Real estate key concepts

Percentage lease

Percentage lease A percentage lease is a rental that is based on a percentage of the monthly or annual gross sales made on the premises. Percentage leases are common with large retail stores, especially in shopping centers. An underlying concept of the percentage lease is that both the landlord and the tenant should share in the locational advantages of the leased premises. There are many types of percentage leases: the straight percentage of gross income, without minimum (uncommon); the fixed minimum rent plus a percentage of the gross; the fixed minimum rent against a percentage of the gross, whichever is greater; and the fixed minimum rent plus a percentage of the gross, with a ceiling to the percentage rental (among others).

Periodic tenancy

Periodic tenancy which is also known as an estate from years to years is a tenancy that is not bound to a lease with a fixed period like an estate for years. A periodic tenancy follows a period such as a month-to-month, week-to-week or year to year. Proper notice must be given to terminate this lease.

Property management

Property management A property manager has a fiduciary relationship with the owner. The primary goals of the property manager are to generate the highest net operating income while maintaining the value of the property. A property manager is a general agent of the owner because they are engaged in an ongoing business relationship. Most states recognize property management contracts as personal service contracts that terminate upon the death of either party. Most states require property management agreements to be in writing. A property manager may be paid based on the gross or net income the property produces The duties of a property manager include: - Preparing the budget - Allocating the money for fixed expenses, operating expenses and reserve funds - Selecting quality tenants witch involves being familiar with the market rent verses the contract rent. - Offering concessions to attract tenants. The lease agreement should specify when the rent is due. If the lease does not specify a date, rent is due the last day of the leasing period. The property manager should maintain good relationships with the tenants. The duties of maintaining the property include hiring contractors and employees overseeing their work. The property manager must reserve funds for capital expenditure such as remodeling and renovating the property. A property manager should have knowledge of the following: - Market conditions - Record keeping - Expenses - How to Hand of environmental hazards - Risk management Risk management involves evaluating the need for insurance coverage to protect the owner and manager from risk such as: - Loss of revenue - Liability from injury of anyone on the premise - Loss due to fire - Medical coverage for employees - And casualty losses The four options a property manager has for avoiding risk are: - Avoid the risk by removing the problem - Retain the risk by purchasing insurance with a large deductible - Control the risk by installing protective equipment - Transfer the risk by obtaining insurance with no deductible

