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Lecture 7 Contracts, Deeds, and Leases
33

Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Dec 14, 2015

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Page 1: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Lecture 7

Contracts, Deeds, and Leases

Page 2: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Lecture 7

Deeds

Page 3: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Title and Deeds

Title: “Proof of Ownership”

Deed: An Instrument of Conveyance– Merchantable Title: Attorney abstracts and opines

conveyance histories

Page 4: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Deeds

TWO PARTIES TO A DEED:

“Grantor”: Owner conveying (selling or giving) right, interest, or title to another party

“Grantee”: Receives right, interest, or title from Grantor

Page 5: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Deeds: Validity Requirements

Grantor must meet age and mental capacities

Grantor must be identified with certainty

Grantor’s signature required

Consideration required

Contain words of conveyance

Legal description

Signature requirements

Deed must be delivered from Grantor to Grantee

Page 6: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Deeds: Warranty Deeds

Grantor conveys ALL property rights to Grantee.

Seizin: Right to Convey

Quiet Enjoyment: Grantee not to be bothered with subsequent claims of ownership

Against Encumbrances: Other than specified easements and other encumbrances, Grantor discloses all known

Page 7: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Deeds: Special Warranty Deeds

Special Warranty Deed covers only the period AFTER the Grantor assumed ownership.

Page 8: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Deeds: Non-Warranty Deeds

Quitclaim Deed– Grantor gives up rights, interests, and title held at

transfer

Judicial Deed– Given by a court following judicial proceedings

Page 9: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Deeds: Recording After Conveyance

Recording: Conveyance instruments become Public Records.

- Constructive Notice of Ownership

- Northeast Fla: $10.00 for first page, $8.50 for add’l pages

Documentary Stamps: State Revenue Department taxes on conveyance of title

- Florida: $0.70 per each $100 of the SALE PRICE

Example: $100,000 sales price = $100,000 * .007 =

$700.00 of Stamps

Page 10: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.
Page 11: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Lecture 7

Title &

Title Insurance

Page 12: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Evidence of Clear (Marketable) Title

Abstract and Attorney’s Opinion

Certificate of Title

Title Insurance

Page 13: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Title Insurance

TWO SIGNIFICANT FORMS:Owner’s Standard: Insures rights of new owner

Mortgagee’s Title Policy: Insures owner up to amount of mortgage debt

ITEMS TYPICALLY INSURED:Duress in execution of Instruments

Marital rights of spouse reported incorrectly

Undisclosed divorce

False representation of true owner

Forged documents

Deeds written by Grantors who were minors, aliens, or incompetent

Page 14: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Lecture 7

Contracts

Page 15: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Types of Contracts

Valid, Voidable, Void, Unenforceable

Bilateral, Unilateral

Page 16: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Types of Contracts

Valid: Fulfills all legal requirements imposed by law, and therefore enforced by courts of law

Voidable: Contract is valid, but one party can exercise right to avoid or set aside contracted obligations

Unenforceable: Contract is valid, but not recognized by courts if legal action is sought in courts

Void: Contract is NOT valid, and not recognized by courts of law

Page 17: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Types of Contracts

Bilateral: Agreement made between two or more people1. One party makes an offer (promise) to second party

2. Second party accepts

3. Bilateral contract formed

Unilateral: Offer (promise) made by one party to another1. One party makes an offer (promise) to a second party, and second

party receives the benefit of the promise contingent upon the performance of the offer (promise)

Real Estate Contracts: Bilateral

Real Estate Listing Agreements: Unilateral

Page 18: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Contracts: Requirements for Validity and Enforceability

Agreement (Offer and Acceptance)

Consideration

Competent Parties

Reality of Consent

Legality of Purpose

Necessity of Writing in Certain Instances

Page 19: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Contracts: Requirements for Validity and Enforceability

AN AGREEMENT

Offer: Initial step in the formation of a contract1. Definite and Certain2. Complete3. Communicated to the Seller4. Intended to create legal obligation between two parties

