Leasing and Property Management
Leasehold estates and lease types
Leasehold estates include the estate for years (definite term, no notice needed to end), the periodic tenancy (renews automatically, notice required), tenancy at will, and tenancy at sufferance (a holdover). Lease structures include gross, net (single, double, or triple net, shifting expenses to the tenant), percentage, graduated, index, ground, and sale-leaseback arrangements. A percentage lease sets base rent plus a percentage of gross sales above a breakpoint. A sublease transfers less than the tenant's full remaining term; an assignment transfers the entire balance.
Management duties and documents
A property manager owes the owner fiduciary duties and the tenants fairness, honesty, and habitability. Trust funds belong in a trust account, never commingled with the broker's operating funds. Common lease clauses include escalators, CAM charges, estoppel certificates, subordination, tenant improvements, and recapture. Lease agreements for more than one year must be in writing under Alabama's Statute of Frauds.
Application and traps
Fair housing rules apply to rental advertising and screening, and occupancy standards must be reasonable and applied uniformly. Be alert for questions that treat a gross lease as a net lease or that forget a leasehold estate for years does not require notice.
Worked example
A percentage lease sets 2,000 dollars monthly base rent plus 5 percent of gross sales above the natural breakpoint. Annual base rent is 24,000 dollars, so the breakpoint is 24,000 divided by 0.05, or 480,000 dollars in sales. Sales of 600,000 dollars produce rent of 24,000 plus 5 percent of the 120,000 dollar excess, which totals 30,000 dollars per year.