Exam 5 - Real Estate Law - Haley Brown

commercial lease

agreement between a landlord and a business outlining terms and conditions of property rental.

commercial lease

specific to renters using property for business or other

lease agreement terms and requirements

1. in writing - if lease is going to last longer than one year, must be in writing

2. security deposits

3. rent

gross rent

flat rent in a commercial lease

flat = always the same

gross rent language

"Business A will pay landlord $1,000 a month for rent"

Triple Net Lease

a form of a commercial lease rental formula that the tenant pays (normal rental term)

triple net lease formula

fixed rent + taxes + insurance + maintenance

triple net lease

I. fixed rent amount ($1,000)

ii. real property taxes

iii. insurance

1. fire

2. casualty (is for negligent actions on the property)

iv. Maintenance

1. repairs (tenant pays for repairs)

2. utilities (electricity, water, garbage, etc)

percentage rate rent

rent for commercial properties expressed as a percentage of gross income (= % of gross income as rent)

percentage rate rent example

rate of rent is 10% of monthly gross income

you made $100,000 in one month

landlord will get $10,000

Condition of Premises

who is responsible for maintaining and repairing the property - will be in the lease

sick building syndrome

occurs when conditions are present in a building that cause respiratory and other ailments in occupants

Condition of premises lease should address:

1. Repairs - who is responsible for repairs

2. Costs - who pays for the repairs

3. Evacuations - the procedure for emergencies

Lease term - landlords rights and duties

1. right of access

2. Duty to maintain premises

right of access

a. when - states when landlord can access it

b. purpose - what purpose they have to accessing it

c. notice - how much notice a landlord has to give before entering

d. form of notice - phone call, letter, text, etc

e. emergency situations - notice requirement can be waved if there is an emergency

Duty to Maintain Premises

landlords responsibility to maintain/keep the premises/property in a way that will prevent injuries

tenants rights and duties

1. Pay Timely Rent

2. Maintain Premises - don't damage the property

3. No Illegal Activities

Multiunits

housing structures that contain two or more different housing units

= building with multiple units/separate places to live

FORMS OF MULTIUNIT INTERESTS

condominiums

cooperatives

townhouses

time-sharing interests

condominium

a building or complex of buildings containing a number of individually owned apartments or houses.

a. ownership

b. creation

Condominum ownership

1. fee simple interest - greatest type of interest in real property

2. undivided joint interest - in common areas of the complex (pools, hallways, clubhouse, etc)

Condominium creation

I. master deed - the document recorded to reflect the location of the condominium project and the individual units

1. legal description of the property - plat mop, meets & bounds, or government survey

2. building - the units, office building, or pool house

3. physical description of each union - shows layout, number of exits, sq ft

4. common areas - stairs, pool, hallways

5. monetary value - how much money each unit is worth

ii. individual deeds

1. legal description - describing which unit is being sold

2. mailing address - of that unit (ex: 123 pleasent st apt. B6)

Condominium/cooperative

form of multiunit housing in which a corporation owns the property and the owners of the shares of the corporation live in each of the units.

a. ownership (corporation owns it, the shareholders live there)

b. creation (articles of incorporation is filed with the secretary of states office)

cooperatives ownership

just a corporation owns this. the shareholders live there (have an undivided joint interest in the land & buildings)

cooperative creation

I. Articles of incorporation - file this document with the secretary of state's office

1. corporation's name - intentional living, inc.

2. purpose of corporation - to create an intentional living cooperation

3. name of legal representative - state a real person who will receive mail, speak for the cooperative, etc.

townhouses

form of multiunit housing in which the owner owns the area in the unit and also owns the land on which the unit is located

a. ownership

b. creation

townhouse ownership

1. owns unit

2. owns land - underneath their unit

3. joint interest in common areas - clubhouse, swimming pool, parking lot, etc

townhouse creation

1. declaration of covenants, conditions, and restrictions - restrictions and limitations on the use and construction of land (document that restricts rules you can follow)

