National Real Estate Exam: Leases and Property Management

National Real Estate Exam: Leases and Property Management

Flashcards Wasteimproper use or abuse of property by one in possession of land, who hols less than the fee estate. Waste impairs value of land.Quiet Enjoymentuse of the property without interference from the landlord.Lease should contain:- Identify parties in lease- Describe property- Specify lease term- Lease start date- Duration or termination date- Rights and duties of lessor and lessee- Amount of rental payment- Acts which may cause termination What does Property Management do?- rental schedule to produce highest yield to owner- market property for rent- screen tenants- negotiate and execute leases- collect rent- handle current and deferred maintenance- audit and pay bills- make sure owner is insured- keep track of income and expenditures- provide owner with report of property activities on regular basis (usually monthly)- develop management plans and operating budgets Ground LeaseTenant leases land only and owns improvements on the land.Percentage leaseRent is totally or in part a percentage of tenant's gross business income.Upon sale of leased property...Lease is binding on the new owner.LeaseTransfers possession, giving tenant right to exclusive possession of property against all other parties. Both a conveyance and contract.Property Managementacts as a fiduciary (agent) of the owner. Goal is to rent or lease space at rate which will produce a return sufficient to pay operating expenses and fixed expenses and provide return on owner's equity. Must try to protect condition of property while maximizing income.Operating Budgetprojection of anticipated costs for annual operation of

building. Includes:- operating expenses (management fees,

utilities, janitorial services, maintenance, insurance premiums, etc.)- reserves for replacement of appliances, carpets, etc.- contingency funs for unusual situations such as replacement of ceiling due to leak.Net LeaseRent is net income to Landloard as tenant pays the rent, as well as some or all of the property expenses, property taxes, and property insurance premiums separately. Most nonresidential leases are net leases as well as sell-leasebacks.

What does NOT terminate lease- abandonment by tenant- death of landlord or tenant- sale of property Graduated leaseRent will increase at regular specified intervals.Periodic costsarise at greater intervals- property taxes Periodic tenancy TerminationCan be terminated with proper notice.Property Management Agreement contains:- name of parties- legally describes property to be managed- specifies effective and expiration dates- establishes procedure for cancellation prior to expiration date- conditions for renewal- report and accounting requirements- type of accounting functions- procedure for contracting for emergency repairs- procedures for payment of outstanding bills- who is authorized to negotiate and sign leases- guidelines for handling tenants problems- if property manager is authorized to negotiate types of insurance and who will pay premiums- fee and commission structure to various services.Rehabilitationto restore to a former or improved conditions whether or not design or use is changed Lease ConveyanceIt conveys a leasehold estate to a tenant Evictionprocess by which tenant is deprived of possession, use, and enjoyment pf property.Estate for years terminationWithout notice on expiration date.Leases may also be terminated by:-mutual consent of lessor and lessee- condemnation or destruction of property- release or merger of leasehold and fee estates- default of terms and conditions such as committing waste or willful destruction.Lease ContractGives tenant right to exclusive possession including landlord.Upon death of lessee...- his interest will pass to his estate Actual evictioninvolves court enforced order to remove lessee Regular recurring costs- wages Flat (or fixed or straight) leaseFixed rental amount is paid periodically throughout term of the lease. Generally used for long-term leases.Gross LeaseRent is gross income to Landlord. Landlord pays operating and maintenance expenses of property, as well as property insurance premiums and taxes. Used primarily for residential property.Index (or escalation) leasecontain an escalator clause that allows the landlord to increase the rent to compensate for inflation and rising operating costs.Constructive evictiontenant forced to move out because of poor condition of premises