Chapter 15
War Eagle
A recent court case called War Eagle was decided by the Iowa Supreme Court regarding the issue of evicting a tenant. Here a tenant was actually served notice of the eviction process after the hearing was already held. The landlord at the time of serving notice did follow all rules and requirements to evict the tenant - including sending a notice by regular mail service to the property which the soon to be evicted tenant occupied. The Legal Aid office successfully persuaded the Iowa Supreme Court that the procedures to evict someone were fundamentally unfair and violated fundamental due process. There was particularly strong evidence in that the tenant did not receive the notice of eviction, where and when they would have to show up to contest the eviction proceeding if they wanted, until after the proceeding was completed and the court gave permission for the eviction to proceed. As a result of this case the court threw out the "standard" eviction proceedings under the Iowa Code. The Iowa Legislature had to quickly establish notice protocol which landlords and managers could utilize if they wanted to proceed to evict someone. The Iowa code was redrafted and the now acceptable methods to provide notice of eviction were to (1) send by regular mail, certified mail and post the notice of eviction on the door of the property, or (2) have the tenant served by personal service - return receipt requested. An additional day for the tenant to respond was also afforded to them. Since the change there have not been any appeals which have reached the Iowa Supreme Court challenging how to give notice to tenants being evicted.
Compliance with Federal Regulations
As mentioned earlier in this course there are a few Federal regulations that have had a significant impact on the rental industry. The regulation with the biggest impact is probably the Americans with Disabilities Act (ADA). This act lays down many responsibilities on both the property manager/landlord, employment issues and the building amenities. For the larger property management companies with more than 15 employees, the ADA declares the employer must adopt nondiscriminatory employment procedures for employees regardless of their disabilities. These employers must provide reasonable accommodations to enable individuals with disabilities to perform essential job functions. Another added responsibility of the property manager is found in Title III of the ADA. This section of the Act stipulates non-discrimination in commercial properties and public accommodations and stipulates that managers ensure that people with disabilities have full and equal access to facilities and services. The landlord or property manager must also determine if the rental facility meets the requirements of the ADA and if not determine if the building can be retrofitted with improvements that are "readily achievable". "Readily achievable" are the key words of the act. An existing two story building with no elevator and no space for an elevator would probably make the use of the second story inaccessible for some people, yet the addition of an elevator would not be "readily achievable". However, existing barriers must be removed when it can be done in a "readily achievable" manner. Here are some of the barriers that are considered readily achievable: a. Reversing the direction that doors open b. Adding raised letters and Braille markings on doors and elevator buttons. c. Ramping entrances d. Lowering wall mounted telephones e. Hand rails in bathrooms f. Raised toilets g. Install flashing lights with door bells
Residential Rental requirements
In Iowa all rental property must be inspected for habitably. This is the responsibility of all municipalities with 15,000 or more population count as determined by Federal Census figures. Residential properties within 1 mile of these communities are also covered by the law. If the city inspector makes a determination that the property does not meet standards, the property would have to be brought to minimum standards before it could be rented. Occupancy certificates are issued by municipalities for properties suitable for rentals and located within property zoning areas. Additionally the occupancy certificate usually is predicated on mechanical restrictions unique to rental property, that means two means of egress, fire extinguishers, fire alarms, fire escapes, smoke detectors, minimum daylight requirements, etc.
Laws of Property Management
It is extremely important for the property manager to have a very good knowledge of the laws affecting property management and the landlord tenant laws of Iowa. Of course the license laws of a property manager are found in Chapter 543B of the Iowa Code. The Landlord Tenant laws are in Chapter 562A of the Iowa Code and the Chapter for Forcible Entry and Detainer Action is found in Iowa Code Chapter 648. There are also Federal laws that a landlord or property manager must be knowledgeable. The Americans with Disabilities Act and the Fair Housing Act put stipulations on rental practices and the accessibility of rental facilities. The Equal Credit Opportunity Act deals with the extension of credit to prospective tenants. More will be discussed later in this course.