Acceptance: Indication of willingness to be bound by terms of an offer

1. Made only by persons to whom offer was made2. Unconditional and identical to terms of the offer3. Communicated to the offeror

Page 20: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Discharge: Complete performance by both parties

Nonperformance: One party legally excused from a binding contract

Breach of Contract: Failure by a party to perform contracted obligations

Liquidated damages, nominal damages, Specific Performance

Discharge, Nonperformance, Breach of Contract

Page 21: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Lecture 7

The Lease

Page 22: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Leases

LEASE: Written document in which the rights to use and occupancy of land or structures are transferred by the owner (Landlord) to another for a specified period of time in return for a specified rent

Page 23: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Parties to a Lease

TENANT: One who holds/possesses real property; commonly, a person who occupies and uses the property of another under a lease (lessee)

LANDLORD: The owner of real estate that is leased to others

Page 24: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Rights of Tenancy

Fee-Simple/ Non-Freehold/

Freehold Interest Less-Than Freehold

Use

Exclusion

Possession

Disposition

Use

Exclusion

Possession

Disposition

Page 25: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Non-Freehold Interests

LEASED-FEE INTEREST: Ownership interest held by a Landlord with the right of use and occupancy conveyed by lease to others

LEASEHOLD INTEREST: Rights to use and occupy real estate for a stated term and under certain conditions; conveyed by a lease

Page 26: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Leased-Fee v. Leasehold

Leased-Fee Leasehold

Rights Conveyed By Lease

Contract Rent

UseExclusionPossessionDisposition

UseExclusionPossession

Page 27: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Positive and NegativeLeasehold Interests

Negative Leasehold Positive Leasehold

Market Rent

CO

NT

RA

CT

RE

NT

CO

NT

RA

CT

RE

NT

Page 28: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Subletting

SUBLEASE: An agreement in which the lessee in a prior lease conveys the right of use and occupancy of a property to another

SANDWICH LEASE: A lease in which an intermediate, or sandwich, leaseholder is the lessee of one party and the lessor of another.

Page 29: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Subletting

Leased-Fee Leasehold Sub-Leasehold

UseExclusionPossessionDisposition

UseExclusionPossession

UseExclusionPossession

Lease

Contract Rent

Contract Rent

Sandwich

Page 30: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Characteristics of Commercial Leases

Agreement and Consideration– “Meeting of the Minds”– Owner sets asking price, and makes proposal to tenant– Tenant accepts, and lease is commenced

Common Lease Clauses– Fixtures Clause– Tenant Improvements Clause– Hours-Of-Business Clause– Use Clause– Signage Clause– Condemnation Clause

Page 31: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Commercial Rental Structures

Gross Lease– Landlord pays for all expenses– Expense Stops

Net Lease – Tenant pays for “pro-rata” share of determined expenses– Triple-Net (NNN): Tenant pays for pro-rata share of

Common Area Maintenance (CAM), Ad Valorem Taxes, Hazard Insurance

Page 32: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Commercial Rental Structures

Percentage Rent (Overage Rent)– Portion of Tenant’s rent based on business income– Fixed Rental Portion + Overage Portion– Recapture Clause (helps hedge owner risk of tenant’s poor business

performance)

Escalated Rents– Flat rent amount over a set period, increases periodically thereafter– Escalators contracted or based on consumer indices

Page 33: Lecture 7 Contracts, Deeds, and Leases. Lecture 7 Deeds.

Examples of Rental Structures

1. Tenant pays $50,000, and Landlord/Owner pays all operating expenses.

2. Tenant pays $30,000 annually, PLUS 2% of all retail sales over $750,000. The store’s gross sales were $900,000.

3. Tenant pays $10,000 annually plus its share of hazard insurance, ad valorem taxes, and CAM totaling $30,000 per year.

4. Tenant pays $24,000 annually for the first year, and the Landlord pays all operating expenses. In years 2 through 6, the rent increases by an amount equal to the respective CPI, or 3.5%.