Real Estate - Ch 10 - Leases

Estate for Years

A leasehold estate set to last for a specific period, after which it automatically terminates.

Periodic Estate

A leasehold estate that continues for successive equal periods of length until terminated by proper notice (not less than 30 days) from either lessor or the lessee. The tenancy automatically renews itself at the end of each period until one party terminates it.

Estate at Will

A leasehold estate that does not have a lease to specify the termination date and rental period. Unlike the estate for years or the periodic estate, an estate at will automatically terminates when either the landlord or tenant dies.

Specific Performance or Forces Sale

A legal remedy in which a court orders someone who has breached a contract to perform as agreed, rather than simply paying damages. The buyer benefits.

Substantial Performance

A promisor does not perform all contractual obligations but does enough so that the promise is required to fulfill his or her obligation.

Which of the following lease types conveys rights other than the rights to exclusive use and occupancy of the entire property?

A rights lease

Constructive Eviction

A tenant is prevented from the quiet enjoyment of the property due to lack of heat or plumbing (owner's negligence) and tenant vacates the property.

Buyer Agency Agreement

Agency contract between a buyer and a real estate broker providing the details of their agreement, including how the broker will be compensated for representing the buyer in the purchases or leases of a property.

Listing Agreement

Agency contract between a seller and a real estate broker stipulating the details of their agreement, including the broker's commission.

Contract

An agreement between two or more parties to do, or not to do something.

Express Contract

An agreement expressed in words, either spoken or written.

Implied Contract

An agreement that has not been put into words, but is implied by actions of the parties.

Earnest Money Deposit

An inducement to have the buyer's offer accepted and a means of showing the seller the buyer is serious and able to follow through with purchase.

Material Breach

Breach of contract important enough to excuse the non-breaching party from performing any contractual obligations.

Cooperative Apartment Purchase and Contract

Buildings owned by corporations with the residents as shareholders who each receive a proprietary lease on an individual unit and the right to use common areas.

Genuine Assent

Consent must be freely given to create a binding contract.

Sales or Purchase Contract

Contract between a buyer and seller detailing the sale of real property.

Lease

Contract between a landlord and a tenant stipulating the terms of tenancy, rent, and tenant's rights and obligations.

Conditions or Contingency Clauses

Contract provisions that make the parties' rights or obligations dependent on the occurrence (or nonoccurence) of certain events.

Option to Buy or Lease

Contract that gives one party the right to buy or lease the property of another at a specific price within a specified time frame.

Sales Contracts

Contracts in which a seller promises to convey title to real property to a buyer in exchange for the purchase price.

Leases

Contracts in which one party (the lessee) pays the property owner (the lessor) rent in exchange for the possession of real estate.

Options

Contracts that give one party the right to do something without obligating him to do so. A unilateral contract.

Graduated Lease

Describes in detail the rent increases (or decreases) generally paid in installments. Example is a long term lease that spells out annual rent increases.

Bilateral Contract

Each party makes a binding promise to the other.

Types of Leasehold Estates

Estate for years, Periodic Estate, and Estate at Will

Property Condition Disclosure Statement

Failure to provide this document results ina credit of $500 to the buyer at closing.

Eviction

Forced removal by legal means of a tenant and the tenant's belongings.

What is one important difference between a sublease and a lease assignment?

In a sublease, the original tenant retains primary responsibility for performance of the original lease contract.

Statute of Frauds

Law requiring certain types of contracts to be in writing and signed to be enforceable.

When a tenant acquires a leasehold estate through a lease, what does the property owner acquire?

Leased fee estate

Legal Competency or contractual capacity includes what?

Legal age of majority (18 years old).

Security Deposit

Money the tenant pays to the landlord that provides monetary security in case of damages to the residence or failure by the lessee to comply with the lease agreement.

What are the Types of Commercial Leases

Net Lease, Percentage lease, land/ground lease, index lease, graduated lease

Does a Lease Need to Be in Writing?

No, an oral lease for less than less than one year is generally enforceable. Leases longer than a year must have the terms listed in writing to comply with the statute of frauds.