Standard Lease Clauses
Now that a property management contract is in place with the owner and the property manager it is time to concentrate on the lease to be used by the complex. There are six basic requirements of the lease: 1. The correct names and signatures of the parties 2. The correct identification of the premises 3. A statement of the rent amount 4. A statement of the use for the premises 5. A statement of the start and stop dates 6. The rights and obligations of both parties 1. The statement of correct names and signatures is pretty self explanatory with a few exceptions: A. Minors are considered incompetent to enter into a legal contract. This does not mean that you can't have a contract with a minor, but it does have special conditions. The minor can make the landlord perform on the contract, but the landlord cannot legally enforce a contract with a minor. B. Insanity or Senility - All jurisdictions hold persons being insane or senile as having the same protections given the minor. Physicians serve the same function as a notary public and/or valid witnesses for contracts between "normal" parties, when insanity or senility is a potential issue. A. Corporations - are regarded as persons or an individual entity of themselves. Corporations can act only thru authorized individuals. The authorization is invested in one or more individuals as listed by the corporation charter and/or resolution and/or by-laws. It is not out of line to request a copy of these documents and attach them to an executed lease to validate the signatures. B. Agents signing for principals - for an agent to sign for and bind his or her principal, they must have specific authority. This written authority should be attached to the lease contract. C. Partnerships - in general it is true that one partner's signature binds both or all partners. Having all partners' signatures is the only way to have some confidence that you have a valid contract. When dealing with partnerships, it is suggested to have the contract reviewed by an attorney. D. Spouse - always seek both spouses' signatures. In the case of a residential lease, it is good advice to have the signature of every adult occupant associated with the rental agreement. 2. Identification of Leased Premises - The leased space must be readily identifiable. An explicit recital is the legal description. If you intend to record the lease document, the legal description must be in the document, before the signatures go on. 3. Statement of Rental Payment(s) - or a statement of consideration. For any contract to be valid, it must be supported by consideration. In the context of the rental contract the consideration is usually an exchange of promises..."you may have the use of my property, if you promise to pay me." Statement of Use - or the legality of use. Some uses of a given property may adversely affect the value of the property and/or create risks that an owner may judge to be excessive for the structure. Usually the zoning regulations, in a residentially zoned area are sufficient enough to restrict unwanted property uses(s) for residential rental contracts. 5. Statement of Start and Stop Dates - or the statement of the commencement and expiration dates. The beginning and the end of a rental contract must be defined. A rental contract that is open ended, or never ending is an unenforceable document. A month to month agreement is not an undefined document. 6. Rights and Obligations of Both Parties - The above five contract components are basically straight forward and can be fairly easily defined with common sense. It's the sixth component of a rental contract that usually causes some discomfort to some individuals. A. Clause of Quiet Enjoyment - This covenant is based on early English law. The tenant is granted the exclusive right of possession and enjoyment of the leased premises. B. Maintenance clause - this covenant should clearly define who is responsible for specific mechanical repairs, interior and exterior maintenance, trash removal, janitorial, exterminating, etc. It should be stated that the author of the document will have the responsibility for any omitted and/or deleted items; therefore it is the responsibility of the landlord in almost all cases. C. Compliance with Codes or Laws - this covenant will define who will bear the cost of complying with the codes and laws. Again, this is usually not defined in residential rental contracts; therefore it is the responsibility of the landlord in almost all residential leases. D. Alteration Clause - The standard wording for this covenant is similar to: "you are prohibited from making any improvement and/or alterations without the written permission of the landlord." This clause is designed to protect the value of the property and its structural integrity. This clause usually provides for the landlord to "keep" the improvement and/or have the improvement removed when the tenant vacates, with no cost to the landlord either way.Utility Clause - This covenant simply defines who will pay for utility charges. In this day and age, it is prudent to include the topics of telephone and other communication and entertainment charges. F. Insurance Clause - This covenant usually has two functions. One is to require the tenant to carry liability and personal property insurance, and the second is to protect the landlord from any activities of the tenant that may cause increased liability to the structure. G. Assignment or Subletting Clause - This covenant governs who the tenant may in turn allow to use all or part of the leased space. The intent is to allow the landlord the right to select the tenants and limit the number of occupants in a given rental space. In most cases landlords allow the tenants to sublet but in reality, the tenant is assigning their leasehold rights the majority of the time. The difference between subletting and assigning is significant and should be fully understood. H. Partial Destruction Clause - This is included in almost all rental contracts. This covenant allows the landlord the right to make repairs in a timely fashion and still retain the tenant. Total destruction generally terminates the lease. I. Default Clause - This covenant is missing in quite a few rental contracts. It should be an essential part of the contract. This section states what will happen if a tenant defaults on their rental contract. Most states have laws defining this event, and limiting the results of a tenant's breach; therefore the omission of this topic may be a mute point. Later in this