1. Renting & Buying Homes

2. Responsibilities of Landlord and Tenant
Renting a Place
to Live
Chapter 33
Section 33.1
The Rental Agreement
Section 33.2
Responsibilities of Landlord and Tenant

3. What You’ll Learn
How to define the main types of tenancies available to persons who rent real property (p. 712)
How to describe some of the common covenants found in a lease (p. 714)

4. What You’ll Learn
How to summarize rent control laws (p. 718)

5. Why It’s Important
Knowing all you can about rental agreements and the types of tenancies will help you choose a place to live and know how to address disputes that may arise.

6. Legal Terms
lessee (p. 712)
lessor (p. 712)
tenancy (p. 712)
tenancy for years (p. 713)
periodic tenancy (p.713)

7. Legal Terms
rent day (p. 713)
tenancy at will (p. 714)
tenancy at sufferance (p. 714)
lease (p. 714)
sublease (p. 716)

8. Section Outline Tenancy Types of Tenancies Tenancy for Years
Types of Tenancies
Tenancy for Years
Periodic Tenancy
Tenancy at Will
Tenancy at Sufferance

9. Section Outline
The Lease Agreement
Terms in a Lease
Rent Control

10. Pre-Learning Question
What is a tenant?

11. Tenancy
If you rent real property, such as an apartment or house, you are a tenant.
If you own real property and rent it to someone else, you are a landlord.

12. Tenancy
The contract between a tenant and a landlord is called a lease.
In a lease, the tenant is known as the lessee, and the landlord is the lessor.

13. in Selecting an Apartment
33.1
What to Look for
in Selecting an Apartment
Location
Near school, work
Near church, mosque, synagogue
Near shopping
Near public transportation
Near recreation: parks, museums

14. in Selecting an Apartment
33.1
What to Look for
in Selecting an Apartment
Finances
Amount of monthly rent
Amount of security deposit
Cost of utilities
Length of lease

15. in Selecting an Apartment
33.1
What to Look for
in Selecting an Apartment
Building
Condition of building and grounds
Parking facilities
Recreation on premises
Security system
Condition of hallways, stairs, and elevators
Access to mailboxes

16. in Selecting an Apartment
33.1
What to Look for
in Selecting an Apartment
Layout and Facilities
Size and condition of unit
Type and controls of heating and cooling systems
Plumbing and water pressure
Type and condition of appliances
Condition of doors, locks, windows, closets, and floors

17. Pre-Learning Question
What is a tenancy?

18. Types of Tenancies
Although they rent from someone else, tenants own an interest in the real estate they lease, called a leasehold estate or tenancy.

19. Types of Tenancies The types of tenancies are Tenancy for years
Periodic tenancy
Tenancy at will
Tenancy at sufferance

20. Tenancy for Years
A tenancy for years is the right to occupy property for a definite or fixed period of time.
It may be for one week or 99 years, as long as the time period is definite.

21. Periodic Tenancy
A periodic tenancy, also called a tenancy from year to year (or month to month, or week to week), is a tenancy that continues for successive fixed periods.

22. Periodic Tenancy
One of the parties may terminate this tenancy by giving advance notice to the other party.

23. Periodic Tenancy
The notice requirement differs from state to state, but it is often the period between rent days.
The rent day is the day on which the rent is due.

24. Tenancy at Will
A tenancy at will is an interest in real property that continues for an indefinite period of time.
No written agreement is required to create this tenancy.

25. Tenancy at Will
It is terminated when either the landlord or the tenant gives the notice required by state laws, which is usually 30 days.

26. Tenancy at Sufferance
A tenancy at sufferance arises when a tenant doesn’t leave the premises after his or her tenancy has expired.

27. Tenancy at Sufferance
This situation often occurs when a tenancy for years expires or when a tenancy at will has been properly terminated by the landlord but the tenant remains in possession.

28. Jill Stunzi signed a lease to rent an apartment for six months
Jill Stunzi signed a lease to rent an apartment for six months. What type of tenancy has she agreed to?

29. ANSWER
Tenancy for years.

30. Jamal Youngston has an oral agreement with Mary O’Donnell to rent her basement apartment until he graduates from college. What type of tenancy has he agreed to?

31. ANSWER
Tenancy at will.

32. Marcus Kennedy is a contract painter and often works for weeks on end away from home. During these times he often rents a hotel room from week to week. What type of tenancy is he agreeing to?

