Chapter 14 Leases

4 types of leasehold estates

(1) Tenancy (Estate) for Years - has a stated expiration date (2) Estate from Period to Period - no set termination date, lease automatically renewed at the end of each period (example month-to-month lease) (3) Estate at Will - either the lessee or lessor can terminate the agreement whenever they so desire (4) Estate at Sufferance - a tenant who stays in possession of property after the lease has expired.

How a Lease May be Terminated

1. expiration of the lease 2. agreement between the parties 3. breach of condition 4. condemnation 5. notice - if the lessee does not give notice to quit to the lessor as required in lease, the lessor can hold the tenant to another full term 6. eviction of the lessee - a. actual eviction b. constructive eviction

Lease Contents

1. name of the lessee and the lessor 2. a description of the leased property 3. duration of the lease 4. amount of rent to be paid 5. possession, maintenance, improvements, and any conditions imposed upon the lessee and any exception to the lessee's rights 6. liability of the parties - the person held responsible for injuries resulting from conditions of the premises 7. special covenants, conditions and provisions

Assignment of Lease

A contract that substitutes a new tenant in the lease. The assignee becomes liable for the remaining term of the lease. Unless prohibited by the lease contract, this can be done without the approval of the lessor, but the original lessee retains secondary liability.

Percentage Lease

A lease, commonly used for shopping malls, whose rental is based on the tenant's gross sales at the premises; it usually stipulates a base monthly rental plus a percentage of any gross sales above a certain amount.

Estate from Period to Period

A leasehold, which is automatically renewed for the same term as in the original lease; also referred to as a periodic tenancy or an estate from period to period. Month to month rental. Notice needed to terminate.

Tenancy at Sufferance

A tenancy that occurs when a tenant that is supposed to vacate does not, but continues to pay rent, and the landlord accepts it.

Sale-Leaseback

A transaction in which the owner sells improved property and, as part of the same transaction, signs a long term lease to remain in possession of the premises.

Ground Lease

An agreement for the tenant to lease the land only and erects a building on the land.

Tenancy at Will

An occupation of space for an indefinite period which can be terminated by either the lessor or lessee at any time.

Lease

Both a contract and conveyance. A contract by which one party conveys land, property, services, etc. to another for a specified time, usually in return for a periodic payment. A nonfreehold estate.

Services Clause

Common clause in commercial lease. Will say who is responsible for cleaning foyers, hallways, restrooms & other common areas, may include lessee's space.

Sandwich Lease

Develops when there is a sublease.... The landlord is on the top layer, the tenant is in the middle, and a subleaser is on the bottom layer

Uniform Residential Landlord and Tenant Act

Federal legislation that places the responsibility of complying with building codes and maintenance of common areas upon the landlord.

Surrender and Acceptance

In landlord-tenant law, surrender occurs when a tenant agrees to return the leased premises to the landlord before the expiration of the lease and the landlord agrees to accept the return of the premises. If landlord does not agree, then tenant may be responsible for unpaid rents

Actual Eviction

Landlords' right to cancel lease. suit for possession; legal removal of a tenant

Tax Adjustment Clause

Often used in office or commercial rentals, offering the lessor protections against the rising costs of ownership. An agreement in a lease whereby the tenant agrees to pay all or a stated portion of any increase in real estate taxes on the leased property.

Reappraisal Lease

Provides for the rents to be appraised at certain intervals

Holdover Tenant

Tenant who remains in possession of leased property after the expiration of the lease term without the landlord's permission

Constructive Eviction

Tenant's right to cancel lease. Occurs when the tenant's use of the premises is substantially disturbed or interfered with by the landlord's actions or failure to act where there is a duty to act. The tenant is effectively forced to move out and terminate the lease without further liability for further rent.

Improvements Clause

The landlord is under no obligation to make improvements or altercations to the property unless it is specifically stated in the lease. Any improvements may become property of the lessor upon termination, with the exception of trade fixtures Some leases will require lessee to return property to original condition

Change of Use by Lessee Clause

The lease should state the use to which the tenant intends to put the property.

sublet

The leasing of part or all of the property held by a tenant, as opposed to a landlord, during a portion of his or her unexpired balance of the term of occupancy. A landlord may prohibit a tenant from subletting the leased premises without the land-lord's permission by including such a term in the lease.

Index Lease

The rental is tied to some commonly agreed to price index such as the Consumer Price Index or the Wholesale Price Index. Rent can go up or down.

Net Lease

The tenant is expected to pay for all the costs related to a piece of property as if the tenant were the actual owner, common in commercial leases.

Rental Adjustment

This clause in commercial lease state that the rent will not be less than the base rental stated in the lease. It is made to reflect the change in the purchasing power of the dollar. Such adjustments may be computed on the most recent United States Department of Labor consumer price index (CPI). The rent could thus be increased or decreased.

Oil and Gas Lease

This lease gives the tenant the right to extract oil and gas from a specific property. A flat rent is usually paid and if oil or gas is discovered, the landowner is paid royalties.

Interruption of Business Clause

a commercial lease will generally provide that if the building is destroyed by fire, flood, tornado, or winds and becomes unusable, the tenant is relieved from rent payments.

demise

a conveyance that is made for a definitive term, such as an estate for a term of years. A lease is a common example, and demise is sometimes used synonymously with "lease" or "let."

Gross Lease

a lease with a flat rent fee that encompasses rent and all costs associated with ownership, such as taxes, insurance, and utilities. Most residential leases are this type.

unlawful detainer

a tenant's failure to move.

Graduated Lease

calls for precise rent increases over a stated period of time... usually starts low and goes up.

Air Lease

gives the right to occupy the space of another over a designated property, like an elevated walkway that connects buildings or a restaurant built over a freeway

Lessor

landlord

Tenancy For Years

leasehold interest for a specific period of time

security deposit

money a renter lets an owner hold in case the rent is not paid or an apartment is damaged

Rent Abatement

provision that may be included in a commercial or residential property lease. It entitles the tenant to suspend rent payments or pay only a portion of the rent until a landlord completes property repairs.

Lease Provisions

quiet enjoyment, rent usually paid in advance usually in writing if longer than a year

Lessee

tenant

Option Clause

tenant has right to renew lease

rent control

the action of a local governing board to place a ceiling on the rent charged by a landlord

Right to Enter Clause

the lessor reserves the right to enter the premises to make repairs and improvements.

Maintenance and Repair Clause

the party responsible for maintenance an repairs of mechanical units, such as HVAC, snow removal, mowing, tree trimming

Reversionary Interest

to whom a property will revert when a lease expires. When a leasehold expires, legal title to the property reverts back to the freeholder.

Triple Net Lease

usually long term commercial and industrial leases where a single tenant is involved; (a.k.a. "nnn" lease) Landlords use this type of lease when they don't want to deal with the hassles associated with ongoing maintenance and other costs.