©2011 Cengage Learning

California Real Estate Principles Chapter 11 Landlord and Tenant Relations ©2011 Cengage Learning

Chapter 11 Define a lease and the 4 types of leasehold estates. Outline the requirements for a valid lease or rental agreement. Explain the difference between a sublease and an assignment of a lease. Discuss the duties and responsibilities landlords and tenants owe each other. Describe how tenants may be lawfully evicted. Explain the role played by professional property managers. ©2011 Cengage Learning

LEASE A lease or rental agreement is a legally binding contract between an owner (lessor/landlord) and a tenant (lessee) where a tenant has possession and use in exchange for rent or services. ©2011 Cengage Learning

Types of Leasehold Estates ©2011 Cengage Learning

LEASEHOLD ESTATES (Less-than-freehold estates) Estate for years Tenancy for years or lease Fixed term (You know when it ends before it begins. Estate from period to period Periodic tenancy or period to period (month-to-month) Unsure when it ends - requires notice by either party. Estate at will Tenancy at will Is a leasehold interest that can be terminated without notice at any time by the landlord. Not used in California Insist that advance notice be given prior to termination… usually 30 days. Estate at sufferance Tenancy at sufferance Possession at the end of a lease ©2011 Cengage Learning

VALID LEASE REQUIREMENTS Written, if more than one year (Statute of frauds) Names of lessor and lessee Adequately describe the property Show amount of rent and how paid Give date lease term begins and length of term Be signed by lessor Involve capable parties Renewal provision in boldface type (Residential property) ©2011 Cengage Learning

Maximum duration Urban Property Agricultural Land 99 years 51 years ©2011 Cengage Learning

RESIDENTIAL RENTAL AGREEMENT Utilities Maintenance Tenant improvements Use of the property Maximum number of occupants Security and damage deposits Property taxes and insurance Rules regarding pets, guests, parking, anything else of importance ©2011 Cengage Learning

SECURITY DEPOSITS (Legal Maximums) Total security limits, including pets: Unfurnished = 2 months Furnished = 3 months Legal deposits including: Waterbed (or insurance), Pet Deposit, Key Deposit, Openers Unused deposit must be returned or written accounting for expenses within 21 days Cannot be called NON-REFUNDABLE Rent Off Set: Maximum twice in any 12 month period No more than 1 month’s rent ©2011 Cengage Learning

ASSIGNMENT A transfer by the lessee (assignor) of ALL the unexpired interest he holds at the time of the assignment Who assigns Lease to Leases to LESSOR LESSEE “A” ASSIGNEE “B” ASSIGNEE “B” pays directly to LESSOR ©2011 Cengage Learning

SUBLEASE A transfer by the lessee of only part of his interest to another (sub-lessee) at the time of the sub-letting Leases to Who sublets to LESSOR LESSEE “A” SUB-LESSEE “B” Who pays Lessor $1,000 Pays Lessee $2,000 LESSEE “A” Sandwich ©2011 Cengage Learning

TYPES OF LEASES Gross Lease Net Lease (Triple Net Lease) Landlord pays operating expenses (TIM) (taxes, insurance, maintenance) Net Lease (Triple Net Lease) Tenant pays operating expenses (TIM) Percentage Lease Tenant pays rent based on tenant’s gross income Fixed lease (Month-to-Month) Tenant pays a fixed rent amount Graduated Lease (Lease) Tenant pays a fixed rent amount for the period with periodic rent increases at specific times ©2011 Cengage Learning

LEASE TERMS EXTENSION: Upon expiration of rental contract, the rental continues under the original terms. RENEWAL: Upon expiration of rental contract, the rental continues under new terms ESCALATOR CLAUSE: During the rental period, the rental agreement allows for rent increases based upon some index ©2011 Cengage Learning

Landlord Duties and Rights Keep property habitable Periodically inspect the premises Insure outside of living quarters Maintain quiet use and enjoyment Prohibit discrimination by all subordinates ©2011 Cengage Learning

UNLAWFUL ACTS BY A LANDLORD Tenant lockout Seizure of tenant property Removal of doors and windows Shutting off utility services Causing uninhabitability Interfering with tenant’s use and quiet enjoyment ©2011 Cengage Learning

Unlawful Detainer Serve 3 Day Notice Tenant fails to respond, landlord files in superior court If landlord wins a judgment then ask for a Writ of Possession Authorities remove the tenant 3 DAY VERSUS 60 DAY NOTICE ©2011 Cengage Learning