33. ANSWER
Periodic tenancy.

34. Pre-Learning Question
What is a lease agreement?

35. The Lease Agreement
A written agreement between a lessor and a lessee is called a lease. The lease creates the landlord-tenant relationship. It provides the tenant with exclusive possession and control of the real property of the landlord.

36. Terms in a Lease
The terms of a lease, known as covenants, set forth the rights and duties of the landlord and tenant.

37. Terms in a Lease Common terms, or covenants, found in a lease include
Security deposit
Decoration and repairs
Assignment and subletting
Option to renew or to purchase

38. Security Deposit
Landlords often require you to pay a security deposit and the last month’s rent at the beginning of a tenancy in order to secure the payment of rent or repairs for damages to the property.

39. Decoration and Repairs
The landlord has no obligation to decorate the premises, unless the lease says so or it is required by statute or local ordinance.

40. Decoration and Repairs
However, the landlord must make any repairs necessary to keep the premises fit for living. This includes repairs such as fixing a leaky roof or a broken furnace.

41. Assignment and Subletting
An assignment of a lease occurs when you transfer the remaining period of time in a lease to someone else.

42. Assignment and Subletting
A sublease occurs when you transfer part of the term of lease, but not the remainder of it, to someone else.

43. Assignment and Subletting
If a landlord doesn’t want a tenant to assign or sublet the property, a covenant in the lease must say that.
Otherwise, a tenant may either assign or sublet the property to someone else.

44. Option to Renew or to Purchase
The option to renew the lease gives renters the right to a new lease, under the same terms, for an additional period.

45. Option to Renew or to Purchase
The option to purchase the property is an agreement by the lessor to sell the property to the lessee for a stated price.

46. Pre-Learning Question
What is rent control?

47. Rent Control
Some large communities have passed rent control laws to keep rent within an affordable range.

48. Rent Control
These laws limit what landlords can charge for rental property and also often contain procedures that must be followed before tenants can be evicted.

49. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
What is the difference between a tenancy for years, a periodic tenancy, and a tenancy at will?

50. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
A tenancy for years is for a fixed time period. A periodic tenancy continues for successive periods until one of the parities ends it by giving proper notice.

51. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
A tenancy at will is for an indefinite time period and is often an oral agreement.

52. Reviewing What You Learned Name the common covenants found in a lease.
Section Assessment
Reviewing What You Learned
Name the common covenants found in a lease.

53. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
Security deposit, decoration and repairs, assignment and subletting, and option to renew or to purchase.

54. Reviewing What You Learned Explain rent control laws.
Section Assessment
Reviewing What You Learned
Explain rent control laws.

55. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
Rent control laws exist to keep rents within an affordable range. The laws limit the amount of rent the landlords may charge for rental property.

56. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
They often contain procedures that must be followed before tenants can be evicted.

57. Critical Thinking Activity Leasing Terms
Section Assessment
Critical Thinking Activity
Leasing Terms
Imagine you are ready to rent a place to live. Make a list of covenants you would want in your lease, and explain why you would want these covenants.

58. Critical Thinking Activity Answer Leasing Terms
Section Assessment
Critical Thinking Activity Answer
Leasing Terms
Answers will vary, but should reflect an understanding of the term covenant.

59. Legal Skills in Action Maintaining the Premises
Section Assessment
Legal Skills in Action
Maintaining the Premises
The grounds surrounding the apartment complex where you live are full of trash. The grass hasn’t been mowed for weeks, and it looks pretty shabby.

60. Legal Skills in Action Maintaining the Premises
Section Assessment
Legal Skills in Action
Maintaining the Premises
You’ve mentioned the problem to the landlord, but no action has been taken. Write a petition to circulate among the tenants to ask the landlord to hold a meeting to discuss the difficulty.

61. Legal Skills in Action Answer
Section Assessment
Legal Skills in Action Answer
Maintaining the Premises
Petitions will vary, but should include the duties of the landlord in regards to the grounds of the property.

62. End of Section 33.1

63. Section 34.1

64. Chapter 34 Buying a Home Section 34.1 Evaluating Housing Alternatives
The Home Buying Process

65. What You’ll Learn
How to compare the advantages and disadvantages of buying a home (p. 730)
How to determine the amount of down payment you will need and the approximate amount you can borrow to buy a home (p. 730)

66. What You’ll Learn
How to describe various types of home ownership (p. 733)

67. Why It’s Important
Being able to evaluate housing alternatives will help you to decide whether to purchase a home.

68. Legal Terms
mortgage (p. 730)
equity (p. 730)
debt ratio (p. 731)
cooperative (p. 735)
condominium (p. 735)

69. Section Outline Deciding to Buy a Home Advantages to Home Buying
Disadvantages to Home Buying
How Much Can You Afford?