Real vs personal property

Real vs Personal Property This is one of the most important concepts on the real estate exam. Real property refers to one of the two main classes of property, personal property being the other. All things attached to the land and all rights inherent with that land generally encompasses real property. As a general rule real property are things that are immovable. This is a general rule to help you pass the real estate exam as there are examples of things that are movable and considered real property. Personal property is a type of property are generally that things that are movable, it is not real estate. Personal property may also be called chattels or personalty. It is distinguished from real property, or real estate. because personal property is generally movable property or movables - any property that can be moved from one location to another. Personal property may be classified in a variety of ways. Tangible personal property refers to any type of property that can generally be moved (i.e., it is not attached to real property or land), touched or felt. These generally include items such as furniture, clothing, jewelry, art, writings, or household goods. In some cases, there can be formal title documents that show the ownership and transfer rights of that property after a person's death (for example, motor vehicles, boats, etc.) In many cases, however, tangible personal property will not be "titled" in an owner's name and is presumed to be whatever property he or she was in possession of at the time of his or her death. Severance is changing an item from real property to personal property by detaching it from the land. Annexation Annexation is the addition to property by the act of attaching a smaller item to the larger property, as in attaching personal property to real property, thereby creating a fixture. For example, a sink becomes a fixture when it is annexed to the plumbing outlet. Appurtenances Appurtenance is a term for what belongs to and goes with something else, with the appurtenance being less significant than what it belongs to. Appurtenance is something belonging to something else, either attached or not, such as a barn to a house, or an easement to land. The appurtenance is part of the property and passes with it upon sale or other transfer. Fixtures A fixture is personal property that becomes real property, when attached in a permanent manner to real estate, and is incorporated into the land. this comes up on the real estate exam allot. An example of a fixture would be a chandelier as it is an item that was movable but now is attached to the property. Personal property that becomes real estate is called a fixture. From a real estate perspective, the principal difference between personal property and a fixture is that personal property stays with the owner when a piece of real estate is sold, and a fixture stays with the property. Say you have lumber delivered to the house to build a deck. At the time of the delivery, lumber is personal property that goes with you if you sell the house. However, if you build a deck with the lumber the following week and attach it to the back of your house, the lumber now is considered a fixture that, of course, stays with the house when you sell it. To remember if something is a fixture or not just remember the acronym MARIA Method of attachment Adaptability of the item Relationship of the parties Intention of the parties Agreement of the parties involved. As stated before Saying that real property is immovable and personal property is movable is a general rule, another way to help you remember what is real and what is personal is to keep in mind that personal property goes with the person and real property goes with the real estate. Trade Fixture A Trade fixture is a piece of equipment on or attached to the real estate which is used in a trade or business. Trade fixtures differ from other fixtures in that they may be removed from the real estate (making it personal property even if attached) at the end of the tenancy of the business, while ordinary fixtures attached to the real estate become part of the real estate. The business tenant must compensate the owner for any damages due to removal of trade fixtures or repair such damage. It is important that you remember trade fixtures remain the tenant's property, hence they are personal property. An example of this is the dentists chair would be a trade fixture as the chair is being used for the dentists business. Even though it is attached to the property, the dentists will take that chair with him when he moves to a different location. Emblements Emblements are annual crops produced by cultivation legally belonging to the tenant with the implied right for its harvest, and are treated as the tenant's property. They are considered personal property. A tenant farmer has the right to his crops even when his lease ends before the end of the growing season. Crops grown on property just before it's sold generally are considered to be the personal property of the seller as well. This comes into play in the law of landlord and tenant, or in the forclosure of mortgages and other legal situations that place the rights of another party in contention with those of a farmer who has planted a crop yet to be harvested. In these situations, the doctrine of emblements operates to guarantee the farmer's right to reap and carry away the fruits of his labor even if he loses title to the land on which they are grown. OR-EE rule On the real estate exam you will here words like Grantor - Grantee Lessor - Lessee Vendor - Vendee Optionor - Optionee Trustor - Trustee Mortgagor - Mortgee Offoror - Offeree And the list can go on The jist of it is, the OR is the giver and the EE receives. Say this to yourself over and over again "GrantOR, LessOR, OptionOR, VendOR makes me the givOR of the propetOR for your pleasOR" So if you see words like Give Convey Sell That is an OR And then say "GrantEE, LessEE, OptionEE, VendEE, gives MEE propertEE which makes me HapEE" So if you see words like Receive Purchase Acquire You know it is an EE It may seem silly, but when you are taking your exam and you see a question that you do not understand but you know one party is giving something and the other party is receiving something you will be thrilled. For example a vendor sells to a vendee. The gantor coveys property to a grantee, who receives it. If on the real estate exam they ask who conveys property? And you see an option that says Grantor and another option is a Grantee. You many not know anything about deeds, but you know the answer is Grantor because OR is the conveyor.

The American disability act of 1992

The Americans with Disabilities Act (ADA) of 1992 seeks to accommodate those with disabilities by broadening their access to public facilities. Any existing business with 15 or more employees must update their facility to conform with ADA rules and regulations. Almost all new construction, with the exception of single-family homes, must be handicapped accessible. While newly-constructed ground-floor apartments are subject to ADA regulations, those on higher levels are not. As of 1988, multi-family buildings with four or more units must comply with ADA standards.

Essentials of a valid contract

The essentials of a valid contract are Capable parties Lawful object Consideration and Offer and acceptance

Type of leases

There are different types of Lease arrangements the lessor and lessee can have. Such as a gross lease, net lease, lease option and a percentage lease.

