23.3 Leasing Considerations

Leasing is where property management becomes very “real world.” A good lease clearly defines the type of tenancy, what’s included in the premises,
who is responsible for what costs, what happens when the lease ends, and how default/eviction is handled. Clear lease language reduces confusion,
disputes, and legal risk.

Lease Types (By the Type of Leasehold Estate)

• For years — tenancy for a definite period (years, months, weeks, days). When it expires, the tenant must return the premises and vacate.Common in commercial leases.
• Periodic (period-to-period) — continues after the original term as long as rent is paid and accepted and no one gives notice to terminate.Common in residential leases.
• At will — similar to periodic, but does not begin with a definite period; continues with consent and regular rent payments; ends on death of either party.Rarely used in a written lease.
• At sufferance — occurs when a tenant stays after the lease expires without permission.Never intentionally used in a written lease.

Lease Types (By How Rent Is Determined)

• Gross lease — tenant pays fixed rent; landlord pays operating expenses (taxes, insurance, utilities, services).Common in residential.
• Net lease — tenant pays rent plus some or all operating expenses attributable to the space.Common in office/industrial.
• Percentage lease — rent depends on tenant income/sales (often base rent + % of gross sales, sometimes only after a threshold).Common in retail.
• Graduated lease — rent increases at specified times over the lease term (can be gross or net).

Owned and Leased Inclusions (What’s Included + Who Owns What)

The lease should clearly state what items are included or excluded in the leased property (appliances, furniture, etc.).
This matters for maintenance costs and for insurance coverage.

• Maintenance: if an item is not included, the landlord/manager may not be responsible to maintain it.
• Insurance: you can only insure what you own. If an item is destroyed, the owner’s policy generally won’t cover something not included as belonging to the property.
• Alterations: leases often require permission for changes and may require the tenant to restore the premises at termination.
• Trade fixtures: typically belong to the tenant and can be removed when the tenant leaves (subject to the lease and avoiding damage).

Reversionary Rights of Owners

The lessor/owner retains a future interest in the property. The lease grants the tenant rights to possess and use the property for the lease term,
but the tenant does not receive the full bundle of ownership rights (for example, the tenant generally cannot sell or encumber the property).

When the lease expires (or if a condition subsequent occurs, such as tenant default), the rights granted by the lease revert back to the owner.

Landlord Rights and Responsibilities (General)

State law (often modeled on the Uniform Residential Landlord-Tenant Act) sets many landlord/tenant rules for residential property.
Common landlord rights include entry under specific conditions, prompt rent payment, and remedies for default.

Common right of entry situations:

• Emergency
• Tenant consent
• Normal business hours with notice (repairs / show to prospects, purchasers, contractors)
• Tenant abandonment/surrender
• Court order

A key landlord responsibility is delivering and maintaining a habitable property (systems working, safe stairs/railings, pest control as needed,
prompt repairs like roof leaks/broken windows).

Tenant Rights and Responsibilities + Evictions (Basics)

Tenants have the right to quiet enjoyment and a habitable property. Depending on state law, tenants may have remedies if the landlord fails to correct
problems the landlord is responsible for.

Common tenant responsibilities include:

• Pay rent on time
• Follow rules/regulations
• Give proper notice for termination (ex: 30-day notice for month-to-month)
• Keep the unit clean/sanitary; dispose of waste properly
• Use fixtures properly; avoid damage and prevent others from damaging the property
• Return keys and leave the unit in required condition

Lease Termination + Security Deposits + Uniform Residential Landlord-Tenant Act

Leases can terminate by expiration, performance, mutual agreement, abandonment, default/breach, notice (periodic/at-will), destruction, condemnation,
foreclosure, and (for tenancy at will) death of either party.

Security deposit procedures are typically governed by state law and commission rules (trust accounts, permitted uses, timing of return, and rules for withholding).
The lease should clearly state the deposit rules.

The Uniform Residential Landlord-Tenant Act is model legislation adopted (in whole or part) by many states to clarify lease language and improve fairness
in areas like term, rent, deposits, access, default/eviction procedures, and general obligations.