Chapter 4

Must be in writing

(applies for leases longer than one year.) Defined by the statue of frauds.

Possession and habitability

-AKA Warranty of Habitability -Insures the unit is habitable. -If the heat doesn't work in winter the place is not habitable. If violated 2 options are available. 1) the tenant can pay for fixing problems and the amount is deducted from rent the next month. 2) The tenet simply refuses to pay rent and they go to court for the money.

Lease termination (how can a lease end)

-Lease term ends -30 day notice (month to month lease) -Eviction (actual or constructive) -Unit abandonment (the tenant just leaves) -Death of a tenant -If the landlord decides to sell the property. (In this case, the landlord "assigns" the leases to a new owner. -Does NOT need the consent of tenants) New buyer must honer lease terms.

Contracts affecting brokers

-Losing agreements -Sales Contracts -Leases -Employment contracts.

Invalid Contracts

-Unilateral contract -Verbal contract

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.

Option to Renew

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

Express Contracts

A contract in which all elements of a contract as specifically stated (offer, acceptance, consideration) and the terms are stated. -A very direct contract, for a lease, everything is explained. nothing is implied.

Bilateral Contract

A contract involving mutual promises (each party is both promisor and promisee) -Many express contracts are Bilateral Contract -For example: A home buyer agrees to pay the seller a certain amount of money in exchange for the title to the home; the home seller agrees to deliver the title in exchange for the specified sale price.

Contract Validity

A contract must: -Be properly written -Have stated term -Have proper signatures -Competent parties -Mutual agreement -Consideration (money or reason for exchange.) -Must be in writing. -Lawful objective: no laws can be broken example can't be a front for money laundering

Executory Contract

A contract which has not been fully performed or executed (the time before it is signed.)

Eviction

A legal proceeding by a lessor landlord to recover possession of real property. -Landlords can not "self-help", they can't throw out a client. They MUST petition the court. -Cant put a dead bolt on to keep tenants out if their personal property is inside.

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.

Security deposits

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. -Typically a month or two months rent -If building is 6 units or more, the landlord is required to keep the security deposit in a separate interest-baring bank account to make money for the tenant.

Unilateral Contract

A one sided agreement whereby you promise to do (or refrain from doing) something in return for a performance. -Example: Take an eating contest, for instance. A restaurant advertises that they will give you a free meal if you eat a 5 pound steak. You agree and eat the steak. After you eat the steak, the restaurant then must give you the free meal as promised.

Option

A right given for consideration to purchase or lease a property upon specific terms within a specific time.. -If the right is not exercised, the option holder is not subjected 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.

Tendency at sufferance

A tenant who remains in possession of leased property after the expiration of the lease term. -Occurs when the tenant doesn't leave and the owner can't do anything but take him to court and get the judge to throw him out.

Covenant

Agreements written into deeds and other instruments promising performance or nonperformance of certain acts, or stipulating certain uses or non-uses of property. - Essentially promises written into a leasing contract. -Capacity of contract -A demising clause -Description of the premeises -Clear statement of the "term" length. -Consideration -Penalties for late rent. -Must be in writing (applies for leases longer than one year.) Defined by the statue of frauds. -Signatures -Plain language requirement. -Use provisions: Renewal of lease- When the lease needs to be renewed (if ever). -Rent control and rent stabilization laws.

Executed Contract

An agreement that has been fully performed.

Sublease

An arrangement in which the lessee (tenant) in a leasee assigns the lease to a third party, thereby making the old lease the sublease, and the new lessee the sublease or subtenant. -A tenant rents out his place to a new leasee. -Original leasor pays the rent NOT new. -Landlord must consent. -All rights so to sublet if approved.

Caveat Emptor

Buyer beware

Contract Practices

Contract delivery -by email because time is limited. Sit down contract singings -delivery of down payments (often a personal check) -NY state attorney legal advice -attorney review clauses.

Termination of lease

If tenant isn't paying rent or is committing an act of waste, the landlord can terminate the lease.

Clear statement of the "term" length

If the lease automatically renews it must be stated.

Improvement

Leases often have a stipulation of who is responsible for improvements and repair.

Penalties for late rent.

Offer clear expectations should the rent be late. '

Capacity of contract

Over 18 years of age, be sane, can not be a guardian in charge of said person

Lead based paint rider

Properties built proper to 1978 require a lead based pain clause. -Is a rdier to put buyer on notice that there is lead based paint, and they can't sue later because of it.

Description of the premeises

Property addresses, unit number.

Estate at will

Similar to employment at will, the lease can be terminated at any time by either the tenet or property owner. -Must give notice, typically 30 days.

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

Specific Performance

Consideration

Specification of the rent or sales price. Must say how much the rent it. -Money, is one of the most important parts of a contract.

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. is known as what...?

Apartment Sharing

The landlord can't dictate who a tenant shares an agreement with.

Assignment

The method or manner by which a right or contract is transferred from one person to another. -A tenant gives over ALL rights to a third party. -The new tenant pays the rent to landlord. -Old tenant can still be held liable. -Landlord is now in contact with new tenant. -One essentially gives their apartment away. -Landlord must consent. -All rights so to sublet if approved.

