XI. Landlord and Tenant

Anchor Tenants – The main tenant or one of the main tenants in shopping center. This may be a department store in a shopping mall, or a grocery store in a strip or shopping center.

Assignment of Lease – Occurs when a tenant assigns the exact entire lease to another party. This doesn’t relieve the original tenant of the obligation under the lase.

Assignment of Rent – An arrangement whereby the landlord of the mortgaged property gives the mortgage lender the right to collect rent directly from the tenant(s) under certain circumstances.

Base rent –The minimum rent due under a lease that has a percentage or participation requirement.

Demised Premises – Property subject to a lease.

Dispossess Proceeding – The legal process by a landlord to remove a tenant and regain possession of a property. For example, after not having received rent for three month, the landlord began dispossess proceedings to eject the tenant.

Distraint – The legal right of a landlord to seize a tenant’s personal property to satisfy payment of back rent. For example, Abel s six months in arrears on rent. Landlord Baker obtains a court order to seize Abel’s furniture to satisfy the rent due. Baker is exercising his right of distraint.

Ejectment – Action to regain possession of real property when there is no lease. For example, the seller is in a conditional sales contract, through an action in ejectment, regains possession when the buyer defaults. Contracts this with eviction and dispossess proceedings, both of which are used to regain possession of leased property.

Escalation Clause – Often found in a gross lease, allows the landlord to pass along expense increases, such as increases in taxes or utilities, above a base year amount.

Eviction – A legal proceeding by a lessor (landlord) to recover possession of leased property. When a tenant fails to comply with the lease agreement (skipping rent payments, unauthorized use of property, etc.), the landlord will seek eviction of the tenant. If successful, this action will terminate the rights of the tenant to use the property.

Gross Lease – SEE BELOW.

Holdover Clause / Holdover Tenant – In a lease that determines what happens when the tenant remains beyond expiration of the lease. A holdover tenant is a tenant who remains in possession of leased property after the expiration of the lease term. For example, Abel leases an apartment for one year. At the end of the year, Abel is still in the process of finding a new home, so he does not want to sign another one year lease. As a holdover tenant, Abel may be evicted or allowed to remain on a month-to-month basis by continuing to pay rent as may be provided by the holdover clause in the lease, or, if not stated, at the landlord’s discretion. Abel is a tenant at sufferance.

Lease – The lease is the document that describes the rights of the parties. The landlord gives the lease and so becomes the lessor. The tenant receives the lease and becomes the lessee. The payment made by the lessee (tenant) to the lessor (landlord) is rent.

Note: According to the statute of frauds, in general, oral leases for one year or less that can be performed within a year of their signing are enforceable.

Three major lease types –

  • Net lease – Base rent plus taxes insurance and maintenance (Owner pays net of those expenses)
  • Gross lease – Landlord pay expenses such as tases, insurance, utilities and repairs.
  • Percentage lease – See below.

Three ways to end a lease –

  • Performance: both parties perform to the end of the term as stated in the lease.
  • Breach: One or both parties violate a lease provision in a manner that terminates the lease.
  • (Mutual) Agreement: Both parties agree to terminate the lease. Aka Surrendor (Recession before performance.)

Lease Durations – Leases are categorized  according to duration as follows:

  • Estate for years: has a fixed period of time
  • Estate from year to year (or month to month): can be renewed each year of month
  • Tenancy at will: either party may terminate the lease at any time
  • Tenancy at sufferance: a formerly lawful tenant remains on the premises after the lease expires; often results when a tenant refuses to move because of his or her proposed new location is not yet available.

Leased Fee – The landlord’s ownership interest in a property that is under lease, that is, a property that is rented to a tenant.

Leasehold or Leasehold Estate – A leasehold or leashold estate is the tenant’s interest in the leased property.

Leasehold Improvements – Fixtures attached to real estate that are generally acquired or installed by the tenant. Upon expiration of the lease, the tenant can generally remove them, provided such action does not damage the property or conflict with the lease.

Leasing – A method of temporarily transferring the right to use property. The property owner (landlord) surrenders this right to a tenant for a specific period of time in exchange for a specified payment.

Lessee – Tenant has actual possession

Lessor – A property owner who rents property for someone else under a lease; a landlord.

Market Rent – Rent that a com would rent for.  Contract or Lease rent – Actually on lease.

Month-to-Month Tenancy – Temporary possession of property by means of a lease agreement that may be extended or canceled each month. For example, Abel rents an apartment from Baker on  a month-to-month basis. Abel may remain as long as he pays rent and Baker does not give notice to cancel the lease. Abel may also cancel the lease upon giving one month’s notice.

Mineral Lease – An agreement that provides the lessee the right to excavate and sell minerals on the property of the lessor or to remove and sell petroleum and natural gas from the pool underlying the property of the lessor. In return, the lessor receives a royalty premium based on a fraction (such as 1/8) of the value of the minerals removd.

Net Lease – See above

Net rentable area – In a building or project floor space that may be rented to tenants, the area on which rental payments are based. With important exceptions, this generally excludes common areas and space devoted to the heating, cooling, and other equipment of the building.

Percentage Lease –  A lease of property in which the rental is based on a percentage of the volume of sales of the tenant from the property. Usually for retailers. Shopping malls….

Percentage Rent or Overage Rent – Rentfrom a percentage lease: Typically the percentage applies to sales in excess of a pre-established base amount of the dollar sales volume.

Rent – Money or other property paid for use of space.

Rental Income – Is the money collected from tenants for the use of space.

Stop Clause – A gross lease states an amount of operating expense above which the tenant must bear the excess. Often the base amount is the amount of expense for the first full year of operation under the lease.

Sublease – TRANSFOR OF LESS THAN LEASEHOLD with the reversion in the sublessor, no form of title for sublessee. A lease from a lessee. The new lessee is a sublessee or subtenant. The sublease can be for all or part of the property, and the rent can be for more or less than the primary lease. Leases often prohibit assignment or subletting without the landlord’s permission. This creates an interest in the property with possessory rights but no form of title.

Surrender – A landlord and tenant mutually agree to terminate a lease. (Note: Rescission is mutual release from contractual obligations before performance.)

Tenant –See lessee.

Tenant Finish-out Allowance – A provision in a lease for an office or retail space that provides certain sum or amount per square foot to the tenant for customizing the space provided.

Tenant Improvements – Are those changes typically in office, retail or individual property, to accommodate specific needs of a tenant. They may include moving interior walls or partitions, carpeting or other floor covering, shelves, windows, toilets, etc. The cost of these is negotiated in the lease; often the lessor provides an allowance.

Tenancy in Sufferance – A “hold-over” tenancy after a lease has expired, but before the landlord has demanded that the tenant quit (vacate) the premises. During a tenancy at sufferance the tenant is bound by the terms of the lease (including payment of rent) which existed before it expired. The only difference between a “tenancy at sufferance” and a “tenancy at will” is that the latter was created by agreement.

Tenancy at Will – See Tenancy in Sufferance. With permission or by agreement.

Triple-net Lease – Tenant pays ALL OPERATING EXPENSES. Owner receives a net rent.

Go back to main page.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s