rent constitutes as a breach of the lease. When a lessee falls behind on his rent, the lessor must first serve notice for remedy of the default. If no corrective action is taken, the lesson may then take the lessee to court to recover damages.

A

right to consideration

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19
Q

When the conditions of the lease are breached by the lessee, the lessor may recover possession of the premises through court-ordered eviction

A

right to eviction

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20
Q

An alternative to eviction. If the property manager thinks there’s a possibility of recovering unpaid rent, he of she can file for _____ of property. The removal of property from the owner of the property until the problem is resolved.

A

sequestration

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21
Q

The court will require the property be held by the landlord in an approved location. 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.

A

right to sequester

The order to sequester is obtained by taking a copy of the lease and all records of unpaid rent, including late notices, to court for approval.

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22
Q

The lessor has a right to do this 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

A

Right to sell, mortgage, or transfer his interest

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23
Q

The lessor has the _____ 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

A

Right to retain improvements

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24
Q

Rights of the lessee:

A
  1. ) Rights of possession, use and quiet enjoyment
  2. ) Right to assign or sublet
  3. ) Right to mortgage
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25
Q

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

A

Rights of possession, use and quiet enjoyment

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26
Q

Unless otherwise stated in the lease, the lessee may transfer his leasehold interest to another party, either by assignment or subletting.

A

Right to assign or sublet

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27
Q

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.

A

To assign a leasehold interest

28
Q

involves a similar transferring of leasehold interest, but with the lessee retaining some reversionary interest in the leasehold.

A

Subletting

29
Q

Typically, in this 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 _____

A

sandwich lease

30
Q

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.

A

right to mortgage

31
Q

Types of leasehold interests:

A
  1. ) Tenancy (or estate) for years
  2. ) Periodic tenancy (or estate)
  3. ) Tenancy (or estate) at will
  4. ) Tenancy (or estate) at sufferance
32
Q

Most common type of leasehold interest. 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. May be of any specified length - a day, month, year, ten years, or whatever the lessor and lessee agree upon. 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.

A

Tenancy (or estate) for years

33
Q

A leasehold of determinate length, of so many days, months, or years. Renews automatically when it expires for another term of equal length, unless the lessor or the lessee acts to terminate it. 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.

A 
Periodic tenancy (or estate) or
estate from period to period
34
Q

Whereas the tenancy for years automatically ____ at a given time unless a new lease is drawn, the periodic tenancy automatically _____ unless action is taken to terminate it.

A

terminates

renews

35
Q

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.

A

holdover tenant

36
Q

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 it. So long as lessor and lessee agree to it, the tenancy continues to exist. In some states, 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. Terminate upon the death of either the lessor or the lessee.

A

Tenancy (or estate) at will

37
Q

An interest formed by a tenant’s occupying a premises without the landlord’s consent. It is the lowest estate interest recognized by law. The tenant’s interest is solely possessory. He has no rights deriving from any existing agreement with the landlord.

A

Tenancy (or estate) at sufferance

38
Q

A tenancy at sufferance may arise in several ways:

A

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.

39
Q

In dealing with a tenant at sufferance, the landlord can do one of three things:

A
  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.
40
Q

The renewal period of leases depends on the state where the property is located. Oral leases are valid up to ___. Beyond one year they must be in writing.

A

one year

41
Q

In Louisiana, a LEASE IS ASSUMED to be _____ if no time limit is specified. If a lease with a time limit expires and the lessee stays there it is also presumed to be ______.

If there is no other time limit included in the lease, such as a 30 day notice to vacate or a 30 day notice to terminate the lease, the owner must give the tenant ____ NOTICE and the same holds true for the tenant. He must give the landlord ____ notice before vacating the premises.

To EVICT, the landlord must give ____ notice.

A

month-to-month

10 days

5 days

42
Q

In Louisiana, leases are ___ or _____.

A

farm or non-farm

43
Q

Are for agricultural purposes. These leases are for one year and when they expire they automatically renew for another year.

A

Farm leases

44
Q

Include residential, commercial and industrial leases, renew month to month unless stated otherwise.

A

Non-farm leases

45
Q

Are enforceable in Louisiana to the point that they can be proved. In other words, if it can not be proved, it is an unenforceable contract.

A

Oral leases

46
Q

THE LEASE AGREEMENT:

A
  1. Names of lessor and lessee.
  2. Description of lease property.
  3. Term of lease with beginning and ending dates.
  4. Amount of rent.
  5. Purposes for which the premises may be used.
  6. Mutual consent.
  7. Legal objective.
  8. Signatures of all parties.
47
Q

Other provisions which may be included are:

A
  1. ) Options to renew
  2. ) Lessor’s right of re-entry
  3. ) Payment of additional charges by lessee
  4. ) Lessee’s right of sublease or assignment
  5. ) Alterations and improvements
48
Q

Classification of leases:

A
  1. ) Gross Lease
  2. ) Net Lease
  3. ) Percentage Lease
  4. ) Graduated or stepped lease
  5. ) Escalated Lease
  6. ) Index Lease
  7. ) Reappraisal Lease
  8. ) Ground Lease
  9. ) Sale-Leaseback
  10. ) Proprietary Lease
49
Q

the gross lease 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.

A

Gross Lease or

the fixed lease, straight lease, and the flat lease

50
Q

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. Net leases are widely used for commercial and industrial renting. They are the most common type of long-term lease.

A

net lease

51
Q

Sometimes in leases for offices and industrial properties, an _______ 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 _____.

If the tenant pays for only two of these charges, it is _____.

A

escalator or participation clause

a triple net lease

a double net lease

52
Q

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.

A

expense stop provision

53
Q

This is a type of variable rent lease. It is used mostly with retail businesses. 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.

A

percentage lease

54
Q

Provides for the rent to be increased at set dates in the future. 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. Attractive to the lessor, since they protect him against the profit-draining effects of inflation.

A

graduated, stepped, or step-up lease

55
Q

In this type of lease an escalator clause provides for periodic increases in rental rates.

A

Escalated Lease

56
Q

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.

A

index lease

57
Q

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.

A

reappraisal lease

58
Q

similar in form to a long-term net lease. The lessee pays rent at a fixed rate, plus property expenses. 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 are used in different leasing circumstances

A

ground lease

59
Q

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.

A

An agricultural ground lease

60
Q

will require that the lessee pay the lessor a percentage of the profits to be derived from oil or gas extraction.

A

oil and gas ground lease

61
Q

Most commercial ground leases run ____. Such lengthy terms are necessary if the lessee is to realize a satisfactory return on his investment.

A

fifty years or more

62
Q

both a species of lease agreement and a form of property financing. Most involve commercial and industrial properties of high investment value. In this type of 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.

A

sale-leaseback agreement

63
Q

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.

A

Proprietary lease

64
Q

The following are the most important ways in which leases are terminated:

A
  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.
65
Q

dispossession resulting from the direct, intentional action of the lessor.

A

actual eviction

66
Q

dispossession resulting from the lessor’s failure to maintain his part of the lease agreement.

A

constructive eviction

Real Estate 101 (11 decks)

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