Chapter 4 - The Contract of Sales and Leases

Reformation

A remedy whereby a court orders a change in a written document to reflect what it ought to have said in the first place.

Rider

Also known as an addendum, in general, is a writing annexed to an agreement.

Executed Contract

An agreement that has been fully performed.

Caveat

A Latin term that means "let him beware.". Caveat is usually interpreted as a sort of warning or cautionary expression.

Attorney Review Clause

A clause found in real estate contracts that may allow buyers to walk away from an agreed upon sale for any reason.

Mortgage Contingency Clause

A clause in a contract that states a mortgage must be obtained in order for the contract to be binding.

Option to Renew

A clause in a lease that outlines the terms for renewing or extending an original lease agreement.

Express Contract

A contract in which all elements of a contract are specifically stated (offer, acceptance, consideration), and the terms are stated, as compared to an "implied" contract in which the existence of the contract is assumed by the circumstances.

Lease

A contract whereby, for a consideration, usually termed rent, one who is entitled to the possession of real property transfers such rights to another for life, for a term of years, or at will.

Executory Contract

A contract which has not yet been fully performed (fully executed).

Right of First Refusal

A contractual right that gives its holder the option to enter a business transaction with the owner of something, according to specified terms, before he owner is entitled to enter into the transaction with a third party.

Land Lease

A land lease--also called a ground lease--is a lease agreement that permits the tenant to use a piece of land owned by the landlord in exchange for rent.

Proprietary Lease

A lease given by a corporation to another. It is often used in a co-op context, where the owner is given a certain number of shares in the co-op, along with a proprietary lease for one of the residences in the building.

Triple Net Lease

A lease in which the tenant or lessee is responsible for paying a portion of or all of the common expenses related to real estate ownership, in addition to base rent.

Percentage Lease

A lease of property in which the rental is based upon the percentage of the volume of sales made upon the leased premises, usually provides for minimal rental.

Gross Lease

A lease of property whereby the lessor is to meet all property charges regularly incurred through ownership.

Net Lease

A lease that requires the tenant to pay, in addition to rent, some or all of the property expenses that normally would be paid by the property owner. These include expenses such as real estate taxes, insurance, maintenance, repairs, utilities, and other items.

Index Lease

A lease tied to an index such as the Consumer Price Index.

Graduated Lease

A lease which provides for a graduated change at stated intervals in the amount of the rent to be paid; used largely in long-term leases.

Eviction

A legal proceeding by a lessor landlord to recover possession of real property.

Implied Contract

A legal substitute for a contract. An implied contract is an agreement created by actions of the parties involved, but it is not written or spoken. This is a contract assumed to have been drawn.

"As is"

A legal term used to disclaim some implied warranties for an item being sold. Denotes that the seller is selling, and the buyer is buying a property in whatever condition it presently exists.

Security Deposit

A monetary deposit given to a lender, seller or landlord as proof of intent. Security deposits can be either refundable or nonrefundable, depending on the terms of the transaction.

Lessee

A person to whom property is rented under a lease.

Contingency

A provision in a contract that requires the occurrence of a specific event before the contract can be completed.

Liquidated Damages

A provision in certain legal contracts that allows for the payment of a specified sum should one of the parties be in breach of contract.

Option

A right given for a consideration to purchase or lease a property upon specified terms within a specified time; if the right is not exercised the option holder is not subject to liability for damages; if exercised, the grantor of option must perform.

Forbearance

A special agreement between the lender and the borrower to delay a foreclosure.

Uniform Commercial Code

A standard set of business laws that regulate financial contracts. The Uniform Commercial Code has been adopted by most states in the U.S. The code itself has nine separate articles. Each article deals with separate aspects of banking and loans. The UCC better enabled lenders to loan money secured by the borrower's personal property.

Statute of Limitations

A statute barring all right of action after a certain period of time from the time when a cause of action first arises.

Holdover Tenant

A tenant who remains in possession of leased property after the expiration of the lease term.

Counteroffer

A type of offer made in response to another offer, which was seen as unacceptable. A counteroffer revises the initial offer, making it more appealing for the person making the new offer.

Power of Attorney

A written instrument duly signed and executed by a person which authorizes an agent to act on his/her behalf to the extent indicated in the instrument.

Covenant

Agreements written into deeds and other instruments promising performance or nonperformance of certain acts, or stipulating certain uses or non-uses of the property.

Periodic Lease

Also known as a tenancy from year to year, month to month, or week to week, is an estate that exists for some period of time determined by the term of the payment of rent.

Ground Lease

An agreement in which a tenant is permitted to develop a piece of property during the lease period, after which the land and all improvements are turned over to the property owner.

Sublease

An arrangement in which the lessee (tenant) in a lease assigns the lease to a third party, thereby making the old lessee the sublessor, and the new lessee the sublessee, or subtenant.

Specific Performance

An order of a court which requires a party to perform a specific act, usually what is stated in a contract.

Constructive Eviction

Any disturbance of the tenant's possession of the leased premises by the landlord whereby the premises and rendered unfit or unsuitable for the purpose for which they were leased.

Consideration

Anything given to induce another to enter into a contract such as money or personal services.

Earnest Money Deposit

Down payment made by a purchaser of real estate as evidence of good faith.

Offer and Acceptance

Elements required for the formation of a legally binding contract. The expression of an offer to contract on certain terms by one person (the "offeror") to another person (the "offeree"), and an indication by the offeree of its acceptance of those terms.

Caveat Emptor

Let the buyer beware. The buyer must examine the goods or property and buy at the buyer's own risk.

Lessor

One who rents property to another under a lease.

Lawyer's Fund for Client Protection

Setup to protect consumers from dishonest attorneys.

Statute of Frauds

State law which provides that certain contracts must be in writing in order to be enforceable at law.

Voidable

That which is capable of being adjudged void, but is not void unless action is taken to make it so.

Novation

The act of either: 1) replacing an obligation to perform with a new obligation; or 2) adding an obligation to perform; or 3) replacing a party to an agreement with a new party.

Leasehold Estate

The interest or estate which a lessee of real estate has therein by virtue of the lessee's lease.

Assignment

The method or manner by which a right or contract is transferred from one person to another.

Down Payment

The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan. This amount varies based on the loan type, but is determined by taking the difference of the sale price and the actual mortgage loan amount. Mortgage insurance is required when a down payment less than 20 percent is made.

Rescission

The right of an individual involved in a contract to return to a state identical to that before they entered into the agreement, due to courts not recognizing the contract as legally binding. In many cases, rescission may be an option if there is a material error in the contract, among other reasons.

Quiet Enjoyment

The right of an owner or a person legally in possession to the use of property without interference of possession.

Void

To have no force or effect; that which is unenforceable.

Actual Eviction

Where one is either by force or by process of law, actually put out of possession.