Unit 17 Flashcards
Lease
a contract between a lessor and lessee
Lessor
owner of real estate, landlord
Lessee
tenant
What happens to a lessor’s rights in a lease?
rights to exclusive possession and use of the property to the tenant for a specific period fo time and establishes the consideration the lessee is the pay rent for use of the property
Statute of frauds
requires lease agreements for more than 1 year to be in writing to be enforceable
Rent
fixed, periodic payment made by a tenant of a property to the owner for possession and use, usually by prior agreement of the parties
Reversionary right
landlord gets possession of real estate after lease term expires
Leashold estate
a tenant’s right to possess real estate for the term of the lease; considered personal property
Types of leasehold estates
- estate for years
- estate from period to period
- estate at wil
- estate at sufferance
Estate (Tenancy) for years
a leasehold estate that continues for a definite period; years, months, weeks or days; always has specific starting and ending dates
Do you have to give a notice of termination for an esate for years?
no
Estate from period to period
created when the landlord and tenant enter into an agreement for an indefinite time - no specific expiration date until someone gives notice of termination
What is unique about an Estate at Will?
if either party dies, the lease is immediately terminated
Estate at Will
the tenant has the right to possess the property with the landlord’s consent for an unspecified or uncertain term
Estate at Sufferance
arises 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
Holds over
when a tenant fails to surrender possession
Holdover clause
provision that governs the right of both the landloard and the tenant
Holdover tenancy
the landloard can accept rent offered by the tenant, thereby creating a new tenancy under conditions of the original lease
Requirements for a valid lease
- capacity to contract
- legal objective
- offer and acceptance
- consideration
Capacity to contract
the parties must have the legal capacity to contract; legal age and sound mind
Legal objective
objective of lease must not be prohibited by law
Offer and acceptance
the parties must reach a mutual agreement on all terms of the contract
Considerations
must be supported by valid consideration - exchange of promises
Tenant at sufferenace
landlord creates by either objecting to the tenant holding over or informing the tenant of such treatment; landlord receives rent, boht parties have to provide notice within a certain period fo terminating the arrangement
Use of premises
lessor may restrict a lessee’s use of premises through provisions included in the lease
Term of lease
period for which the lease will run should be stated pricesely including beginning and ending dates together wiht a statement of the total period of the lease
Security deposit
held by the landlord during the lease term for if the tenant defaults on payment of rent or destroys premises
Security deposit
held by the landlord during the lease term for if the tenant defaults on payment of rent or destroys premises
Improvements
neither the landlord nor the tenant is required to make any improvements to the leased property; the tenant can make improvements with the landlord’s permission or as required to make the rented premises accesible; most would become property of landlord
Accessibility
illegal to discriminate against a prospective tenant on teh basis of the tenant’s real or perceived disability; must allow tenant to make reasonable modifications to a property at the tenant’s own expense
When would trade fixtures need to be removed?
before the lease expires, provided the tenant restores the premises to the previous condition
Maintenance of premises
lessor must maintain dwelling units in a habitable condition; must make necessary repairs to common areas and maintain safety features
Destruction of premises
usually, residential tenants are permitted to reduce their rent payments in proportion to the amount of space they are unable to use; if property was destroyed as a result of the landlord’s negligence, the tenant can recover damages; if leased premises are destroyed don’t have to continue paying rent; tenants who have constructed buildings on leased land are still obligated for the payment of rent even if the improvements are damanged or destroyed
Assignment
tenant transfers the entire leassehold interest to another person; new tenant is legally obligated to comply with all of the promises the original tenant made in the lease
Sublease
tenant transfers less than the entire leasehold interest by subletting the premises to a new tenant; original tenant remains responsible
Sandwich lease
sublessor’s (original lessee’s) interest in real estate
When can you do assignemnt and subleasing?
only when a lease specifically permits them
When can you do assignemnt and subleasing?
only when a lease specifically permits them
Are leases recorded?
not usually
What leases are recorded?