TENANT OBLIGATIONS Pay rent when due according to the contract Give minimum 30 day notice for termination Keep the premises occupied, clean and sanitary Liable for negligence to others Dispose of all rubbish, garbage and waste from the unit in a clean and sanitary manner Properly use and operate all electrical, gas and plumbing fixtures and keep them clean and sanitary Not interfere with other tenants rights Refrain from willfully or wantonly destroying, defacing, impairing or removing any part of the structure or appurtenances Occupy and use the premises only for the intended or designed use ©2011 Cengage Learning

RENTAL OFFSET REPAIR & DEDUCT Notify landlord of necessary repairs and allow adequate time for repairs to be made If landlord refuses: Abandon the property with no future rent. Spend up to one month’s rent on repairs, send receipts for repairs, offset amount on next month’s rent payment. NOTE: Can only use twice in any 12 month time Cannot be used for decorative purposes, only for habitability. ©2011 Cengage Learning

TERMINATION OF A LEASE Expiration of the term Mutual agreement (surrender) Violation of terms and conditions Destruction of the premises Or government action: condemnation Eviction Notice Unlawful detainer action Non-payment of rent Illegal use of premises Sheriff serves the eviction ©2011 Cengage Learning

PROPERTY MANAGER Controls operating expenses to maximize income Obtains tenants and leases Maintains property by keeping it in repair and modernizing or renovating when needed Oversees the on-site resident manager for residential apartments of 16 or more units. C.P.M. = Certified Property Manager ©2011 Cengage Learning

RENT CONTROL Intent is to make property available for rent at reasonable rates when there is a shortage of available space May not be effective because artificially low rent may increase demand and discourage new construction ©2011 Cengage Learning

Review Quiz Chapter 11 It is illegal to screen and eliminate potential tenants based on: (a) income levels (b) credit rating (c) past delinquent rental history (d) martial status ©2011 Cengage Learning

Review Quiz Chapter 11 Lessor A leases to Lessee B who legally subleases to Sublessee C. Which of the following is correct? (a) Lessor A looks to Lessee B for payment (b) Lessor A looks to Sublessee C for payment (c) Lessee B does not have a contract with Sublessee C (d) There is only one contract in this transaction ©2011 Cengage Learning

Review Quiz Chapter 11 Most month-to-month rental agreements can be classified as an: (a) estate for years (b) estate from period to period (c) estate at will (d) estate at sufferance ©2011 Cengage Learning

Review Quiz Chapter 11 A lease on agricultural land cannot exceed: (a) 15 years (b) 37 years (c) 51 years (d) 99 years The maximum security deposit for an unfurnished apartment is: (a) one month’s rent (b) two month’s rent (c) three month’s rent (d) four month’s rent ©2011 Cengage Learning

Review Quiz Chapter 11 A landlord signs a 6 month lease and the lessee takes possession but never signs the lease. Under these circumstances the lease is: (a) valid (b) void (c) voidable (d) illegal ©2011 Cengage Learning

Review Quiz Chapter 11 If a lessee abandons a lease prior to the expiration date, the lessor may: (a) leave the premises unoccupied and sue for the entire lease amount (b) lease the property again and collect from two sources (c) leave the premises unoccupied and sue for each installment as it becomes due (d) either (a) or (b) ©2011 Cengage Learning

Review Quiz Chapter 11 How many units would there have to be in an apartment building to make it necessary for the owner to hire an on-site resident manager? (a) 20 or more units (b) 18 or more units (c) 16 or more units (d) 14 or more units ©2011 Cengage Learning

Review Quiz Chapter 11 Under the rental offset rule, which of the following is true? The tenant can do housing code repairs up to: (a) one month’s rent, once per year (b) two month’s rent, twice per year (c) one month’s rent, twice per 12 month period (d) one month’s rent, twice per year ©2011 Cengage Learning

Review Quiz Chapter 11 If you were to lease a mountain cabin from April 5 to April 30 of the same year, the lease would be recognized as an: (a) estate at will (b) estate at sufferance (c) estate from period to period (d) estate for years ©2011 Cengage Learning

Answers to Review Quiz Chapter 11 D 6. A A 7. C B 8. C C 9. C B 10. D ©2011 Cengage Learning