Does a Lease Terminate when the Property is Sold or One Party Dies?

No, the heirs or new owner must honor the existing lease contracts.

Breach of Contract

Occurs when one party to a contract fails to perform with no legal cause.

Mutual Agreement

Offer and acceptance. This indicates a meeting of the minds.

Unilateral Contract

Only one party makes a binding promise to the other.

Tenancy at Sufferance

Possession of property by a tenant who came into possession of the property under a valid lease but stays on after the lease expires without the landlord's permission. This is not a leasehold estate.

Liquidated Damages

Reflects the amount of money specified in a contract to be awarded (to the seller) in the event the agreement is breached. Typical the down payment

Right of First Refusal

Right to have the first chance to buy or lease property if the owner decides to sell or lease.

Option to Renew

Sets forth the renewal methods and terms of the new lease.

Which of the following happens when a leased property is sold?

The buyer acquires title subject to the lease.

A lease automatically terminates under which of the following circumstances?

The leased property is foreclosed.

Covenant of Quiet Enjoyment

The property cannot be interrupted or invaded by anyone, including the property owner, without the lessee's consent. Must give 24 hr. notice to enter tenants apartment.

What is the purpose of the "Time is of the Essence" clause?

The purpose of this phrase is to emphasize timely performance as an essential part of the contract, and failure to perform on a time is a material breach.

What is the rule of Parol Evidence?

The rule of parol evidence provides that the written agreement overrides any oral agreement.

Escape Clause or Kickout Clause

The seller can request an escape clause in the contract to allow them to pursue other buyers. Typical 48hour or 72hours from the signing of the contract.

Which of the following summarizes the general terms of a ground lease?

The tenant leases the ground from the landlord and owns the improvements.

A landlord and tenant complete a one-year lease. The following week, the landlord dies. Which of the following is true?

The tenant must continue to abide by all lease terms.

Percentage Lease

The tenant pays a percentage of gross sales on the premises, often in addition to a fixed monthly rental payment. Most commonly used for retail tenants.

Net Lease

The tenant pays some or all of the expenses associated with the property taxes, insurance, and maintenance in addition to rent

Sublease

When a tenant transfers only part of his right of possession or other interest in leased property to another person for part of the remaining lease term.In a sublease, the original tenant or lessee is responsible to the the owner for all provisions in the lease.

When is a contract formed?

When an offer is accepted, a contract is formed, and both parties are legally bound.

If a lease does not state a specific ending date, when does it terminate?

When either party gives proper notice

Can a minor void a contract with an adult?

Yes. When an adult enters into a contract with a minor, the contract is voidable by the minor only.

A lease contract is best described as

a conveyance of a possessors interest.

In accordance with the Statute of Frauds,

a five-year lease must be in writing to be enforceable.

Installment Sales Contract/Land Contracts

agreements for which the buyer makes payments tot he seller in exchange for the right to occupy and use the property, but no deed or title is transferred until all, or a specified portion of, payments have been made. The seller holds title to the land as security.

A primary theme of the Uniform Residential Landlord and Tenant Act is that both landlord and tenant

bargain with each other in good faith.

The adult does not have the power to disaffirm the _________________.

contract made with a minor

One of the aims of the Uniform Residential Landlord and Tenant Act is to

discourage the use of unfair and overly complex leases.

An owner leases a property to a business in exchange for rent. The tenant is required to pay all operating expenses as well. This is an example of a

net lease

When an owner leases her property, she temporarily relinquishes the right to

occupy the property

Assignment

one of the parties transfers rights or interests under a contract to another person.

Index Lease

rent tied to a common index indicator such as consumer price index.

The percentage lease is most often used by

retail landlords

Among the usual remedies available to the injured party if tenant or landlord defaults on the terms of a lease is the right to

sue to compel performance of the contract.

Land Lease/Ground Lease

tenant leases unimproved land on a long term basis; typically included a provision that the tenant will construct a building on the property which the tenant will own upon completion.

Novation

the substitution of a new contract for an earlier contract."

Gross Lease

the tenant pays a fixed rent while the owner or landlord pays all ownership expenses.