Valid, Void & Voidable Contracts

Valid, Void & Voidable Contracts A contract can be classified as valid, void, voidable. A valid contract is one that meets the basic elements of contract law. For example, you sign to buy a red house, the house red, thus the contract is valid. A voidable contract provides the option to rescind by either party. At the creation of the contract it is valid but it could be voided in the future. Most sales contracts are voidable contracts because they contain contingency clauses. A contingency is the dependence upon a stated event that must occur before a contract is binding. If a contingency provision cannot be met, the contract can be legally voided. Contracts entered into under duress, misrepresentation or fraud are voidable. For example you sign to buy a red house and the house is blue, you have the option to rescind, or, if you do mind the color blue, you have the option to go through with the purchase. A void contract has no legal force. It is missing an essential element, thus it is not a contract. For example a contract to kill would be void, because it has an illegal purpose.

An example of substantial performance is when ____.

a contractor substitutes materials during a job

Lawful object (contracts)

A contract must be entered into for a legal purpose. For example, when you see in the movies a contract to kill, that is really no contract at all because it is not lawful. A contract like this with an illegal purpose is void. A contract must also be entered into freely, without duress, threats, blackmail, misrepresentation or fraud.

Fee simple estate

A fee simple (or fee simple absolute) is an estate in land. This form of ownership can not be defeated by the previous owner or the previous owner's heirs; however it is not free from encumbrances. Fee simple absolute is the greatest interest in a parcel of land that one can possibly own. Sometimes designated simply as "Fee." Fee simple ownership represents absolute ownership of real property but it is limited by the four basic government powers of taxation, eminent domain, police power, and escheat and could also be limited by certain encumbrances or a condition in the deed.

Free hold estate

A freehold estate is an estate in which ownership is for an undefined length of time. The 3 types of freehold estates are. Fee simple absolute. Fee Simple deafesable And a life estate.

Land contract

A land contract is a financial agreement between a vendor and a vendee. Generally, title is held by the seller until final payment is made. The land functions as the security device. Unless agreed otherwise, the seller is responsible for paying taxes and insurance because the seller retains legal title to the property. A land contract is also known as a contract for deed, an agreement to purchase and sell, or a land installment contract. In a land contract, the seller is the vendor, and the buyer is the vendee. The buyer has an equitable interest, which indicates a beneficial interest in the property and gives the holder the right to acquire legal title in the future

Life estates

A life estate is an interest in real property, which is held for the duration of the life of a designated person. It may be limited by the life of the person holding it or by the life of another person. For example, Anne can give a property to Dan for the life of Anne. Dan would be the life tenant. A life tenant receives the property and is responsible for maintenance of the property and paying taxes. If a life tenant allows a property to deteriorate it would be committing waste, a life tenant cannot commit waste. A life tenant cannot leave a property to anyone in their will. A life tenant may sell, mortgage or lease the property for the duration of the estate. Thus all contracts would be terminated upon the death of the life tenant For example, if Dan dies and the property were to go back to Anne, Anne would have the estate in Reversion. If Anne dies, then the property would not be Dan's because he had it as long as Anne was alive. Upon Anne's' death the property would go to Lisa, and then Lisa would have the estate in Remainder.

Estate for years

An estate for years is a leasehold interest in land for a fixed period of time it is often called a tenancy for years. An example of an estate for years would be a summer rental, as it has a defined beginning and end date. No notice to be terminated is need as the end of lease is established at the conception of the rental.

Estate in sufferance

An estate in sufferance arises when the tenant wrongfully holds over after the expiration of his term; often called a tenancy at sufferance. An example of an estate at sufferance would be a tenant that does not pay rent. In simple terms the landlord is suffering. This is not a form of trespass as at one point the tenant had the right to be on the property. The landlord would have to legally evict the tenant when a tenancy at sufferance is created.

Executed Contract

An executed contract is when all parties have fulfilled their promises. For example, a sales contract is complete when the transaction closes. Do not confuse an executed contract with the act of signing a document, which is execution of the document.

executory contract

An executory contract is when one or both parties have obligations still to be performed. For example, a sales contract is an executory contract until the buyer has obtained financing, and the seller has confirmed a clear and marketable title.