70. Section Outline Types of Home Ownership Single- and Multifamily Homes
Mobile Homes
Cooperatives
Condominiums

71. Pre-Learning Question
What do you do before deciding to buy a home?

72. Deciding to Buy a Home
Buying a home may be the most important purchase you will ever make.

73. Deciding to Buy a Home You will need to:
Weigh the advantages and disadvantages.
Consider how much you can afford.
Determine the type of house will best fit your needs.

74. Deciding to Buy a Home
Most people take out a mortgage to help with the costs.
A mortgage is a written instrument by which the buyer (the mortgagor) pledges real property to the lender (the mortgagee) as security for a loan.

75. Advantages to Home Buying
There are several advantages to buying a home.
One is the ability to do with it as you wish without having to answer to another owner.

76. Advantages to Home Buying
Another advantage is the increase in equity, or the difference between the fair market value and the mortgage, in the property. Equity increases as you pay off the mortgage and as the property increases in value.

77. Advantages to Home Buying
A third advantage is that you can deduct property taxes and interest paid on your mortgage from your income tax return.

78. Disadvantages to Home Buying
There are some disadvantages.
The inconvenience and cost of upkeep.
The inability to move easily and quickly if necessary.

79. How Much Can You Afford?
To determine how much you can afford to pay for a house, you must consider:
The amount of down payment.
The amount you can borrow based on your income and expenses.

80. Down Payment
Down-payment requirements range from zero to 30 percent of the purchase price.

81. Down Payment 34.1 Veteran’s Administration (VA) loans
Type of Loan
Down Payment
Veteran’s Administration (VA) loans
(for qualified veterans to buy a house up to $203,000)
0 percent
Mortgages backed by federal agencies, such as Fannie Mae and Freddy Mac
3 percent
FHA loans (loans insured by the Federal Housing Administration)
3 to 5 percent
10 to 30 percent
Conventional bank loans

82. Loan Qualifications
A lender will judge your ability to repay your loan based on your credit report and your debt ratio, or the amount of your monthly payments compared to your monthly income.

83. Loan Qualifications
Your mortgage payment, including taxes and insurance, should not exceed 28 percent of your monthly gross income.

84. Loan Qualifications
Total monthly debt payments (including your new mortgage, credit cards, car payments, and so on) should not exceed 36 percent of your income.

85. The Elements of Buying a House
It’s important to consider the following issues when making a home purchase:
Location
Down payment
Mortgage rates and points

86. The Elements of Buying a House
Closing costs
Monthly payments
Maintenance costs

87. Pre-Learning Question
What are some different types of homes a person can own?

88. Types of Home Ownership
You have many choices in selecting a home, depending on how much you can afford and the desired size of the house and its location.

89. Types of Home Ownership
Different types include:
Single-family homes
Multifamily homes
Mobile homes
Cooperatives
Condominiums

90. Single- and Multifamily Homes
Single-family homes are the most popular type of home.
They offer privacy and more overall usable space than other types of housing.

91. Single- and Multifamily Homes
Multifamily dwellings are less expensive to own because of the income from nonowner-occupied units.
The owner’s monthly mortgage and tax payments can often come from rental income.

92. Mobile Homes Mobile homes are also known as manufactured homes.
They are less expensive to purchase and to keep up.
They usually can be sold quickly and easily.

93. Cooperatives
A cooperative (co-op) is a form of home ownership in which buyers purchase shares in the corporation that owns an apartment building and holds the mortgage on it.

94. Cooperatives
Shareholders have a proprietary lease that gives them the right to the individual units.

95. Condominiums
In a condominium (often called a condo), each owner has an absolute individual interest in an apartment unit and an undivided common interest in the common areas of the condo project.

96. Match the type of home with its description.
Multi-family home
Cooperative
Condominium
Mobile home

97. A situation in which each owner has an absolute individual interest in an apartment unit and an undivided common interest in the common areas.

98. A situation in which buyers purchase shares in the corporation that owns an apartment building and holds the mortgage on it.

