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Lease Agreement Basics | Real Estate Exam Prep Videos - YouTube
Channel: The Real Estate Classroom
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[Music]
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hey everybody my name is paul vachesky
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and welcome to the real estate classroom
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youtube channel it's just a place that
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if you're studying for your real estate
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licensing exam
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you could come here and watch videos and
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get study material to help you pass that
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exam
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before we get started do me a favor
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please give this video a thumbs up hit
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that subscribe button click that little
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notification bell
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all right the topic of today's video is
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the lease agreement or the lease
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contract
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in my next video we're actually going to
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discuss the different types
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of lease agreements that are out there
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but today we're just going to deal with
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the lease agreement
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in its general sense so what is a lease
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contract or release agreement
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first thing you have to know is a lease
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contract and a lease agreement mean the
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same thing that those two terms are used
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interchangeably the other thing that you
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have to know is a lease contract
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is between the lessor and the lessee the
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lessor is the landlord or the third
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party
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property manager and the lessee is the
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tenant
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and the lease can be verbal or it can be
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written now there is a caveat to that
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there is a law called the statute of
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frauds you're going to have to know that
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for your real estate licensing exam
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every state has their own set of statute
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of frauds
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and the statute of frauds in most states
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say that if a lease is
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greater than one year then it must be in
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writing to be enforceable
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if it's a year or less it can be
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verbal however we never want verbal
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contracts but there is an opportunity
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for that to exist in most of the states
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all right so what does a lease contract
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do
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well it basically outlines the duties
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responsibilities and the processes
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of all the parties involved which is the
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lessor and the lessee
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so how much the rent is those type of
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things the other thing that it does
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from a technical perspective this is
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very important to remember
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a lease contract conveys
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the legal right of possession so when
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the landlord
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is sitting on a vacant rental unit the
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landlord has
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absolute or fee simple absolute so under
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the fee simple absolute
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he or she has the bundle of rights that
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we've already discussed in a different
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video
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which includes the legal right to lease
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out or rent out the property
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all right there's a separate and
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distinct legal interest called the legal
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right of possession which is separate
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from
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ownership so the landlord can maintain
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ownership but convey or transfer the
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legal right of possession to the tenant
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now that legal right of possession also
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contains
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certain rights that go along with it and
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that includes the right to quiet
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enjoyment
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the right to enjoy the property the
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right to occupy and use it
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all of those type of things but it
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belongs to the owner until the owner
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conveys it and we convey that legal
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right
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of possession by using a lease contract
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whether that lease contract is verbal
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or it's written now when a landlord
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intended or lessee
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less or relationship is entered into
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there's an estate that's created
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remember the term estate simply means
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a legal interest and depending on that
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legal interest
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represents the quality of that estate
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so let's take a look at some key terms
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here that you have to know for your real
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estate licensing exam
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once the lease contract is signed or
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agreed to between these two parties
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then they've entered into one of four
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leasehold interest leasehold interest
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okay the first one is what we call
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tenancy for years
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now the key about tenancy for years is
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it's a
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fixed expiration date it's fixed
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very common now typically in apartment
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communities for example
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we'll see we'll see a fixed expiration
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date of one year it's a typical
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one-year lease or a two-year lease but
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it doesn't have to be one year
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it can be for six months or three months
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the key to a tenancy for years
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it simply means that there's a fixed
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expiration date
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whether that's three months or six
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months or a year or two years
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there's a definitive date that it
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expires
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periodic tenancy this is commonly known
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as month
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to month or what we call period
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to period this can actually be quarter
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to quarter
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year to year but this is typically
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determined by whatever that individual
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state's landlord tenant law
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says and in most states that's month to
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month or we call a 30-day cycle
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the next one is tenancy at will
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and i like to say immediate
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immediate termination now we don't see
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this very often
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in in any kind of landlord tenant
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situation
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outside of hotels hotels the the
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type of tenancy or the leasehold
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interest is
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tenancy at will so you pay for the night
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and quite frankly either side can
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terminate at that agreement
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at any time that's why when you were
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young and you you know you'd go to prom
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and after prom you would go to a hotel
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room
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and then the hotel staff would come up
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and throw you out because it's
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its tenancy at will either side can
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terminate that relationship
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on demand or immediately and the last
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one is called tenancy at
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sufferance now this is where the
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la the lessor and the lessee entered
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into a lease contract
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and then the tenant stops paying the
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rent and refuses to move
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that means the eviction process has
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started
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and the landlord or the lessor is
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suffering because not only are they not
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getting rent income but now they're
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going to have to evict the tenant
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that's tenancy at sufferance so if you
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look at this from the perspective
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of the quality of the interest or the
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quality of the estate