course we will go through the process of evicting a tenant in the case of a default.J. Hold Harmless Clause - This covenant is perhaps the most common lease component, since it is used to try to limit the landlord's liability for conditions caused by events beyond the control of the landlord. The intent is to protect against claims that may be brought by the "offending" tenant, neighboring tenants, or guests who are on the property. K. Right of Re-Entry Clause - This covenant permits the landlord to re-enter the leased space for justifiable reasons. The primary purpose is to allow the landlord access to protect the property. This clause is "the other side of the coin" to the tenant's right of quiet enjoyment. L. Holdover Tenancy Clause - This covenant defines one type of rental contract renewal. If a tenant remains in possession after the termination of their initially agreed term, then the contract renews for a specified term (usually month to month) with all other covenants and conditions remaining in full force and effect. M. Automatic Renewal Clause - this clause eliminates the need for the formal renewal of a lease agreement. The typical wording would specify a time period of 60 to 120 days prior to the expiration of a rental contract, during which a termination notice could be given by either party. If nothing was said, the agreement would automatically renew for the same term as the original. All other terms and conditions would remain identical to the preceeding agreement, too. It should be noted that this is in direct contradiction to the Holdover Tenancy Clause. N. Sign Restriction Clause - This covenant is seldom included in a residential rental contract. Its primary purpose is to protect a landlords rights in relation to commercial space becoming a problem in a residential property. This bears some attention here, for the residential properties that often are above retail commercial locations. O. Bankruptcy, Insolvency and Receivership Clause - This dictates the rights of the landlord in the event of any of the above events regarding the tenant's financial status. If you have been named as a creditor in any of the above actions, consult an attorney before proceeding with any eviction actions due to non- payment of funds due. You are probably barred from taking any actions until the legal proceedings are completed. This is one of the best reasons to not be tardy when "going after" a non payer.P. Time is of the Essence Clause - Time is of the essence contracts provide for the leased space to be turned to the tenant, in agreed condition, precisely at the pre-agreed time. Failure to deliver, at this time, is grounds for the tenant to break the contract without penalty. Q. Postponed Delivery Clause - This covenant wording also speaks to giving possession of a leased space to a tenant. Generally this wording states that "on or about" a specific date the tenant will be given possession of their leased space. This wording builds in some time to clear out a previous tenant, who is dragging their feet, or to prepare the apartment after experiencing genuine vendor scheduling problems, and still save the rental contract. This covenant is in direct contradiction to the Time is of the Essence clause, and these two clauses should not appear in the same document. R. Condemnation clause - This covenant is designed to protect a landlord from damages that may be sustained by a tenant if the leased space is included in property that is condemned to build a "new freeway." In some cases a landlord's property can be taken from him by governmental bodies (e.g. Eminent domain) "against his will" and without any prior knowledge of this action, at the time of signing the lease document. S. Service of Notice - In some states a tenant may agree to waive his or her rights to the prevailing legal procedure(s). In the states that have adopted the Uniform Landlord/Tenant Law, this will not be allowed by state law, even if both parties agree. Iowa is a state that these remedies cannot be waived as provided in Iowa Code 562A.11 (1) (a).
Rental Deposits
Now that we have gone through the covenants of the rental contract we need to turn our attention to the rental deposits and how they are required by Iowa law to be handled. A landlord shall not demand or receive as a security deposit an amount or value in excess of two months' rent. All rental deposits shall be held by the landlord or property manager, for the tenant, who is a party to the agreement, in a bank or savings and loan association or credit union which is insured by an agency of the federal government. Rental deposits shall not be comingled with the personal funds of the landlord. All rental agreements may be held in a trust account, which may be a common trust account and which may be an interest bearing account. Any interest earned on a rental deposit during the first five years of a tenancy shall be the property of the landlord. A landlord shall, within thirty days from the date of termination of the tenancy and receipt of the tenant's mailing address or delivery instructions, return the rental deposit to the tenant or furnish to the tenant a written statement showing the specific reason for withholding of the rental deposit or any portion of that deposit. If the rental deposit or any portion of the rental deposit is withheld for the restoration of the dwelling unit, the statement shall specify the nature of the damages. The landlord may withhold from the rental deposit only such amounts as are reasonably necessary for the following reasons: 1. To remedy a tenant's default in the payment of rent 2. To restore the dwelling to the condition at the commencement of the tenancy, ordinary wear and tear excepted. 3. To recover expenses incurred in acquiring possession of the premise from the tenant who does not act in good faith. A landlord who fails to provide a written statement within thirty days of the termination of the tenancy and receipt of the tenant's mailing address or delivery instructions shall forfeit all rights to withhold any portion of the rental deposit. If no mailing address or instructions are provided to the landlord within one year from the termination of the tenancy the rental deposit shall revert to the landlord and the tenant will be deemed to have forfeited all rights to the rental deposit. The bad faith retention of a deposit by a landlord, or any portion of the rental deposit, shall subject the landlord to punitive damages not to exceed two hundred dollars in addition to the actual damages.
