CH 9 TRANSACTIONS USED Iin REAL ESTATE TRANSACTIONS part 2.pdf.docx

Method of rent payments leases are also classified by

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Method of Rent Payments Leases are also classified by method of rent payments, such as gross, net, and percentage leases. Gross lease : A gross lease is also called a flat, fixed, or straight lease. The tenant pays an agreed-upon sum as rent and the landlord pays any other expenses such as taxes, maintenance, or insurance. Residential leases are usually gross leases with fixed, level payments, usually due on the 1 st of each month. Net lease : In a net lease, the tenant pays an agreed-upon sum as rent, plus certain agreed-upon expenses per month (i.e., taxes, insurance, and ___________________________________________________________ Unit 9: Contracts Used In Real Estate Transactions II 329
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repairs). The benefit of a net lease to the lessor is that it creates a fixed income. Net leases are categorized as a single net (N) lease, a double net (NN) lease, or a triple net (NNN) lease. Percentage lease : A percentage lease is a lease in which the tenant pays a percentage of gross monthly receipts in addition to a base rent. Usually the higher the gross receipts, the lower the percentage rate. A percentage lease typically is used for retail stores in shopping centers or malls. Leasehold Estates A leasehold estate (or tenancy ) is the tenant’s estate or interest in real property that is created by a lease agreement. A leasehold is created when an owner (or landlord working as the owner’s agent) signs a lease agreement that gives temporary possession and use to the tenant in return for the payment of rent. A tenant may use the leasehold according to the terms of the lease, such as for residential, commercial, or recreational use. The four types of leasehold estates are described by the duration of the tenancy: (1) periodic tenancy, (2) tenancy for years, (3) tenancy at sufferance, and (4) tenancy at will. Periodic Tenancy Perhaps the most common type of lease agreement for residential property and storage units is the periodic tenancy . It is also known as a month- tomonth agreement or a tenancy from month-to-month, week-to-week, or period-to-period. A periodic tenancy is for an indefinite period of time, with rent payments due on a given periodic basis. The duration of the estate is determined by the term or frequency of rent payment. With proper notice to the tenant, the landlord can increase the rent or change the terms of the agreement at any time. The obligations of the lease end upon the death of the tenant or the owner. A periodic tenancy automatically renews at the end of each period unless one party gives notice of termination to the other. Notice equal to the length of the period of tenancy must be given to terminate the tenancy. If a tenancy for years has been fulfilled, the parties to the agreement may allow the tenant to change to a periodic tenancy, such as month-tomonth. Tenancy for Years Leases for office, retail, and industrial space do not typically use monthto- month tenancy agreements. Owners of these types of properties rely on long-term leases that provide a consistent and reliable income, and tenants usually build out the spaces to accommodate the needs of their business.
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  • Fall '19
  • Leasehold estate

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