Contracts

Lesson Five

Learning Objectives

Review meaning of leasehold estate. Learn and understand lease rights. Become familiar with the various types of leases. Explain how leases can be terminated. Know the difference between actual and

constructive eviction. Statute of Frauds and Oral leases in relationship

to lease enforcement.

Leases

Non-Freehold EstateLandlord/LessorTenant/Lessee

Categories of Lease Rights

Estate for YearsFor a Definite Period of Time

Example: 6 months, One Year, Five Years

Period to PeriodSix Months + One Day = Six

MonthsOne Year + One Day = One YearFive Years + One Day = Five

YearsMust give written Notice to

Terminate Listing

Tenancy at Will

Must give Notice to Terminate Lease

May Live in Home until it is Torn Down

At will of Owner

Tenancy at Sufferance

A Tenant has Overstayed the Lease Period

In LA this is known as a Holdover Tenant

Non-Farm LeasesUsually for One Month Plus One

Week, Gives Another Month

Farm LeaseUsually for One Year Plus One

Month, Gives Another Year

Types of Leases

Gross Lease (Owner pays Expenses)

Net Lease (Tenant pays Expenses)

$ 2,000 base rentPlus $ 2,500 5% of the

$50,000 in sales$ 4,500 rent for the

month

Percentage Lease

Ground Lease“Separate Immovable”

Step-Up Lease

325

300

275

250

Graduated LeaseEscalator Clause

$400

Increase Taxes & Ins.

$250

Sale & Leaseback

Sale To Obtain CashLease Property from New

Owner

Re-Appraisal Lease

$100,000 x 10% = $10,000$200,000 x 10% = $20,000

Index Lease

Lease $10,000 GNP 8% New Rent $10,800

AssignmentTransfer of Rights to Third

PartyOriginal Lessee is still

Responsible for LeaseOne Lease

Sub-Lease

Transfer of Rights to Third Party

Two LeasesOriginal Lessee is still

Responsible

Termination of LeasesExpiration of TimeMutual AgreementBreach of ContractDeath10 Days Notice

Eviction

Actual EvictionTenants Fault

Constructive EvictionOwners Fault

Security Deposit

In LA Deposit must be returned within 30 days less itemized list of damages.

Statute of Fraud

Requires all Contracts be in writing to be enforceable.

Oral Lease in LA are good for any length.

Note: In both cases it is still wiser to write all leases and long term leases should probably be recorded.