Eviction
Now that we have reviewed the process of leasing the rental facility and what the landlord/property manager can and cannot do, we should study what needs to be done when a lease or tenant fails to proceed as expected. First of all, let's examine the eviction of a tenant creating a clear and present danger to the landlord, the property manager or other employees, other tenants, or other people or within 1000 feet of the property. Iowa Code section 562A.27A(1) provides for eviction if the clear and present danger includes: a physical assault or the threat of an assault, the illegal use of a firearm or other weapon, the threat to use a firearm or other weapon, the possession of an illegal firearm, the illegal possession of a controlled substance, or other dangerous activities. The landlord/property manager must give a written notice stating the reason for termination that the tenancy terminates immediately, that the tenant has 3 days to vacate, and the notice must set out remedies per Iowa Code section 562A.27A. The notice must state that if the tenant may have a defense if someone else other than the tenant is engaging in the activity constituting a clear and present danger. The notice shall also state the tenant must do one of the following as a remedy: a. Seek a protective order, restraining order, or an order to vacate the unit b. Report the person to the police c. File a trespass action against the person d. Write a letter to the person telling them to stay away from the unit and send a copy of the letter to the police.
Education Required
Of course with your real estate license you will be able to find a job in the area of apartment management and probably a job for a salary as a property manager, but if you want to manage property on a larger scale, much more education will most certainly be necessary. The Institute for Real Estate Management, a part of the National Association of REALTORS®, is without a doubt the best source for advanced education in property management. The Institute offers a certification in management called a CPM, Certified Property Manager. Most larger organizations in the property management business will require a CPM designation.
Forcible Entry and Detainer Action
Sometimes it is necessary to force a tenant out of the premises they are renting by stronger methods than a simple eviction notice. Chapter 648 provides the basis for a Forcible Entry and Detainer Action. This action is taken when the following circumstances occur. a. Where the defendant has by force, intimidation, fraud, or stealth entered upon the prior actual possession. b. Where the lessee holds over after the termination of the lease. c. Where the lessee holds contrary to the terms of the lease. d. Where the defendant continues in possession after a sale by foreclosure of a mortgage. e. For the nonpayment of rent, when due. f. When the defendant remains in possession after the issuance of a valid tax deed. Before the forcible entry action can be taken the three day notice to quit must have been served on the tenant and the required cure time has passed. However, if the tenant is renting the manufactured or mobile home or the land from the landlord, the landlord may commence the action without giving the three day notice to quit. Thirty days peaceable possession by the tenant with knowledge of the default by the landlord/property owner is a bar to an action for possession as provided in chapter 648.18. The landlord/property manager must bring eviction action within a month of the rent being unpaid. The landlord/property manager should serve notice within the first week of every month rather than letting nonpayment accrue. If there is a tenant that is late every month and notice has to be given every month, each time the notice is cured, the payment to cure has to be applied to the oldest month. In summary, the landlord/property manager should never let unpaid rents go more than 25 days before serving a three day notice to quit or the process for getting a Forcible Entry and Detainer Action becomes much more difficult.
Equal Credit Opportunity Act
The Equal Credit Opportunity Act prohibits the landlord/property manager from denying credit or a lease to a person based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. The landlord/property manager should apply the same lease procedures to all applicants and use the same documentation. If the landlord/property manager requires a credit report before the signing of a lease, that requirement should apply to all applicants.
Court Proceedings
The court within the county shall have jurisdiction of actions for forcible entry and detainer. They shall be tried as equitable actions. Unless it commences as a small claim, a petition shall be presented to a district court judge. Upon receipt of the petition, the court shall order a hearing which shall not be later than seven days from the date of the order. Personal service shall be made upon the defendant not less than three days prior to the hearing. In the event that personal service cannot be completed in time to give the defendant the minimum notice required by this section, the court may set a new hearing date. A default cannot be made upon a defendant unless the three days' notice has been given. Iowa Code 648.5 Once the court ruling has been made in favor of the landlord the tenant will be removed either on their own or by the county sheriff.