long term commercial leases
What is long term considered
usually 3 years or longer
Where are leases recorded?
county where the property is
Nondisturbance clause
included in the financing instrument used to mortgage leased premises; mortgagee agrees not to terminate the tenancy of the lessee(s) so long as the lessee is current in payment of the required rent, should the mortgagee foreclose on the mortgagor’s building
If ownership of a leased estate changes, do tenants keep their leaseholds?
yes unless special provision for it
Renewal option
clause grants the lessee the privilege of renewing the lease
Purchase option
lessee has option to purchase the leased premises
right of first refusal
allows the tenant the opportunity to buy the property before the owner accepts an offer from another party
Types of leases
- gross lease
- net lease
- percentage lease
Gross lease
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
Net lease
tenant pays all or most of the property expenses (hazard insurance, property taxes, common area maintenance charges) in addition to the rent
Percentage lease
rent is based on a minimum fixed rental fee + percentage of the gross income received by the tenant doing business on the leased property; generally for retail businesses
Types of variable leases
- graduated lease
2. index lease
graduated lease
provides for specified rent increases at set future dates
index lease
allows rent to be increased or decreased periodically based on changes in the CPI or some other indicator
Ground lease
when a landlord leases unimproved land to a tenant who agrees to erect a builing on the land; mostly used in commerical and industrial property development
What type of lease is a ground lease?
net lease
Oil and gas lease
when an oil company leases land to explore for oil and gas; negotiate annual rent payable the first day of the year and what % of profit the lessor would get
lease purchase
used when a tenant wants to purchase the porperty but is not yet able to do so; negotiate lease and sales price
Sale-and-leaseback
property owner sells the property and then leases it back for an agreed period and rental
Breach
violation
Actual eviction
when a tenant breaches a lease or improperly retains leased premises, the landlord regains possesssion
Constructive eviction
if a landloard breahes any clause of a lease agreement, the tenant has the right to sue and recover damages against the loardloard; terminates the lease agreement
In constructive eviction, how must the tenant leave the premises?
in the condition that made the premises uninhabitable
Protenant legislation
state by state legislation; Uniform Residential Landlord and Tenant Act
What does the Uniform Residential Landlord and Tenant Act address?
- landlord’s right of entry
- maintenance of the premises
- tenant’s protection against retaliation
- disclosure of the property owner’s name and address to tenant
- specific remedies available to both teh landlord and tenant if a breach of the lease agreement occurs
Right to Distrain
landlard’s right to seize the tenant’s proeprty for rent in arrears incases of nonpayment of rent
When is a lease discharged?
when the contract terminates
Lease termination
occurs either when all parties have fully performed their obligations under the agreement or when teh parties agree to cancel the lease
Does a tenant remain liability if they abandon the property?
yes
Does a lease terminate if the parties die or if the property is sold?
no
How does a lease from the owner of a life estate end
with the death of the person on whose life the estate is measured
When can tenancy at will terminate?
death of either party
Sale clause
enables the new landlord to claim possession and negotiate a new lease under new terms and conditinos; requires the tenant be given some period fo notice before the termination
How many days notice must a landlord give a tenant for eviction?
10 days
How can you terminate an estate for years?
if both parties agree or one party breaches contract
month-to-month tenancy
when a tenant takes possession with no definite termination date and pays monthly rent
Holdoer tenancy
when a tenant with an estate for years remains in possession after the lease term expires; landlord may evict the tenant or treat the holdover tenant as one who holds a period tenancy
How long can a holdover tenancy be?
length of orignal lease, not exceeding 1 year
when is an estate at will terminated?
death of either the landlord or tenant, express agreement or operation of law
Notice to quit
landlord an treat the tenant as a trespasser and proceed with an eviction and damanges action
Covenant of quiet enjoyment
lessee can occupy the premises without interference from teh owner or anyone else
Possession of premises
basically same as convenant of quiet enjoyment; landlord must give adequate notice to the tenent if they will be entering the property unless emergency situations
