Real Estate Contracts & Leases – Key Vocabulary

Vocabulary flashcards covering the essential terms, clauses, and lease types from the Real Estate Contracts & Leases lecture notes.

Purchase Agreement

A contract in which a seller promises to convey legal title to real property to a buyer in exchange for the purchase price.

Legal Title

The actual, lawful ownership of real property conveyed through a deed.

Equitable Title

A limited ownership interest created when a valid sales contract is executed, giving the buyer the right to obtain legal title later.

Standardized Contract

A pre-printed real estate form drafted by attorneys/REALTOR® associations to avoid the unauthorized practice of law.

Statute of Frauds

Law requiring real estate purchase agreements (and most leases ≥1 year) to be in writing and signed to be enforceable.

Time-is-of-the-Essence (Expiration Date)

Clause making stated deadlines strictly enforceable; missing a date can void the contract.

Earnest Money

Good-faith deposit offered by a buyer; usually becomes liquidated damages if the buyer defaults.

Escrow (Trust) Account

Separate account where brokers must hold client funds (e.g., earnest money) to avoid commingling or conversion.

Commingling

Illegally mixing personal or business funds with money held in trust for clients.

Contingency Clause

Contract provision making rights/obligations depend on an event (e.g., appraisal, financing).

Rider / Addendum

An amendment or attachment that adds or alters provisions of a standard contract.

As-Is Clause

Provision stating the buyer accepts property in its present condition; does not remove duty to disclose latent defects.

Binder (Letter of Intent)

A non-binding document outlining a buyer’s offer; serves as a blueprint for a later purchase agreement.

Uniform Electronic Transactions Act (UETA)

Law granting electronic signatures and records the same legal effect as ink signatures and paper documents (with mutual consent).

Option

Unilateral contract giving the optionee the right, but not the obligation, to buy or lease property at a set price within a specified time.

Right of First Refusal

Right to match a bona fide offer and purchase/lease property before it is offered to others; creates a cloud on title when recorded.

Lease

A contract conveying a leasehold estate: tenant pays rent in exchange for possession of real property.

Leasehold Estate

Tenant’s temporary right of possession and quiet enjoyment; also called a less-than-freehold estate.

Lessor (Landlord)

Property owner who leases the premises to another.

Lessee (Tenant)

Person who leases and occupies property from a landlord.

Reversionary Interest

Landlord’s future right to regain possession when the lease ends.

Security Deposit

Money held by a landlord to ensure lease compliance; may be used for unpaid rent or damages beyond normal wear.

Assignment

Transfer of a tenant’s entire lease interest to another; both assignor and assignee remain liable for rent unless released.

Sublease

Tenant transfers possession for part of the term; original tenant stays primarily liable to the landlord.

Novation

Substitution of a new lease (or borrower) with landlord’s consent, releasing the original tenant from liability.

Gross Lease

Tenant pays fixed rent; landlord pays all ownership expenses (taxes, insurance, maintenance).

Net Lease

Tenant pays some or all ownership expenses in addition to rent; variants include single, double, and triple net.

Double Net Lease (Net-Net)

Tenant pays two ownership expenses—typically property taxes and insurance—plus rent.

Triple Net Lease (Net-Net-Net)

Tenant pays property taxes, insurance, and maintenance, in addition to rent; common in industrial property.

Percentage Lease

Tenant (usually retail) pays base rent plus a percentage of gross sales above a threshold (overage rent).

Graduated Lease

Lease with pre-set, step-by-step rent increases at stated intervals.

Index Lease

Lease in which rent is tied to a market index (e.g., CPI) and adjusts accordingly.

Land (Ground) Lease

Long-term lease of land only; tenant may build and own Improvements during the term.

Sale-and-Leaseback

Owner sells property to an investor and simultaneously leases it back, freeing up capital while retaining occupancy.

Lease with Option to Buy

Combination of lease and unilateral option; tenant may purchase later, often applying part of rent toward price.

Lease Purchase

Combination of lease and bilateral purchase agreement; tenant is obligated to buy under agreed terms, with rent often credited.

Cloud on the Title

Any claim, encumbrance, or defect that may make a property’s title unmarketable.

Quiet Enjoyment (Covenant)

Tenant’s right to possess property without interference from the landlord or others claiming title.

Mortgage Contingency

Clause making a purchase contract dependent on buyer obtaining mortgage approval.

Overage Rent

Additional rent paid under a percentage lease when gross sales exceed a specified amount.