lecture 7 contracts, deeds, and leases. lecture 7 deeds
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Lecture 7 Contracts, Deeds, and Leases Slide 2 Lecture 7 Deeds Slide 3 Title and Deeds Title: Proof of Ownership Deed: An Instrument of Conveyance Merchantable Title: Attorney abstracts and opines conveyance histories Slide 4 Deeds TWO PARTIES TO A DEED: Grantor: Owner conveying (selling or giving) right, interest, or title to another party Grantee: Receives right, interest, or title from Grantor Slide 5 Deeds: Validity Requirements Grantor must meet age and mental capacities Grantor must be identified with certainty Grantors signature required Consideration required Contain words of conveyance Legal description Signature requirements Deed must be delivered from Grantor to Grantee Slide 6 Deeds: Warranty Deeds Grantor conveys ALL property rights to Grantee. Seizin: Right to Convey Quiet Enjoyment: Grantee not to be bothered with subsequent claims of ownership Against Encumbrances: Other than specified easements and other encumbrances, Grantor discloses all known Slide 7 Deeds: Special Warranty Deeds Special Warranty Deed covers only the period AFTER the Grantor assumed ownership. Slide 8 Deeds: Non-Warranty Deeds Quitclaim Deed Grantor gives up rights, interests, and title held at transfer Judicial Deed Given by a court following judicial proceedings Slide 9 Deeds: Recording After Conveyance Recording: Conveyance instruments become Public Records. - Constructive Notice of Ownership - Northeast Fla: $10.00 for first page, $8.50 for addl pages Documentary Stamps: State Revenue Department taxes on conveyance of title - Florida: $0.70 per each $100 of the SALE PRICE Example: $100,000 sales price = $100,000 *.007 = $700.00 of Stamps Slide 10 Slide 11 Lecture 7 Title & Title Insurance Slide 12 Evidence of Clear (Marketable) Title Abstract and Attorneys Opinion Certificate of Title Title Insurance Slide 13 TWO SIGNIFICANT FORMS: Owners Standard: Insures rights of new owner Mortgagees Title Policy: Insures owner up to amount of mortgage debt ITEMS TYPICALLY INSURED: Duress in execution of Instruments Marital rights of spouse reported incorrectly Undisclosed divorce False representation of true owner Forged documents Deeds written by Grantors who were minors, aliens, or incompetent Slide 14 Lecture 7 Contracts Slide 15 Types of Contracts Valid, Voidable, Void, Unenforceable Bilateral, Unilateral Slide 16 Types of Contracts Valid: Fulfills all legal requirements imposed by law, and therefore enforced by courts of law Voidable: Contract is valid, but one party can exercise right to avoid or set aside contracted obligations Unenforceable: Contract is valid, but not recognized by courts if legal action is sought in courts Void: Contract is NOT valid, and not recognized by courts of law Slide 17 Types of Contracts Bilateral: Agreement made between two or more people 1. One party makes an offer (promise) to second party 2. Second party accepts 3. Bilateral contract formed Unilateral: Offer (promise) made by one party to another 1. One party makes an offer (promise) to a second party, and second party receives the benefit of the promise contingent upon the performance of the offer (promise) Real Estate Contracts:Bilateral Real Estate Listing Agreements:Unilateral Slide 18 Contracts: Requirements for Validity and Enforceability Agreement (Offer and Acceptance) Consideration Competent Parties Reality of Consent Legality of Purpose Necessity of Writing in Certain Instances Slide 19 Contracts: Requirements for Validity and Enforceability AN AGREEMENT Offer: Initial step in the formation of a contract 1. Definite and Certain 2. Complete 3. Communicated to the Seller 4. Intended to create legal obligation between two parties Acceptance: Indication of willingness to be bound by terms of an offer 1. Made only by persons to whom offer was made 2. Unconditional and identical to terms of the offer 3. Communicated to the offeror Slide 20 Discharge: Complete performance by both parties Nonperformance: One party legally excused from a binding contract Breach of Contract: Failure by a party to perform contracted obligations Liquidated damages, nominal damages, Specific Performance Discharge, Nonperformance, Breach of Contract Slide 21 Lecture 7 The Lease Slide 22 Leases LEASE: Written document in which the rights to use and occupancy of land or structures are transferred by the owner (Landlord) to another for a specified period of time in return for a specified rent Slide 23 Parties to a Lease TENANT: One who holds/possesses real property; commonly, a person who occupies and uses the property of another under a lease (lessee) LANDLORD: The owner of real estate that is leased to others Slide 24 Rights of Tenancy Fee-Simple/Non-Freehold/ Freehold Interest Less-Than Freehold Use Exclusion Possession Disposition Use Exclusion Possession Disposition Slide 25 Non-Freehold Interests LEASED-FEE INTEREST: Ownership interest held by a Landlord with the right of use and occupancy conveyed by lease to others LEASEHOLD INTEREST: Rights to use and occupy real estate for a stated term and under certain conditions; conveyed by a lease Slide 26 Leased-Fee v. Leasehold Leased-Fee Leasehold Rights Conveyed By Lease Contract Rent Use Exclusion Possession Disposition Use Exclusion Possession Slide 27 Positive and Negative Leasehold Interests Negative Leasehold Positive Leasehold Market Rent CONTRACT RENT Slide 28 Subletting SUBLEASE: An agreement in which the lessee in a prior lease conveys the right of use and occupancy of a property to another SANDWICH LEASE: A lease in which an intermediate, or sandwich, leaseholder is the lessee of one party and the lessor of another. Slide 29 Subletting Leased-Fee LeaseholdSub-Leasehold Use Exclusion Possession Disposition Use Exclusion Possession Use Exclusion Possession Lease Contract Rent Contract Rent Sandwich Slide 30 Characteristics of Commercial Leases Agreement and Consideration Meeting of the Minds Owner sets asking price, and makes proposal to tenant Tenant accepts, and lease is commenced Common Lease Clauses Fixtures Clause Tenant Improvements Clause Hours-Of-Business Clause Use Clause Signage Clause Condemnation Clause Slide 31 Commercial Rental Structures Gross Lease Landlord pays for all expenses Expense Stops Net Lease Tenant pays for pro-rata share of determined expenses Triple-Net (NNN): Tenant pays for pro-rata share of Common Area Maintenance (CAM), Ad Valorem Taxes, Hazard Insurance Slide 32 Commercial Rental Structures Percentage Rent (Overage Rent) Portion of Tenants rent based on business income Fixed Rental Portion + Overage Portion Recapture Clause (helps hedge owner risk of tenants poor business performance) Escalated Rents Flat rent amount over a set period, increases periodically thereafter Escalators contracted or based on consumer indices Slide 33 Examples of Rental Structures 1.Tenant pays $50,000, and Landlord/Owner pays all operating expenses. 2.Tenant pays $30,000 annually, PLUS 2% of all retail sales over $750,000. The stores gross sales were $900,000. 3.Tenant pays $10,000 annually plus its share of hazard insurance, ad valorem taxes, and CAM totaling $30,000 per year. 4.Tenant pays $24,000 annually for the first year, and the Landlord pays all operating expenses. In years 2 through 6, the rent increases by an amount equal to the respective CPI, or 3.5%.