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obviously tenancy for years is the
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highest
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that's the best quality in this
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leasehold interest
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the next one would be periodic tenancy
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because it's from
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a period to period it's not quite as
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good as tenancy for years but it's still
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not bad and then tenancy at will has a
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lot of risk
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you're still maybe getting income but
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it's still risky for the parties
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involved meaning either side can give
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notice to terminate at any time
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and then tenancy at sufferance obviously
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is the lowest one because
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all parties are suffering because one
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party i.e the lessee
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they're not they're not holding their
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end of the uh of
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their end of the contract all right so
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these are leasehold interest
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you have to know these these are key
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concepts for the real estate licensing
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exam
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now let's go back to the beginning of
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the video when i said that
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under the lease contract the landlord
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transfers or conveys the legal right of
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possession
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well we got to talk about this thing
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called reversionary interest
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reversionary interest means there's a
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future interest that the lessor has
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in this relationship because once the
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tenant
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has completed their obligation under the
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lease contract
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or they're evicted by a court
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that reversionary interest or that legal
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right of possession reverts back to
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the owner or the property manager if
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there's a third party management
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contract
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so then that property can be rented out
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again
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the point is the reversionary interest
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is called in a leasehold relationship
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it's called the legal right of
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possession
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and we talked about uh reversionary
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interest in the life estate video
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as well that i did a a couple of months
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ago
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the next part of the video i want to
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talk about the basic makeup of a lease
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agreement what must be
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in a lease agreement a lot of that
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depends on
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the individual state which the property
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is located in
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and that's in accordance with the
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landlord tenant statute of that state
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but there are some key things that you
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have to know for your licensing exam
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number one we have to have the identity
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of the parties
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all right the lessor the lessee we have
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to identify them in the document
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we have to identify the leasehold
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interest
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all right what is it's one of these
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right here
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is it a month a month is it is there a
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fixed expiration is a
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tenancy at will those type of things we
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have to know the rent
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amount how much is the rent
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and when is the rent being paid now in
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the residential side it's usually about
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the month but it doesn't have to be
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it's common now for bi-monthly rent
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payments or in the commercial industry
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you might see a quarterly payment or
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even an annual payment
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all of that is going to be determined
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inside the lease
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agreement the address
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that's very important and then anything
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else that's going to be relevant such as
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responsibilities for things like
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maintenance
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or the cost associated with
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uh in addition to the rent so the cost
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that the tenant may have to pay
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such is is taxes or the insurance
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the maintenance of the grounds in the
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common areas all of that's going to be
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outlined
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in the lease agreement how does tenancy
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end
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well there's a couple of key ways that
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it ends number one
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the contract expires all right
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all right so we're going to put up here
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the lease agreement
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ends what are the key terms here it
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expires
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the next way is through mutual consent
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so we could be
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on a one year lease and two or three
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months into it it's not working out and
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the lessor and the lessee just say
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listen we've had enough each
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of each other and we're going to part
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ways we call that
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mutual consent both party
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parties agree the next way is called
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eviction and actually there's two key
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terms here that i need you to know for
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your exam
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actual eviction and
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constructive
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both of these are types of evictions
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now actual eviction exists
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when for example the tenant doesn't pay
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the rent and they're not moving
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and then the landlord has to go and
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evict them through the court system
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that's called
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actual eviction now constructive
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eviction is where
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the landlord isn't holding up to their
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end of the agreement
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so there are certain responsibilities in
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the lease contract that requires the
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landlord to do certain things such as
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grounds maintenance so if the landlord
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isn't doing their part
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then through the constructive eviction
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process
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the tenant then terminates the lease
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with the landlord you have to know these
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two key terms
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actual eviction and constructive
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eviction for the real estate licensing
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exam another one would be if the
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property is condemned
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if the property is condemned by a local
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government that terminates
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the lease now the last way that we
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terminate a lease contract is what's
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called notice
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this typically exists with a
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periodic tenancy leasehold interest or a
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month a month
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as it's better known as and that just
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simply means the landlord or the tenant
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either one can give proper notice and
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that notice is going to be dependent on
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state law some states as a 30-day notice
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some states it's a 60-day notice
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but in accordance with their state
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landlord-tenant law they're going to
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give notice
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to terminate the lease so those are the
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ways
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that we end a lease agreement
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all right that's all i have for this
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video go ahead and click on this video
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if you want to continue your studies
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otherwise if you have not subscribed to
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the channel click the little circle
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right there i will see you
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in the next video
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