Chapter 18 · National foundations
Leasing and Property Management
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Lease relationships
The Lessor The party granting a leasehold interest. See Chapter 18. Glossary grants possession; the Lessee The tenant receiving a leasehold interest. See Chapter 18. Glossary receives it. A lease transfers a possessory interest while the owner retains the Reversion An interest returning to the grantor or lessor after a lesser estate ends. See Chapter 4. Glossary. A written lease should address the premises, term, rent, deposits, permitted use, maintenance, entry, Assignment Transfer of contractual rights; not necessarily release of the original party's obligations. See Chapter 10. Glossary, subletting, default, renewal, and other required terms.
An Estate for years A tenancy for a defined term, even when shorter than one year. See Chapter 18. Glossary has a defined term; it does not have to last multiple years. A Periodic tenancy A tenancy continuing through recurring periods until properly ended. See Chapter 18. Glossary renews for successive periods until properly terminated. A Tenancy at will A tenancy dependent on continuing consent under applicable rules. See Chapter 4. Glossary depends on the parties' continuing consent under applicable law. A Tenancy at sufferance A holdover situation after lawful possession has ended, subject to law and later conduct. See Chapter 18. Glossary concerns possession wrongfully continuing after a lawful right ends. An owner's Acceptance Assent to an offer in the required manner without a material change that creates a counteroffer. See Chapter 10. Glossary of rent from a holdover tenant can affect the legal relationship, depending on law and circumstances. S14
Rent structures
A Gross lease A lease commonly placing many operating expenses on the landlord, subject to its terms. See Chapter 18. Glossary commonly places many operating expenses on the landlord, but the actual expense allocation controls. A Net lease A lease shifting specified property expenses to the tenant. See Chapter 18. Glossary shifts specified expenses to the tenant. A triple-net lease commonly shifts property taxes, insurance, and maintenance obligations, subject to negotiated exclusions and details.
A Percentage lease A lease tying some rent to defined business sales or revenue. See Chapter 18. Glossary includes rent tied to business revenue, often in addition to base rent. A graduated lease provides scheduled changes. An Index A reference measure used with a margin or formula to adjust a rate or payment. See Chapter 15, Chapter 18. Glossary lease adjusts rent using an identified index and formula. A Ground lease A lease of land with terms governing its use and often improvements. See Chapter 18. Glossary concerns use of land, often for a long term with provisions governing improvements. A lease Option A right, not an obligation, to enter the specified transaction under agreed conditions. See Chapter 11. Glossary combines a tenancy with a separately defined purchase option. S14 S01
Percentage-rent example
A lease requires annual base rent of $30,000 plus 5% of gross sales above $600,000. If sales are $800,000, excess sales are $200,000. Percentage rent is $10,000, so total annual rent is $40,000. Do not apply 5% to all sales when the lease specifies only sales above a breakpoint.
Assignment and sublease
A lease Assignment Transfer of contractual rights; not necessarily release of the original party's obligations. See Chapter 10. Glossary generally transfers the tenant's remaining Leasehold A tenant's possessory interest under a lease or recognized tenancy. See Chapter 4. Glossary interest. A Sublease Transfer of less than the tenant's full remaining leasehold interest under the conventional distinction. See Chapter 18. Glossary typically transfers less than the tenant's full remaining interest, leaving a reversionary interest with the original tenant. Consent requirements and precise treatment vary. Neither arrangement necessarily releases the original tenant from obligations to the landlord. A release or Novation Consented substitution of an obligation or party with release of what is replaced. See Chapter 10. Glossary is a separate matter. S14
Landlord and tenant obligations
A covenant of quiet enjoyment protects lawful possession and use against qualifying interference; it is not a promise that the surroundings will never produce sound. Habitability and repair duties in residential tenancies depend on law and cannot necessarily be waived by a form clause.
Actual eviction involves removal or exclusion from possession. Constructive eviction Qualifying serious interference that may support a tenant's departure and remedies when required elements are met. See Chapter 18. Glossary concerns serious qualifying interference that can justify a tenant's departure and legal remedies when required elements are met. Notice and departure requirements vary. A tenant should not assume any inconvenience authorizes immediate rent withholding; an owner should not assume nonpayment authorizes changing the locks.
Entry notices, security-deposit limits and return deadlines, permitted deductions, abandoned property, retaliation, rent regulation, and eviction procedures are state or local subjects. These require current jurisdiction-specific study. S14
The management agreement
A property manager operates within a written management agreement and applicable licensing law. The agreement should define authority, compensation, spending limits, repairs, emergency action, tenant selection, trust funds, owner reporting, insurance, termination, and records.
A manager is often a General agent An agent authorized for an ongoing range of activities within a defined scope. See Chapter 8. Glossary within a defined range of activities, not an unlimited agent who may sell or mortgage the property. A budget approval does not automatically authorize every major capital improvement. Conflicts, vendor ownership, and rebates require proper treatment. S12 S14
Operating a property
Management combines leasing, maintenance, financial control, and risk management. A Rent roll A record of units, tenants, rents, and relevant lease information. See Chapter 18. Glossary shows units, tenants, rent, terms, and related lease information. An operating budget estimates income and routine expenses. A capital budget addresses major replacements or improvements. Preventive maintenance anticipates problems; corrective maintenance repairs existing problems; deferred maintenance postpones work and can create larger costs or hazards.
Reports should distinguish billed rent from collected rent, owner funds from tenant deposits, and current operations from capital spending. A high occupancy rate does not guarantee good collections or profitability. Physical occupancy measures occupied space; economic occupancy considers income realization under the chosen definition. S14 S15
Tenant screening and equal treatment
Use lawful, consistently applied criteria, protect sensitive information, and follow fair housing and consumer-report rules. Reasonable accommodation A necessary reasonable change to a policy, rule, practice, or service concerning disability access. See Chapter 13. Glossary requests require individualized evaluation. A computer-generated tenant score does not remove the manager's legal responsibility. Adverse action based on a consumer report can require notice even when the application is approved on less favorable terms. S16 S20 S41
A manager may spend any amount because management creates a general agency.