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. Residentialleases are usually gross leases with fixed, level payments, usually due onthe 1stof each month. Net lease: In a net lease, the tenant pays an agreed-upon sum as rent, pluscertain agreed-upon expenses per month (i.e., taxes, insurance, and___________________________________________________________ Unit 9: Contracts Used In Real Estate Transactions II329
Subscribe to view the full document.
repairs). The benefit of a net lease to the lessor is that it creates a fixedincome. 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 apercentage of gross monthly receipts in addition to a base rent. Usuallythe higher the gross receipts, the lower the percentage rate. A percentagelease 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 realproperty that is created by a lease agreement. A leasehold is created whenan owner (or landlord working as the owner’s agent) signs a leaseagreement that gives temporary possession and use to the tenant in returnfor the payment of rent. A tenant may use the leasehold according to theterms of the lease, such as for residential, commercial, or recreational use. The four types of leasehold estates are described by the duration of thetenancy: (1) periodic tenancy, (2) tenancy for years, (3) tenancy atsufferance, and (4) tenancy at will. Periodic Tenancy Perhaps the most common type of lease agreement for residential propertyand storage units is the periodictenancy. It is also known as a month-tomonth agreementor a tenancy from month-to-month, week-to-week, orperiod-to-period. A periodic tenancy is for an indefinite period of time,with rent payments due on a given periodic basis. The duration of theestate is determined by the term or frequency of rent payment. Withproper notice to the tenant, the landlord can increase the rent or change theterms of the agreement at any time. The obligations of the lease end uponthe death of the tenant or the owner. A periodic tenancy automatically renews at the end of each period unlessone party gives notice of termination to the other. Notice equal to thelength of the period of tenancy must be given to terminate the tenancy. Ifa tenancy for years has been fulfilled, the parties to the agreement mayallow 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 onlong-term leases that provide a consistent and reliable income, and tenantsusually build out the spaces to accommodate the needs of their business.
As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.
Temple University Fox School of Business ‘17, Course Hero Intern
I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.
University of Pennsylvania ‘17, Course Hero Intern
The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.