Leases and Property Management
Lease Types
A lease transfers the right of possession for a term in exchange for rent. Distinguish estate for years (fixed term, no notice needed to end), periodic tenancy (month-to-month, notice required), tenancy at will, and tenancy at sufferance (holdover). Know gross lease (owner pays expenses), net lease (tenant pays some/all expenses), and percentage lease (rent based on sales, common in retail).
Rights and Duties
Understand the covenant of quiet enjoyment, implied warranty of habitability, security deposits, and the landlord's duty to mitigate damages on abandonment. Traps: confusing assignment (tenant transfers entire interest) with sublease (tenant retains an interest and remains liable unless released). Eviction is a legal process; self-help eviction is generally prohibited.
Property Management
A property manager acts as the owner's agent with fiduciary duties. Know the management agreement, budgeting, operating statements, and the difference between gross and net operating income. Maintenance, risk management, and tenant screening must comply with fair housing law.
Worked Example
A percentage lease charges $1,500 base rent plus 5% of gross sales over a $100,000 breakpoint. If sales are $140,000, rent = $1,500 + 5% × ($140,000 − $100,000) = $1,500 + $2,000 = $3,500.
Rule of Thumb
Read the lease to see who pays which expense before answering-most lease questions hinge on identifying the lease type.