Implied contract

An implied contract is created by the acts of the parties. The old saying comes to mind of "if it walks like a duck, smells like a duck and sounds like a duck, then it must be a duck." Acting as something can mean you are that thing, for example at a restaurant, once a patron sits down and orders it is implied he or she will eat, and he or she will pay for the food.

Bilateral & Unilateral

Bilateral & Unilateral contacts A bilateral contract is one where there is a promise for promise. Sales contracts and listings are examples of bilateral contracts. In a listing contract the seller promises to pay if the agent promises to procure a purchaser. A unilateral contract is a one-sided agreement, that is, only one party makes a promise to perform. A lease option is a unilateral contract until the option is exercised. Another example of a unilateral contract is a lost dog sign, you find the dog, you get paid, but you are not promising to go and look for the dog.

Consideration

Consideration is anything of value. It is bargained for and received. Valuable consideration is something of value given or promised by one party in exchange for the promise of the other. Valuable consideration is usually the promise to pay money in exchange for an item that has monetary value.

Estate at will

Estate at will means that it can be ended at any time. An estate at will gives the lessee the right to possession until the estate is terminated by either party; the term of this estate is indefinite.

Exclusive Authorization and right to sell Listing

Exclusive Authorization and right to sell Listing Exclusive Authorization and Right to Sell Listing is a contract where the Owner agrees to sell the property in question through the Listing Broker. The Listing Broker does not need to show that he is the "Procuring Cause" of the buyer. The agent gets paid no matter who brings the buyer as long as the property sells in the agreed upon fashion. This is when you see a broker for sale sign in the front yard. Only that broker is trying to solicit the buyer. This is what most people are accustomed to seeing.

Fee Simple Defeasible

Fee simple Defeasible If previous grantors of a fee simple estate do not create any conditions for subsequent grantees to own the conveyed property in fee simple title, which is commonly the case these days, then the title is called fee simple absolute. Other fee simple estates in real property include fee simple defeasible (or fee simple determinable) estates. A defeasible estate is created when a grantor places a condition on a fee simple estate (in the deed). Upon the happening of a specified event, the estate may become void or subject to annulment. Two types of defeasible estates are the fee simple determinable and the fee simple subject to a condition subsequent. If the grantor uses durational language in the condition such as "to A as long as the land is used for a park" then upon the happening of the specified event, the estate will automatically terminate and revert to the grantor or the grantor's estate; this is called a fee simple determinable. If the grantor uses language such as "but if alcohol is served" then the grantor or the heirs have a right of entry, but the estate does not automatically revert to the grantor; this is a fee simple subject to a condition subsequent. In the United States many of these concepts have been modified by statute in some states.

Free hold estate

Freehold Estate A freehold estate is an estate in which ownership is for an undefined length of time. The 3 types of freehold estates are. Fee simple absolute. Fee Simple deafesable And a life estate. Fee simple absolute A fee simple (or fee simple absolute) is an estate in land. This form of ownership can not be defeated by the previous owner or the previous owner's heirs; however it is not free from encumbrances. Fee simple absolute is the greatest interest in a parcel of land that one can possibly own. Sometimes designated simply as "Fee." Fee simple ownership represents absolute ownership of real property but it is limited by the four basic government powers of taxation, eminent domain, police power, and escheat and could also be limited by certain encumbrances or a condition in the deed. Fee simple Defeasible If previous grantors of a fee simple estate do not create any conditions for subsequent grantees to own the conveyed property in fee simple title, which is commonly the case these days, then the title is called fee simple absolute. Other fee simple estates in real property include fee simple defeasible (or fee simple determinable) estates. A defeasible estate is created when a grantor places a condition on a fee simple estate (in the deed). Upon the happening of a specified event, the estate may become void or subject to annulment. Two types of defeasible estates are the fee simple determinable and the fee simple subject to a condition subsequent. If the grantor uses durational language in the condition such as "to A as long as the land is used for a park" then upon the happening of the specified event, the estate will automatically terminate and revert to the grantor or the grantor's estate; this is called a fee simple determinable. If the grantor uses language such as "but if alcohol is served" then the grantor or the heirs have a right of entry, but the estate does not automatically revert to the grantor; this is a fee simple subject to a condition subsequent. In the United States many of these concepts have been modified by statute in some states. Life estate A life estate is an interest in real property, which is held for the duration of the life of a designated person. It may be limited by the life of the person holding it or by the life of another person. For example, Anne can give a property to Dan for the life of Anne. Dan would be the life tenant. A life tenant receives the property and is responsible for maintenance of the property and paying taxes. If a life tenant allows a property to deteriorate it would be committing waste, a life tenant cannot commit waste. A life tenant cannot leave a property to anyone in their will. A life tenant may sell, mortgage or lease the property for the duration of the estate. Thus all contracts would be terminated upon the death of the life tenant For example, if Dan dies and the property were to go back to Anne, Anne would have the estate in Reversion. If Anne dies, then the property would not be Dan's because he had it as long as Anne was alive. Upon Anne's' death the property would go to Lisa, and then Lisa would have the estate in Remainder.

