Chapter 34: Contracts in Property Management

In what section of a lease would you find information regarding the landlord's right to access the property?

Inspections section

What is a major tool used to reduce an owner's risk against liability loss?

Insurance

What is the most helpful method when of identifying the property location in a management agreement?

Legal description

Which of the following statements is most accurate?

Management agreement terms are purely negotiable.

Under what type of lease does the tenant pay rent, maintenance and taxes?

Net lease

What is the minimum period for a property management agreement?

One year

When is a percentage lease commonly used?

Percentage leases are commonly used in commercial agreements with shopping centers or retail stores.

What is another term given to a lease covenant?

Promise

What statute states that a lease exceeding one year must be in writing to be enforceable?

Statute of Frauds

What is it called when an owner is liable for an injury to a person without being at fault?

Strict liability

What are the two methods used to allow a third party to take on the responsibility of an existing lease agreement?

Subleasing and lease assignment

What is tenancy at sufferance?

Tenancy at sufferance occurs when a lease term has expired and the tenant has stayed on the property without the landlord's consent. The tenancy is referred to as a holdover tenancy.

List 3 commons causes of a lease termination.

Term expiration Voluntary agreement Property destruction

What law governs the making, interpretation, and enforcement of leases?

The Law of Contracts

Which of the following statements best defines the task of property management?

The administration of rental or other property by a person or a team of people who are acting for the owner

List three provisions a property management agreement would likely contain.

The beginning date of the contract Identification of the parties Property description

How do the owner and the property manager arrive at a management fee?

The fee is a negotiated item. It often is a base fee and/or a percentage of the collected rents.

What happens to the lease if the tenant dies?

The lease does not terminate upon the death of the tenant. It becomes part of the tenant's estate, which is bound by the terms of the lease.

Describe a property management agreement.

The management agreement is the employment contract for a property manager. The owner is the principal and the property manager is the general agent in this agreement, which creates an agency relationship between the parties.

In a subletting arrangement, which party is the sublessor?

The tenant

What are the two ways to repossess a leased property?

Voluntarily or through a court proceedings

What is it called when both parties agree to terminate a lease at any time?

Voluntary agreement

Generally, a lease for a period exceeding one year

cannot be oral but must be in writing to be enforceable because of the Statute of Frauds.

A lease is both a

contract between principal parties to uphold obligations and an instrument of conveyance.

A landlord may not

extinguish the obligations and covenants of a lease.

If a tenant is in default, the landlord may

file a suit for eviction.

Rent levels under a

gross lease are higher than under a net lease.

Constructive eviction occurs when the

landlord's negligence has rendered the property unoccupiable and a tenant vacates the premises and declares the lease cancelled.

In a lease arrangement, the owner is the

landlord, or lessor, and the renter is the tenant, or lessee.

The term "demise" can be used interchangeably with the term

lease.

As a conveyance, a lease conveys an interest called the

leasehold estate.

A leasehold is also called a

less-than-freehold estate.

Commercial leases are typically

net leases.

A property manager owes fiduciary duties to the

owner.

In a management agreement, the owner is the

principal and the property manager is the general agent.

A property management agreement should be

signed and dated by the parties.

In a graduated lease,

the rent payments start at a fixed amount but increase as the lease term matures.

Typically in a lease,

the tenant is responsible for routine maintenance and the landlord is responsible for repairs.

In order to obtain a constructive eviction judgment,

the tenant must vacate the premises.

Define a gross lease.

the tenant pays a fixed rent and the owner pays the taxes, insurance, and other normal ownership expenses

In a net lease,

the tenant pays not only the rent for occupancy, but also pays maintenance and operating expenses such as taxes, insurance, utilities, and repairs.

What is the typical proper termination notice in a lease agreement?

30 or 60 days

What action extinguishes all prior interests in a property, including a leasehold?

A foreclosure

What is a lease?

A lease is both an instrument of conveyance and a contract between principal parties to uphold certain covenants and obligations. As a conveyance, a lease conveys an interest, called the leasehold estate, but does not convey legal title to the property. For this reason, a leasehold is also called a less-than-freehold estate.

In what section of a lease would you find information stating that the tenant is not allowed to make physical changes to the property?

Alterations

Describe an option to renew clause in a lease agreement.

An option to renew is a lease provision that gives the tenant the right to extend the lease for an additional period of time and sets forth the terms for the renewed lease.

In what section of a lease would you find how long the lease will last?

Clear Statement of Term

What are the two most commonly used indexes in an index lease?

Consumer Price Index and the Wholesale Price Index

What lease clause talks about how the landlord is leasing the property and the tenant is taking possession of the property?

Demising clause

List 3 covenants that are common in a lease

Demising clause Description of the premises Clear statement of term

What is it called when the landlord provides the tenant an irrevocable right to sole and complete possession during the lease term?

Exclusive possession

What section of a management agreement deals with aspects of what authority the manager has with regard to such things as hiring and firing employees, setting the rental rates, and authorizing repairs?

Extent of Authority

Which of the following is a common option used in commercial leases?

For the tenant to be able to lease additional adjacent space

What type of lease requires the landlord to pay the property's operating expenses, including utilities, repairs, and maintenance, while the tenant pays only rent?

Gross Lease

What does it mean if there are no limitations on the use of the property written into the lease?

If no limitations are written into the lease, the tenant may use the property for any lawful purpose, providing the tenant does not violate any deed restrictions.

What is the most common form of landlord default?

Failure to provide services and maintain the property condition

What type of lease is typically used by a mining operation?

Ground lease

What document is used to contract a property manager?

Management agreement

Which of the following lease types is the most costly?

Triple Net

A landlord

can restrict the use of the property by including such restrictions or limitations in the lease.

A valid lease

creates obligations that survive the death of the landlord or tenant.