Property Management Contract
The first order of business in property management is the property management contract. This is the contract or agreement between the property owner and the management company. This contract must stipulate the terms and conditions of the agreement between the two parties, just as a listing agreement does in the case of an agreement for sale or lease. Included in the contract should be the address of the property, the time of the agreement, the responsibilities of the management company and the extent of the manager's authority, the compensation, the owner's desires or purpose and responsibilities, the reporting requirements of the management company, what costs of management are to be paid by the manager and what part paid by the owner, and a statement relating to Fair Housing. This contract sets the rules by which the property manager must abide. This contract is also a legal requirement of a licensee when operating as a property manager under Chapter 543B and the Administrative Rules of that chapter.
Notice of nonpayment of rent
The landlord/property manager must give a written notice of nonpayment of rent, specifying that the rent is unpaid, and that the tenant has 3 days to cure the nonpayment by paying the rent in full including any late payment fees and that the tenancy will terminate if the tenant does not cure the deficiency and that in the alternative the tenant may vacate the premises. The notice should (but is not mandatory), include the amount of rent and fees due. There must be an opportunity to cure. If the tenant pays the full amount of rent plus any late fees within the cure period, the landlord/property manager must accept it, and the tenant is cured. The landlord/property manager is not, however, required to accept any partial payments.
Tenancy
The most common form of real property lease is a residential rental agreement between a landlord and tenant. The relationship between the landlord and tenant is called a tenancy. The right to possession by the tenant is called a leasehold interest. Fixed term tenancy or tenancy for years lasts for a fixed period of time. It has a definite time of beginning and a fixed termination date. Even though the title is tenancy for years the duration of the tenancy can be for any period of time, even for a period of one day. If the tenant remains in the property after the expiration of the lease, they become a tenant at sufferance because the landlord/lessor has suffered or allowed the tenant to remain. Such a tenancy typically is "at will"; meaning the tenant or landlord may terminate the tenancy upon the providing of proper statutory notice. Although the tenant is technically a trespasser at the time of holdover and possession of this type is not a true estate in the property, the tenant can still be held liable for rent. The landlord can evict the tenant at any time without notice.
Manager's Reports to the Owner
The property manager must have good accounting skills to successfully account the profitability of the managed property to the owner or owners. These skills are also necessary to be able to forecast the vacancy rate and the anticipated costs of operation. Of course the larger the complex makes these projections more difficult. It is extremely important for the manager to be very aware of the rental market and rental rates being offered by comparable properties. Owners expect the manager have the skills to provide them with a very accurate cash flow report on a regular basis. The cash flow report gives the manager and the owner a very good picture of the financial condition of the property. If the cash flow is not sufficient to make the property profitable, the manager needs to decide if the problem is rents being too low or the expenses being too high. If the expenses are too high the manager needs to determine if it is the fixed expenses or the variable expenses that are causing the problem. Fixed expenses may be the property taxes, wages, utilities, or maybe the cost of insurance. Variable expenses are typically repairs, landscaping or possibly the costs of getting an empty unit ready to rent again. The bottom line is the owner has given the property manager control of the facility and expects that manager to have the accounting skills and reporting skills to make the facility profitable and to be able to report the financial condition to the owner.
Landlord Access
The tenant has the exclusive right to occupy the rental unit, but this right has some limitations. The landlord has the right to enter the premises to: a. Inspect the premises b. Make necessary or agreed repairs, decorations, alterations, or improvements. c. Supply necessary or agreed services. d. Exhibit the rental unit to prospective or actual purchasers, lenders, contractors, or tenants. e. In an emergency f. At the tenant's request or with consent. g. At times reasonably necessary during a tenant's absence in excess of 14 days to conduct a welfare check of the rental unit. h. The landlord can also give access to public officials for the purpose of building inspections, to police for serving an arrest warrant or in pursuit of fleeing criminals, or under exigent circumstances that would obviate the need for an arrest warrant. A good practice to follow is to refer to Chapter 562A before you enter a rental premises without giving the tenant 24 hours notice.