Gross Lease

Gross lease is a rental agreement for the use of the property where the tenant pays a fixed amount which does not change as a result of changes in the various expenses of the property. The landlord pays for these expenses such as all repairs, taxes and operating expenses incurre

HUD standards

Housing intended to serve those 55 and older is acceptable according to HUD standards. Words indicative of race, religion, color, familial status, sex, handicap, or national origin are not acceptable, nor are words that could be considered discriminatory, such as "exclusive," "restrictive," "traditional," or "board-approved."

Option Contracts

In an option contract, the seller is the optionor and the buyer is the optionee. It is a unilateral contract in that the seller is obligated to sell, but the buyer has the option to buy. When created, an option contract is a unilateral contract. But when the buyer exercises the option, it becomes a bilateral contract. The option is assignable to another party unless the contract forbids it. In a lease option, the lessee agrees to lease the property with an option to buy the property. The option is usually given for some type of consideration, This can be money up front or added on to the rent amount to be aplied to the purchase. The lessee would be the optionee and the lessor would be the optionor as they are giving the option to purchase at a designated time.

Exclusive Listing

In exclusive Listing, one agent is hired, therefore there is one commission however that commission can be shared with an agent that brings a buyer. The way that the commission is being divided must be disclosed to the seller.

Leas option

Lease option A lease option is a rental agreement indicating a tenant's option to purchase a property during the term or at the end of the lease. The Owner of the property would be the optionor, the tenant would be the optionee. Consideration is given to the optionor in order to secure the option for the optionee. The consideration can be monthly payments consisting not only of rent, but an overage, or it can be money up front that can be applied towards a down payment on an already established amount. If the optionee exercises the option, title would revert back to the time the contract began, not when the option was exercised.

Net lease

Net lease A net lease where the responsibility to pay taxes, insurance, and maintenance are incurred by lessee in addition to the monthly lease payment. This is often referred to as a triple net lease.

novation

Novation is when a new contract is used to replace the initial contact.

Offer and acceptance

Offer and acceptance is also called mutual consent or a meeting of the minds. An offer must contain the exact terms and conditions, and the offer must be accepted without changes. The offer must be clear in character, the property must be accurately described to identify the subject matter, and you must have an exact price. You can not offer to by a house for a whole lot of money, you must say one million dollars or what the exact amount is you are offering. The offeror is the party giving the offer; and the offeree is the party receiving the offer. In real estate the offer is usually made by the buyer and received by the seller. An offer must be accepted without change by the offeree or the offeree's authorized agent. Prior to acceptance an offer or counteroffer can be revoked. Notice of revocation must be received by the offeree prior to the acceptance of the offer. An offer will be terminated by death; or insanity of the offeror or offeree; destruction of the property; or a material change in circumstance. A counteroffer occurs when the seller changes any of the terms made by the offeror. This reverses the legal position of the parties and the offeror becomes the offeree, and the offoree becomes the offeror.

Capable parties

Other competent parties would include - Person given authority to enter into contracts on behalf of a corporation - Person with a proper power of attorney - Fiduciary given the authority to contract - Emancipated minor.