Unit 1 Chapter 21

Question 1

A lease is

Answer 1

an agreement in which property owners give parties the right to use or occupy their real property for a
specific period of time in return for consideration.

Question 2

If freehold means ownership, non-freehold means

Answer 2

non-freehold means rights or interests in real property not involving ownership. These rights are normally conveyed by a lease which conveys a leasehold interest or estate to the tenant that grants the following rights during the lease term:
• Exclusive possession and occupancy
• Exclusive use
• Quiet enjoyment
• Profits from use

Question 3

The tenant is obligated to

Answer 3

pay rent, maintain property condition, comply with rules and regulations, and return the property to the landlord at the end of the term.

Question 4

Landlord’s Rights and Obligations

Answer 4

• Lease conveys a leased fee estate to the owner.
• Rights include rent, repossession at the end of the term, rights to monitor premises.
• Landlord is obligated to provide building support and services; maintain property condition.
• Landlord may sell, assign, or mortgage the leased fee interest.

Question 5

leased fee estate,

Answer 5

In conveying the leasehold estate, the landlord acquires a leased fee estate, which entails the rights to receive
rent, re-possess the property following the lease term, and monitor the tenant’s obligations to maintain the
premises. The landlord’s obligations are principally to provide the necessary building support and services and
maintain the condition of the property.

Question 6

Leaseholds are of four principle types when considered from the point of view of duration of the lease

Answer 6

1. Estate for years—specific term
2. Estate from period-to-period—automatic renewal of term
3. Estate at will—no specified term
4. Estate at sufferance—tenancy without consent and no term

Question 7

Estate for years

Answer 7

• Specific period of time with beginning and ending date
• Does not require notice to terminate at end of term
• Renewal is not automatic

Question 8

Estate from period-to-period

Answer 8

• Called periodic tenancy
• Lease term renews automatically upon acceptance of monthly or periodic rent
• No definite ending date
• Can be terminated by either party upon proper notice as defined by state law

Question 9

Estate at will

Answer 9

• Also called tenancy at will
• No definite expiration date and no renewal cycle provided rent paid on time
• No lease required
• Death of either party terminates tenancy

Question 10

Estate at sufferance

Answer 10

• Tenancy against landlord’s will and without an agreement
• Tenant fails to vacate at end of lease term
• Landlord must evict through courts
• Landlord cannot lock tenant out, turn off utilities, or forcibly remove tenant

Question 11

types of leases

Answer 11

• Gross – full service lease, landlord pays operating expenses
• Net – tenant pays utilities, internal repairs, and share of taxes, insurance, and operating expenses in
addition to rent; common in office and industrial properties
• Percentage – landlord shares in income generated from use of property; rent can be fixed percent of
gross revenue without minimum rent, fixed minimum rent plus percent of gross sales, the greater of
percentage rent or minimum rent
• Residential – short lease terms, lease clauses comply with local landlord-tenant laws, lease clauses
generally not negotiable; can be net or gross lease
• Commercial – long term up to 25 years, require tenant improvements to meet usage needs, lease
clauses are negotiable, lease clauses must express all points of agreement and be very precise
• Index – commercial lease with rent based on standard that relates to tenant’s trade, must be clearly
stated in contract, and impacts rent adjustments
• Graduated – commercial lease with low beginning payments that increase over time
• Ground or land – lease is for land only for either agricultural or mining, for development of land, or when
owner wants to sell interest in improvements made to land while retaining ownership of the land itself
• Proprietary – leasehold interest to owner of cooperative
• Rights – leasing of water, air, or mineral rights

Question 12

Lease Purchase and Option Arrangements

Answer 12

• Lease purchase – for tenants who want to buy the property but do not have the funds at the time and
need to use the premises until they can purchase.
• Lease option – tenant can buy leased property within the lease term; option goes with property if
assigned to third party; option can be assigned apart from the rest of the lease stipulations; is secondary
to rental agreement.