Leases

1
Leases
2
Leasing Basics

• Lessor
• Lessee
• Landlord retains a reversionary right
• In most states, Alabama included, lease
  agreements for more than one year must be in
  writing to be enforceable.

3
Leasehold Estates

• A leasehold estate is the interest in real estate
  that a tenant has.
• Estate for years continues for a definite
  period of time. Lease has a specific expiration.
• Estate from period to period indefinite length
  requires notice to terminate.
• month-to-month tenancy
• holdover tenancy

4

• Estate at will tenant possesses property with
  landlords consent for an indefinite period.
• Estate at sufferance tenant continues
  possession after lease end without approval of
  landlord.

5
Lease Agreements

• A lease is a contract so the same requirements
  are necessary for a lease to be valid.
• capacity to contract
• legal objectives
• offer and acceptance
• consideration

6
Whats Covered in the Lease

• Possession of the premises
• covenant of quiet enjoyment
• Use of premises can be for any lawful purpose
  if use is not limited. Most commercial leases
  limit use.
• Term of lease can be up to 100 years in most
  states.
• Security deposit

7

• Improvements usually become landlords property
  and must be done with landlords permission.
• Accessibility tenants with disabilities must be
  allowed to make reasonable modifications at their
  own expense. The landlord may require that they
  be removed when the tenant leaves.

8

• Maintenance of premises most states require
  that the landlord maintain the premises in a
  habitable condition.
• Destruction of premises most of the time,
  destruction of the premises does not negate the
  liability of the tenant to pay rent.
  (commercial)
• Assignment and subleasing are permitted
  whenever a lease does not prohibit them.
  Original tenant is still liable.

9

• Recording a lease more common for long term
  leases.
• Options
• lease renewal
• option to purchase

10
Types of Leases

• Gross lease most common for residential.
  Tenant pays fixed amount and landlord covers
  expenses.
• Net lease tenant pays some or all of the
  property expenses. NN NNN
• Percentage lease rent based on a fixed base,
  plus a percentage of gross income.
• Variable lease usually graduated or based on an
  index.

11

• Ground lease usually very long term.
• Oil and gas lease
• Lease-purchase the purchase is the primary goal
  of the agreement and the lease is used to delay
  the actual closing.

12

• Discharge of leases
• giving up possession does not eliminate the
  obligation to pay the remainder of the rent.
• property sells subject to existing leases unless
  there is a sale clause.
• tenancy may also be terminated by operation of
  law, e.g., bankruptcy or condemnation.

13

• Breach of lease can be done by either party
• When a tenant breaches, the landlord takes action
  to regain possession, known as actual eviction.
• When the landlord breaches, the tenant can
  abandon the premises through what is known as
  constructive eviction.

14
Fair Housing and Civil Rights Laws

• Well cover this in chapter 20.