In my last post, “Real Estate Alphabet Soup: K is for Knowledge” I continued my primer on the “alphabet soup” of real estate. This post continues to stir the “alphabet soup” with the letter “L.”
L is for “Lease.” A Lease is a written agreement between two parties involving a right to the use and possession of certain real property for a set period of time. The first party is the “Lessor” sometimes also referred to as the “Landlord”, which is the party possessing ownership of the real property. The second party is the “Lessee”, sometimes also referred to as the “tenant”, which is the party taking a “Leasehold” interest in the real property, subject to the specific terms and conditions as set forth in the Lease.
Upon execution of the Lease, the Lessor relinquishes its right to the immediate possession of the property, while retaining the ultimate legal ownership of the property. In consideration of leasing the property to the Lessee, the Lessor is entitled to receive payment from the Lessee of certain agreed upon rent. In addition to requiring the payment of rent, at the time of execution, Lessors also generally require the payment by Lessee of a security deposit, to be held in escrow by the Lessor to apply against any damages caused by Lessee or unpaid amounts due, as set forth in the Lease. Leases also contain provisions governing the payment of utilities and other costs and fees related to the real estate, such as real estate taxes. The Lease will also set forth certain responsibilities for maintenance of the property, insurance requirements, permissible uses of the property, and other conditions. And, if the leased premises are part of a larger property with any shared common areas, then the Lease will also contain provisions for payment of the Lessee’s proportionate share of the maintenance and operating expenses for those common areas.
Assuming that the Lessee pays the rent and is otherwise in compliance with the terms and conditions of the Lease, then the Lessee is entitled to the peaceful and quiet enjoyment of the leased premises during the term of the Lease.
Although the Lease is governed by the terms and conditions contained in the written document or Lease Agreement, there are also statutory provisions and laws governing leases and the enforcement of leases, of which both Lessors and Lessees should be aware before entering into any Lease agreement.
In my next post, I will move on to the letter “M”, the next letter in this real estate “alphabet soup.”
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.
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