2. individual deed

time sharing interest

a form of multiunit housing in which owners own the unit for a limited period of time during each year

a. ownership

b. creation

time sharing interest ownership

1. fee simple interest - like a condo, but you're restricted

2. right of possession limited - own it, but you can only possess it/use it for a limited amount of time each year

time sharing interest creation

1. limited fee simple interest - own it, but limited when you can use it

2. recreational lease - time share lease = lease in a multiunit house that runs for a short period of time during each year

homeowners association

has an executive board and it manages the common areas & enforces rules (very restrictive to make property value stay high)

broker

agent hired either by the owner of a property to aid in its sale or by a potential buyer to find property suitable for specified needs

agent

a. agency relationship

b. fiduciary duty

Agency Relationship

1. agent - one who works on behalf of the principal

2. principal - delegates some of his power to the agent for the agent to act on his behalf

Fiduciary Duty

an agents owes the principal loyalty, obedience, and care

1. duty of loyalty

2. duty of obedience

3. duty of care

4. duty to handle escrow

Duty of Loyalty

the broker must act solely for the benefit of the principal

Duty of Obedience

the broker must obey the commands of the principal

Duty of Care

the broker is obligated with a duty to avoid mistakes, whether those mistakes are done negligently or intentionally.

a. Negligently - the failure to use due care

b. Intentionally

duty to handle escrow

just money held by a third party on behalf of the other two parties in a transaction

i. Cannot Commingle

ii. Cannot Use

hired

open listing agency

exclusive agency

buyer-broker

dual agency

designated agency

open listing agency

when an owner lists the property to be sold with more than one broker

exclusive agency

the seller is required to pay a commission to the listing broker if that broker sells the property (just one broker selling the property)

buyer-broker

when the buyer is represented by the broker

dual agency

permits an agent to represent both sides in a transaction so long as the parties are aware of the dual representation, and both the parties must sign a "Consent to Act" disclosure form

designated agency

when one firm represents both the buyer and seller in the transactions

commission

fee or the amount of money the broker will receive for their services

Listing Agreement

contract between a broker and landowner for the broker's services in helping to sell the owner's property

listing agreement contract

1. How Much? (2-3% of sell price)

2. When Paid?( when they find a someone to buy the home)

a. Ready and Willing

i. Ready to Purchase (ready to mentally enter a contract)

ii. Made Necessary Deposits (they are financially ready to enter into a contract) (ex, he put the money into an escrow account)

b. Able

i. Financial Ability (has the money or can come up with it)

ii. Credit (proof from the bank that we can get a loan)

iii. Necessary Resources (steady job and can make payments on your loan)

Legal Duties and Responsibilities to Third Parties

third party = someone the broker does not represent; this person did not hire him

Misrepresentation

= lie

a. intentional misrepresentation

b. negligent misrepresentation

c. Nondisclosure

Intentional Misrepresentation

broker knows a fact but he (1) mistakes it or (2) doesn't disclose it

I. mistakes facts - broker knows property is zoned commercial but says its residential

II. Doesn't disclose facts - murder happened here but doesn't tell you

III. Puffing as a defense - an opinion or judgment that is not made a representation fact = sales talk

neglient misrepresentation

didn't intend to lie, but didn't do your job good enough

1. failed to determine whether fact was true or false (failed to investigate)

2. buyer relied on misrepresentation

Nondisclosure

SPECIFIC type of misrepresentation

1. residential property disclosure act

2. psychological disclosure acts

residential property disclosure act

focuses on residential property. don't folloe these laws with commercial property.

(if you're going to live there, you must be told certain info about it - ex: structure/foundation problems, plumbing problems)

psychological disclosure act

statutes that require disclosure of events on property that create psychological reactions in buyers and after market value

a. Psychological reactions in buyers - knowing a murder happened there freaks you out

b. affect market value - makes the price go down

Example of Duty of Loyalty

Property owner hires a broker to sell his house

property owner is the principal

the broker is the agent

the broker tells the principal to set the sell price lower than it should be

the broker buys the property for himself

by doing this he violated the duty of _________

Example of duty of Obedience

the property owner tells the broker to sell the property

broker refuses to do so

the broker violates the duty of _________

example of duty of care

broker should set the selling price at a reasonable level

if its set to high, it wont sell

if its set to low, it will sell, but the owner will lose money

if its not set at a reasonable level, then the broker violated the duty of _________