Chapter 3 Pt. 2 Leases, Listings & Real Estate Concepts

Vocabulary flashcards covering essential terms from the lecture on leases, landlord-tenant responsibilities, listing contracts, and real-estate taxation.

Lease

A contract granting a tenant the right to use and occupy real property for a stated term in exchange for rent.

Restriction-on-Use Clause

Lease provision limiting how the tenant may use the premises (e.g., no pets, no business activity).

Lease Term

The clearly stated duration of a leasehold, such as one week, two years, or ninety-nine years.

Security Deposit

Money held by the landlord to cover damages or breaches by the tenant.

Destruction-of-Premises Clause

Lease clause specifying rights and obligations if the property is damaged or destroyed by events like fire or flood.

Lease Option

An agreed-upon right, such as to purchase or renew the lease, that a tenant may exercise within a certain period.

Lessor

The landlord; retains legal title, must maintain the property, receives rent and reversionary interest.

Lessee

The tenant; holds a personal property interest (leasehold estate) and owes rent and proper care of the premises.

Economic Rent

The market rent that a property could command under current conditions.

Right of Quiet Enjoyment

Tenant’s right to possess premises without interference from the landlord or third-party claims.

Waste (Real Estate)

Tenant’s act of damaging or diminishing the value of leased property, violating lease obligations.

Reversion

The landlord’s future right to regain possession of the property when the lease expires.

Gross Lease

Lease where the landlord pays taxes, insurance, and expenses while collecting a flat rent from the tenant.

Escalation (Escalator) Clause

Lease provision allowing the landlord to pass increased operating costs (e.g., taxes, insurance) on to the tenant.

Net Lease

Lease in which the tenant pays property taxes, insurance, and sometimes maintenance in addition to base rent.

Percentage Lease

Commercial lease in which rent is based on a percentage of the tenant’s gross sales, often plus a base rent.

Graduated Lease

Lease with predetermined rent increases at set intervals over the term.

Index Lease

Lease whose rent adjusts up or down according to a specified economic index, commonly the CPI.

Ground Lease

Long-term lease of land only, often for farmers or gas stations; tenant may build improvements.

Assignment of Lease

Transfer of all lease rights to a new tenant; both assignor and assignee remain liable to the landlord.

Sublease

Transfer of less than all lease rights; original tenant remains solely liable to the landlord.

Non-Disturbance Clause

Provision ensuring that tenant leases remain valid even if the landlord’s property is foreclosed; must appear in both lease and mortgage.

Actual Eviction

Legal process by which a landlord removes a tenant for breach, typically through a suit for possession.

Constructive Eviction

Tenant’s remedy to terminate lease when premises become uninhabitable and landlord fails to remedy conditions.

Open Listing

Non-exclusive listing allowing owner and multiple brokers to sell; only procuring cause earns commission.

Exclusive Agency Listing

Listing where one broker and the owner can sell; broker receives commission unless owner sells personally.

Exclusive Right-to-Sell Listing

Listing giving a single broker the exclusive right to earn commission regardless of who sells the property.

Net Listing

Illegal arrangement where broker keeps any sale amount above the seller’s required net price.

Protective Period Clause

Listing provision entitling broker to commission if a buyer introduced during the listing purchases soon after expiration.

Indemnification (Hold-Harmless) Clause

Agreement that one party will protect the other from legal liability arising from the transaction.

Expiration Date (Listing)

Required ending date that must appear in every listing contract.

Employment Contract (Listing)

Legal characterization of a listing agreement, creating an agency relationship between seller and broker.

Procuring Cause

The broker whose actions directly lead to a completed sale, thus earning commission under most listing types.

Errors & Omissions (E&O) Insurance

Policy protecting real estate licensees from negligence claims or mistakes in professional duties.

Hazard Insurance

Coverage guarding a brokerage against property damage losses such as vandalism.

General Liability Insurance

Insurance covering bodily injury or property damage claims, e.g., if a visitor is hurt at the brokerage office.

Capital Gain

Profit realized from selling an investment, such as real estate, above its adjusted basis.

Tax Relief Act of 1997

Law allowing homeowners to exclude up to $250,000 (single) or $500,000 (married) of gain on a principal residence owned 2 of past 5 years.

Section 1031 Exchange

IRS-recognized swap of like-kind investment properties that defers capital gains tax.

Like-Kind Property

Real estate held for investment or business that qualifies for tax-deferred exchange when traded for similar real property.

Boot

Cash or non-like-kind property added to an exchange to equalize value; immediately taxable.

Basis

Owner’s original cost of a property, adjusted for improvements and depreciation, used to calculate capital gain.

Capital Improvement

Permanent addition or structural change that increases a property’s value and raises its basis.

Depreciation (Tax)

Deductible allowance for wear and tear on investment property improvements, reducing taxable income.