Notices
There are different requirements set forth in Iowa law for the notices that must be given to tenants. All notices except the notice for Forcible Entry and Detainer Action can be served by the landlord/property manager through personal service or certified mail. There is a 30 day notice required for increases in rent and for adoption of new occupancy rules. The landlord/property manager must give a 24 hour notice to enter the premises.
The Opportunities Grow
There are opportunities today that were rare twenty years ago because of the changing moods of society today. In the past a property manager might be confined to management of apartment complexes, strip malls, smaller business buildings, and some condominiums, cooperatives, and townhouses, the list has gotten much longer in today's business. Time Shares have become many times more popular than they were twenty years ago. Society has grown accustomed to owning a unit for a week or two each year along with the ability to trade that couple weeks for time in another time share in another part of the world. Senior Living Centers and other care units have become very popular with more and more seniors choosing housing such as this that will let them change their agreements and their care need change in their late years. Homeowners Associations have become more popular with the increase of gated communities. Real Estate Investment Trusts control very large packages of investment properties and provide well paying careers of well trained property managers.
Fair Housing Act
applies to most rental facilities but there are a few exceptions. The rental of rooms or units is exempted in an owner occupied one-to- four family building and in housing operated by organizations or private clubs that limit occupancy to members. If the rental facility does not fit into one of the above categories, it will be subject to the Fair Housing Act. To refresh your memory, the Act prohibits discrimination against race, color, religion, National origin, sex, disability, or familial status, and in Iowa sexual orientation has been added.
Commercial Leases
are designed different than residential leases in a number of ways. In general there are four different kinds of commercial leases: *Gross Lease *Full Service Lease *Gross Industrial Lease *Triple Net Lease
Periodic Tenancy
is a tenancy from year to year or month to month or week to week. The tenancy is an estate that exists for some period of time determined by the term of the payment of rent. A periodic tenancy differs from the fixed term tenancy because it could run in one month cycles with each month being an extension of the prior month. Either the landlord or the tenant can terminate the lease but notice must be equal to the term of the lease.
Tenancy at Will
is a tenancy which either the landlord or the tenant may terminate at any time by giving reasonable notice. Unlike a periodic tenancy a tenancy at will has no specified period of time. A tenancy at will is broken by operation of law if the: *Tenant commits waste against the property *Tenant attempts to assign the tenancy *Tenant uses the property to operate a criminal activity * Landlord transfers his/her interest in the property * Landlord leases the property to another person *Tenant or landlord dies.
Triple Net Lease
is almost the reverse of a Gross Lease. There is a quoted base rent but the tenant is responsible for all the costs incurred with the operation of the space. The tenant pays the taxes, insurance premiums, utilities, etc. This concept is best understood if the property has only one tenant but often times there is more than one tenant. In this situation the landlord pays for these expenses as they occur but each tenant pays in advance for his share of the expenses.
Expense Stop
is similar to a base year except instead of using the actual number for a given year the landlord simply quotes an amount. If the expenses are higher than that amount the tenant would have to pay his prorate share. In this case, care should be taken by the tenant that the quoted amount for the expenses is an accurate estimate.
Full Service Lease
is similar to the Gross Lease except it contains provisions to pass on escalating costs to the tenant. The landlord establishes a rate that includes paying the taxes, insurance and CAM (Common Area Maintenance Charge) equal to what was spent in a given year. Typically the most recent year's expenses are used to determine the CAM but any year could be used. It would be to the landlord's advantage to use an early year or to the tenant's advantage to use the latest year. The expenses would most likely increase as the years pass.
Gross Industrial Lease
is similar to the Triple Net Lease except the base lease rate includes the payment of taxes and insurance. If the property is a multi-tenant property the common area expenses will also be added and usually are quoted as a per square foot cost much like an expense stop. Industrial leases are usually Gross Industrial or Triple Net Leases. A major difference in the four types of leases is the way repairs and maintenance costs are handled. In the Full Service and Gross leases the landlord is responsible for repairs and maintenance and the estimated cost of these is included in the quoted rate and also in the base year or expense stop quoted. In the Triple Net Lease and Gross Industrial Lease the tenant is responsible for the repairs and maintenance of his space.
Gross Lease
is the simplest form of lease. In this form of lease the tenant simply pays the stated amount each month. The monthly rate covers all the monthly expenses that the landlord would normally incur. The landlord takes care of everything and the rate does not change. Any increase in the cost of these expenses is absorbed by the landlord. Most landlords are not willing to take the risk of inflating costs, so these leases are typically for short periods of time.