99. Also known as a manufactured home.

100. Less expensive to own than a single-family home because of the income from nonowner-occupied units.

101. ANSWER Multi-family home (d) Cooperative (b) Condominium (a)
Mobile home (c)

102. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
What are the advantages and disadvantages of buying a home?

103. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
Advantages—the ability to do with it as you wish; equity build up; ability to deduct property taxes and interest paid on your mortgage from your income tax return.

104. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
Disadvantages—the inconvenience and cost of upkeep and the inability to move easily and quickly.

105. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
Is it possible to buy a home with no down payment? Explain your answer.

106. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
Yes. Qualified veterans can obtain a VA (Veteran’s Administration) loan to buy a house up to $203,000 with no down payment.

107. Reviewing What You Learned Describe the five types of home ownership.
Section Assessment
Reviewing What You Learned
Describe the five types of home ownership.

108. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
(1) Single-family—offer the most privacy and usually have more usable space than other types of house. (2) Multi-family—are less expensive to own because of the income from nonowner-occupied units.

109. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
(3) Mobile homes—also known as manufactured homes, are less expensive to purchase than ordinary houses and cost less to keep up. They can usually be sold quickly and easily.

110. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
(4) Cooperatives—buyers purchase shares in the corporation that owns an apartment building and holds the mortgage on it.

111. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
(5) Condominiums—each owner has an absolute individual interest in an apartment unit and an undivided common interest in the common areas of the condo project.

112. Critical Thinking Activity Lender Criteria
Section Assessment
Critical Thinking Activity
Lender Criteria
If you were planning to borrow money to buy a home, why would your employment history be important to a lender?

113. Critical Thinking Activity Answer Lender Criteria
Section Assessment
Critical Thinking Activity Answer
Lender Criteria
Answers will vary, but should include that a lender will want to judge your ability to repay your loan based on different criteria such as your employment history, credit report, and your debt ratio.

114. Legal Skills in Action Calculating the Down Payment
Section Assessment
Legal Skills in Action
Calculating the Down Payment
Using the following scenarios, determine the down payment required on a house that costs $203,000. (Assume all other costs are already included.)

115. Legal Skills in Action Calculating the Down Payment
Section Assessment
Legal Skills in Action
Calculating the Down Payment
VA loan to a qualified veteran
Fannie Mae loan: 3 percent
FHA loan: 4.5 percent
Conventional loan: 15 percent

116. Legal Skills in Action Answer
Section Assessment
Legal Skills in Action Answer
Calculating the Down Payment
VA loan—no down payment
3 percent loan—$203,000 x .03 = $6,090
4.5 percent loan—$203,000 x .045 = $9,135
15 percent loan—$203,000 x .15 = $30,450

117. End of Section 34.1

118. Section 34.2

119. What You’ll Learn
How to identify some suggestions to follow before signing a contract a buy house (p. 736)
How to describe different types of mortgages (p. 737)

120. What You’ll Learn
How to compare the types of co-ownership of real property (p. 740)
How to discuss the various deeds in common use (p. 741)

121. What You’ll Learn
How to explain ways that title to property can be lost (p. 745)

122. Why It’s Important
Knowing about the home-buying process will make the experience easier for you when that time comes.

123. Section Outline Contracting to Buy a House Applying for a Mortgage
Applying for a Mortgage
Types of Mortgages
Federal Protection

124. Section Outline
Taking Ownership
Co-ownership
Deeds

125. Section Outline Limitations on Property Use Zoning Laws Eminent Domain
Adverse Possession
Easements

126. Pre-Learning Question
What happens when you contract to buy a house?

127. Contracting to Buy a House
When you contract to buy a house, you are entering into a purchase and sale agreement with the seller.
The agreement should be subject to your getting a mortgage to purchase the property.

128. Contracting to Buy a House
To obtain the best legal protection, have a lawyer review the agreement before signing it.

129. Average Sales Prices of New Single-Family Homes
34.2
Average Sales Prices of New Single-Family Homes

130. Applying for a Mortgage
Lenders need security, a way of getting their money back in case the borrower does not pay. The mortgage is a way to satisfy this need.

131. Applying for a Mortgage
If the buyer, or mortgagor, pays the money back as agreed, then the mortgage is discharged and the homeowner owns the property outright.

132. Applying for a Mortgage
If the mortgagor does not pay the money back according to the terms of the agreement, the lender, or mortgagee, can have the property sold to pay off the loan.

