lecture 7 contracts, deeds, and leases. lecture 7 deeds
TRANSCRIPT
Lecture 7
Contracts, Deeds, and Leases
Lecture 7
Deeds
Title and Deeds
Title: “Proof of Ownership”
Deed: An Instrument of Conveyance– Merchantable Title: Attorney abstracts and opines
conveyance histories
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
Deeds: Validity Requirements
Grantor must meet age and mental capacities
Grantor must be identified with certainty
Grantor’s signature required
Consideration required
Contain words of conveyance
Legal description
Signature requirements
Deed must be delivered from Grantor to Grantee
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
Deeds: Special Warranty Deeds
Special Warranty Deed covers only the period AFTER the Grantor assumed ownership.
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
Deeds: Recording After Conveyance
Recording: Conveyance instruments become Public Records.
- Constructive Notice of Ownership
- Northeast Fla: $10.00 for first page, $8.50 for add’l 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
Lecture 7
Title &
Title Insurance
Evidence of Clear (Marketable) Title
Abstract and Attorney’s Opinion
Certificate of Title
Title Insurance
Title Insurance
TWO SIGNIFICANT FORMS:Owner’s Standard: Insures rights of new owner
Mortgagee’s 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
Lecture 7
Contracts
Types of Contracts
Valid, Voidable, Void, Unenforceable
Bilateral, Unilateral
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
Types of Contracts
Bilateral: Agreement made between two or more people1. 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 another1. 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
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
Contracts: Requirements for Validity and Enforceability
AN AGREEMENT
Offer: Initial step in the formation of a contract1. Definite and Certain2. Complete3. Communicated to the Seller4. 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 made2. Unconditional and identical to terms of the offer3. Communicated to the offeror
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
Lecture 7
The Lease
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
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
Rights of Tenancy
Fee-Simple/ Non-Freehold/
Freehold Interest Less-Than Freehold
Use
Exclusion
Possession
Disposition
Use
Exclusion
Possession
Disposition
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
Leased-Fee v. Leasehold
Leased-Fee Leasehold
Rights Conveyed By Lease
Contract Rent
UseExclusionPossessionDisposition
UseExclusionPossession
Positive and NegativeLeasehold Interests
Negative Leasehold Positive Leasehold
Market Rent
CO
NT
RA
CT
RE
NT
CO
NT
RA
CT
RE
NT
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.
Subletting
Leased-Fee Leasehold Sub-Leasehold
UseExclusionPossessionDisposition
UseExclusionPossession
UseExclusionPossession
Lease
Contract Rent
Contract Rent
Sandwich
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
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
Commercial Rental Structures
Percentage Rent (Overage Rent)– Portion of Tenant’s rent based on business income– Fixed Rental Portion + Overage Portion– Recapture Clause (helps hedge owner risk of tenant’s poor business
performance)
Escalated Rents– Flat rent amount over a set period, increases periodically thereafter– Escalators contracted or based on consumer indices
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 store’s 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%.