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1 Chapter 17
CHAPTER 17: Real Estate Leases
I. The Leasehold Estate
II. Creating a Valid Lease
A. Explain The Lease Document
B. Discuss Conveyance in a lease
C. Discuss Contract Aspects
III. Discuss the Landlord-Tenant Laws applicable
in your state
IV. Lease Considerations
A. Setting Rents
B. Option Clauses
C. Assignment and Subletting
V. Lease Variations
A. Ground Lease
B. Vertical Leases
VI. Contract Rent, Economic Rent
VII. Lease Termination
A. Eviction
B. Eminent Domain
VIII. Discuss Rent Control and America's Rent
Control Experience
IX. Property Management
A. Before Buying
B. Advertising
X. Tenant Selection
A. Security Deposit
B. Rent Concessions
XI. Tenant Retention
A. Communications
B. Leases
C. Collecting Rents
1. Late Rents
2. Eviction Problems
3. Manager Remedies
XII. On-Site Management
A. Management-Unit Ratios
B. Off-Site Management
XIII. FOB Opportunities
A. Training Programs
B. Professional Organizations
This is an excellent time to review the
leasehold versus freehold estate theories
again. Stress the possession aspect of
Give examples of leasing a portion of a
store to another and/or proting from a
good rental rate.
This is an excellent topic to bring in
economic issues, and how economic cycles
can make a leasehold estate have a very
Is there a foolproof method? Discuss
personal experiences which are good
examples in an area like this. Check
Internet for examples and as resource.
This chapter will look at leases from the standpoint of the
tenant, the property owner, and the property manager.
Chapter 17 2
Page Ref.
Hard Soft
back back Topic Teaching Tips
277 293 Opening Remarks Start this chapter with a general overview of the leasing and
property management functions discussed throughout this chapter.
277 293 The Leasehold Memory Hooks:
Estate Lessor = Owner or Landlord ("0" for owner)
Lessee = Tenant
Reference: Review these estates as discussed in Chapter 3.
278 294 Creating a Valid Stress: A lease, like a deed, conveys a real estate interest. Whereas
Lease a deed conveys ownership rights, a lease conveys "user" rights.
278 294 The Lease Local Distinction: If a standard lease form is used in your state, pro-
Document vide a copy to each student and "walk through" it with your class.
281 297 Landlord-Tenant Local Distinction: If your state has a specific landlord-tenant law,
Laws acquire a copy of it from either a local attorney or the attorney
general's office and summarize it for your class.
281 298 Setting Rents Summary:
Gross Lease: Landlord pays all operating expenses of the property,
i.e., electric and insurance for the building, etc.
Note that tenants can still be expected to pay their own utilities,
i.e., electric, gas and water, personal property insurance.
Net Lease: Tenant pays his rent plus most of the operating expenses,
i.e., taxes, insurance, and maintenance (TIM).
Expanding the Text: Percentage leases are common in shopping
centers.
282 298 Option Clauses Stress: An Option most generally benefits the tenant. The landlord must
wait for the tenant to exercise the option. Landlords will offer options
in a soft rental market.
282 299 Assignment and Memory Hook:
Subletting Assignment is All of the rights
Sublet is Some of the rights
283 299 Lease Termination Summary:
Actual Eviction: Landlord evicts the tenant.
Constructive Eviction: Tenant "evicts" himself. (This is the only
legal way that a tenant may terminate a lease before the stated
termination date.)
284 - Rent Control Local Distinction: If rent controls are used in your city/state,
Experience address the pros and cons related thereto.
285 - Property Local Distinction: Invite a local property manager to discuss this
Management topic with your class.
Page Ref.
Hard Soft
back back Topic Teaching Tips
286 - Tenant Selection Stress: When selecting tenants, one may not discriminate on the
basis of race, color, religion, sex, national origin, familial status, or
handicap. (More about the Fair Housing Laws in Chapter 22.)
Local Distinction: Does your city, county, state have additional
"protected classes"?
287 - Rent Concessions Stress: Although concessions cost the landlord, they enable him to
keep the rent level up and to entice tenants who might otherwise
choose another property. Concessions should never "break" the
landlord, however.
287 - Tenant Retention Stress: Retention is equally important in residential as well as com-
mercial or industrial property management. Move-outs cost money.
288 - Late Rents Local Distinction: Your state law may dictate how soon you can
declare rent late, and eviction proceedings may be tied in to that
date. Check local law and review with the class.
288 - Eviction Problems Local Distinction: Address the eviction procedures of your state.
Consult your state's attorney general's office for advice (if needed).
288 - Manager Remedies Stress: Meticulous record keeping is essential. Tenant requests
should be "in writing," as well as dates and times of responses. There
is never too much "paper trail."
It's worth the effort to get the non-payment onto the tenant's credit
report. Actually, these judgments get paid more often than thought.
When the delinquent tenant cannot buy a car or get a mortgage loan,
he/she tends to "pay up."
290 - Job Opportunities Expanding the Text: Property Management is a growing field,
particularly since some states are requiring a separate license.
290 - Training Programs Expanding the Text: The National Association of Home Builders
offers the Resident Apartment Manager (RAM) designation and the
National Apartment Association offers the Certified Apartment
Manager (CAM). Both require successful completion of their courses.
Additionally, the National Association of Residential Property
Managers (NARPM) offers networking to property managers who
specialize in single-family dwellings. Check their websites for more!
291 301 Wrap-Up 1. The lessor is the landlord/owner and the lessee is the tenant.
2. A lease conveys a real property interest? (True, leasehold)
3. Explain the difference between gross and net leases: (Under a gross
lease, the landlord pays the operating expenses and under a net
lease they are generally paid by the tenant.)4. When selecting
tenants, a property manager can legally discriminate against
families with children under 18 years of age? (False)