133. Types of Mortgages
Because different lenders charge different interest rates, you can save money by shopping around for a mortgage. There is a variety of creative financing available.

134. 34.2
Types of Mortgages
The rate stays the same throughout the life of the mortgage, but requires a large down payment.
Fixed-rate mortgage
The rate moves up and down, following an index to which it is tied.
Adjustable-rate mortgage (ARM)
Graduated-payment mortgage
The rate is fixed during the life of the mortgage, but monthly payments increase over the life of the loan.
Balloon-payment mortgage
Has relatively low fixed payments during the life of the mortgage, but is followed by one large final (balloon) payment.

135. Federal Protection
The Real Estate Settlement Procedures Act (RESPA), a federal law, gives you protection when you apply for a loan.

136. Federal Protection Under RESPA, the lender must give you
A booklet that explains the real estate settlement procedure
An estimate of the costs that you will incur in obtaining the loan
A truth-in-lending statement

137. Pre-Learning Question
What are some different types of property ownership?

138. Taking Ownership
Ownership of property can be taken in your name alone or with someone else as a co-owner. There are different types of co-ownership as well as different types of deeds in common use.

139. Co-ownership
There are three main ways that you can own real property with others.
Tenancy in common
Joint tenancy
Tenancy by the entirety

140. Kim Wu, Xìn Weng, and Bob Potter want to buy a beach house in Hawaii together.

141. If each person wants his or her children to inherit the property upon his or her death, which type of co-ownership should they choose? Why?

142. ANSWER
Tenancy in common allows heirs to inherit.

143. If Kim and Lĭ Wu, a married couple, decide to buy a beach house, which type of co-ownership should they choose? Why?

144. ANSWER
Tenancy by the entirety allows for the surviving spouse to inherit.

145. Pre-Learning Question
Are there ever any limitations on property use? If so, what are they?

146. Limitations on Property Use
There are limitations on property use that may affect how you build on your land, as well as how you can use it.

147. The Nature of Real Property
Real property is the ground and everything permanently attached to it.

148. The Nature of Real Property
Real property includes
Buildings
Fences
Trees and perennial plants on the surface

149. The Nature of Real Property
Earth, rocks, and minerals under the surface
Airspace above the surface

150. Zoning Laws
Communities use ordinances and bylaws to regulate the use of real property within their boundaries. Most cities and towns have zoning laws that prescribe the use that may be made of property in specified areas.

151. Eminent Domain
Eminent domain is the right of the government to take private land, with compensation to its owners, for public use.

152. Eminent Domain
The government can take private land for such things as public buildings, highways, school buildings, power projects, housing projects, parks, and other public uses.

153. Adverse Possession
Ownership of real property can be lost by adverse possession. This loss occurs when someone who doesn’t own property takes possession of it for a period set by state statute, such as twenty years.

154. Adverse Possession
The possession must be open, not secretive, with a claim that it is being done rightfully.

155. Easements
An easement is the right to make some use of another’s land.

156. Easements
Most often it is the right to cross someone else’s land at a particular place for a certain purpose such as a driveway or for drainage.

157. Easements
It may also be a right to erect poles and suspend power lines over land or to lay pipelines beneath the surface.

158. Easements
Local governments and public utilities frequently obtain easements to construct service lines and roads.

159. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
What should you do before you sign a contract to buy a house?

160. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
Have a lawyer review the agreement.

161. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
Describe the differences among a fixed-rate, an adjustable-rate, a graduated-payment, and a balloon-payment mortgage.

162. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
A fixed-rate mortgage stays the same throughout the life of the mortgage but requires a large down payment.

163. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
An adjustable-rate mortgage has an interest rate that moves up and down, following an index to which it is tied.

164. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
A graduated-payment mortgage has a fixed interest rate during the life of the mortgage, but the monthly payments increase over the life of the loan.

165. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
A balloon-payment mortgage has relatively low fixed payments during the life of the mortgage but is followed by one large final (balloon) payment.

166. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
What is the difference between joint tenancy and tenancy by the entirety?

167. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
Joint tenancy: two or more people own an interest in the whole property. Tenancy by entirety: may only be held by a husband and wife, who are regarded by law as one.

168. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
What types of deeds are discussed in this chapter? How are they alike? How are they different?

169. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
A special warranty deed contains express warranties that no defect arose in the title during the time that the grantor owned the property, but not before.

170. End of Section 34.2