6/23/2017

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Rent/Lease

Rent is a fixed payment made periodically for the use of land and/or the buildings, houses, apartments, condo's, etc., that are located on the land. For other purposes, rent can be described as payments made to an owner for the use of automobiles, machines for use in manufacturing or other commercial businesses, household appliances and furniture, tools, and other items. Renting or leasing for a specific time can often save on the costs compared to the purchase price of items.

The person who rents or leases the property is called the tenant or lessee. The tenant, or lessee, pays the owner of the property, called the landlord or the lessor, for the use of the property.

Leasehold interests in a property results from the rights that are conveyed to a tenant by an owner. This gives the tenant the rights to possess the property and to use it for the purposes in which it is contracted and/or zoned until the term of the the leasehold expires.

During the period of tenancy, the owner, or landlord, is entitled to the agreed upon amount of rental income. Payment for the use of the property is made under the terms of the rental or lease agreement. It can either be paid directly to the owner or it can be submitted to a person or company, property manager or management company, that is authorized to act on behalf of the owner.

Agreements to pay rent may be written, implied, or oral. An agreement is a contract that may be weekly, monthly, yearly or for several years. Rental agreements and leases are regulated under contract law.

Leaseholds interests are established by the length of time in which they are negotiated. There are several types of leases and rental agreements that cover different lengths of times and warranties.

  • A fixed term tenancy, called an estate for years, lasts for a specific time, which is part of the agreement between the landlord and the tenant.
  • A periodic tenancy, based on timeframes such as a week or month with automatic rental periods with the same length of time. Month to month rentals are periodic tenancies.
  • A tenancy at will has the right to the possession of property with the consent of the owner, can be terminated at any time by advanced notice from the tenant or the landlord, and does not have a fixed duration.
  • Oil, gas, and mineral leases give rights to the use of mineral deposits beneath the surface of land. Payments are called royalties and the tenant, or lessee, keeps any profits derived from the sale of the oil or other minerals that are extracted. Water is sometimes included in this type of lease.
  • A ground lease is granted in exchange for the payment of rent that is based on the rental value of land, regardless of whether the land is vacant or improved.
  • A master lease benefits property owners who want the financial advantages of owning rental property but has no desire to handle the day to day mananging chores.
  • A sublease is created when a tenant or lessee, who is obligated by the terms of an already existing lease, rents or leases the same property or a portion of the property to another individual. The sublessee is usually bound by the same terms of the master lease agreement set forth between the landlord and the original lessee.

In exchange for the rights to the use and occupancy of property, the landlord is entitled to collect rental income during the life of the contract.

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