Once contract is executed

The provisions states in a contract are much more prevalent than the binder provisions. -Any proper documents signed go away, the terms in the contract are the ones honored.

What documents are commonly involved with a contract?

The standard Bloomberg form, riders for the seller and buyer and a lead based paint rider.. -Bloomberg is the one that varies based on the type of property being sold.

If rent is over $2,000...

Then the rent offered is allowed to be un-stabilized ( not controlled).

Reformation

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

When does a contract need to be in writing?

When the contract exists for longer than 1 year.

Renewal of lease

When the lease needs to be renewed (if ever).

Actual Eviction

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

Essential of a sales contract

-Date -Identification of parties -Legal description (The unit itself, the shares involved- will say address and what is in the building) -Personal property provision (whats in the building, curtains lamps, TV's) -Consideration -Terms of payment (when the payment is due) -Type of deed -Closing time and place -Broker clause- where the seller is obligated to pay a brokers fee. All official brokers will be listed and paid on first page of contract. -Apportionments: real-estate tax, added fees, The allocation of property expenses such as insurance and taxes between the buyer and seller -Lien Law: If seller has unpaid parking tickets, this law lets those he owes have a stake in the property. -Condition of property: The seller gives the buyer the property as is. Responsibility is on the buyer to check. -Merger clause: States that all the clauses and stipulation before the contract all merge into the deed upon signing. Limit of sellers liability- A way to limit seller liability. If a buyer backs out they still get the 10% put down plus damages. -Loan contingency clause (mortgage contingency clause): gives buyers an allotted amount of time to get a loan. Often offers a 45 day montage contingency. *If a buyer cannot obtain financing, he must cancel the contract within 45 days of signing in order to receive his down payment back. -Possession paragraph: When a tenant staying in property longer than lease states, it is in writing in the possession paragraph. Tenants compensate owner for interest and principle. -Down payment: Standard practice is 10%. -No survival- The terms of the contract merge into a deed and non survive.

Data required for contract preparation

-Prior deed (all deeds are recorded and available on ACRIS) -Prior title insurance policy -Survey -Certificate of occupancy -Personal data (Names, addresses, phone numbers, martial statuses, SS numbers) -Downpayment

Mortgage Contingencies

-Purchase Money Mortgages, where the seller finances the property for the buyer, contains the terms of that agreement also. - Assumed Mortgages: where someone inserted a property, all mortgages and debts go to new owner. -FHA Financing: loans where homes are under water -Fannie Mae regulations

Lease Requirements

-Security deposits -Possession and habitability (Warranty of Habitability) -Improvement -Assignment and subletting -Apartment Sharing -Termination of lease

Proprietary Lease

-Seen in co-ops -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 property lease for one of the residences in the building.

Closing Steps

1. Sellers broker sees out the data sheet 2. Sellers attorney drafts the contract 3. Contract handed to BUYERS attorney for negotiation. (They control the negotiation.) -Due diligence (2-7 days) -Negotiation 4. Buyer signs -10% deposti (sends to sellers attorney) 5. Seller signs 6. Sellers attorney gives notice to buyers attorney -deposit the 10% deposit.

Mortgage Contingency Clause

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

Lease

A contract whereby, for a consideration, usually termed rent, one who is entitled to the procession of real property transfers such rights to another for life, for a term of years or at will. -A lesser amount of sticks than a fee simple would be. -Gives lesser the right to quit enjoyment of the property for a specified period of time.

"Time is of the essence"

A phrase in a contract that means that performance by one party at or within the period specified in the contract is necessary to enable that party to require performance by the other party

Constructive Eviction

A term used in the law of real property to describe a circumstance in which a landlord either does something or fails to do something that he has a legal duty to provide (e.g. the landlord refuses to provide heat or water to the apartment), rendering the property uninhabitable. -Uses the concept of Warranty of Habitability and the tenants right for the quiet enjoyment of the property. -For example, if the stove or refrigerator doesn't work. -Often the tenant will leave. -Can also be thought of as a passive aggressive eviction. The place becomes so bad the tenent leaves.

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. -The owner doesn't own the building itself, he lets a tenant use a space for a set amount of time and takes possession after it. -Associated with co-operatives.

Estate for years

An estate for a duration. -Typically a year for residential. -5 to 10 years for commercial real estate.

Periodic Estate

An estate that renews on its own. -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.

Installment Sales Contract

Is a contract between a seller and buyer of real property in which the seller provides financing to buyer to purchase the property for an agreed-upon purchase price and the buyer repays the loan installments. -Like lay away

Plain language requirement.

Must be plain talk for all to understand, required for residential real-estate. :Means to terms, the rent, the due dates etc.

Use provisions

Property can be used for any lawful purpose. :Common in commercial leases.

Signatures

Proves understanding, doesn't need to be notarized unless to be recorded.

Leasehold Estate

The interest or estate which a lessee of realist has where by virtue of the lessees lease. -A leasehold estate is an ownership of a temporary right to hold land or property in which a lessee or a tenant holds rights of real property by some form of title from a lessor or landlord. Although a tenant does hold rights to real property, a leasehold estate is typically considered personal property -Ones name is not on the lease and they have the property for a specified period of time.

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.

A demising clause

When the property is going to handed over. Must say when the lease begins.