Deeds and Leases
Deed - the actual written instrument by which ownership (title) of property is transferred. To be
valid, a deed must
 Identify the parties involved in the transfer, the buyer (grantor) and the seller
(grantee)
 There must be consideration given for the property (usually stated as $10 plus other
consideration in order to keep the price private - taxing jurisdictions can only ask that
the true price be voluntarily disclosed)
 A legal description of the property must be included so that the exact boundaries of
the property transferred are known
 The specific interests being transferred must be spelled out (land, mineral rights,
etc.)
 The deed must be signed by both parties and witnessed (notarized)
The deed typically contains covenants and warranties as well, unless these covered by state
statute:
 Covenant against encumbrances (other than those of public record)
 Covenant of seisin or ownership (the right to convey the property)
 Covenant of quiet enjoyment (there are no other claims on the property)
 Covenant of further assurances (that seller will execute any other documents that are
needed for conveyance of title)
 Warranty forever (seller will defend the transfer of title as valid in the future)
Types of Deeds
 General Warranty Deed - broadest type of deed which includes the covenants and
warranties
 Special Warranty Deed - limits seller's warranties to events that occurred during
his/her ownership (lawsuit for ownership of Padre Island)
 Bargain and Sale Deed - implies that the seller has title and the right to sell the
property, but does not guarantee validity of title
 Quitclaim Deed - transfers any interest that the grantor may have in a property.
Generally used to clear the title (typical following a divorce settlement)
Leases – Agreement (contract) transferring use and possession (but not ownership) of property
from owner (lessor) to tenant (lessee) in exchange for consideration (rent).
Types of Leases:
 By duration of term
o Tenancy for a stated period (or “Estate for years”) – term of lease is stated and
possession reverts to the landlord at the end of the term. (Long-term leases are
usually recorded at the courthouse so that public knows that tenant has an
interest in the property. The interest is referred to as a “leasehold estate”.)
o Tenancy (or “Estate”) from period to period – indefinite duration that terminates
upon written notice by either party (usually thirty days); otherwise, it
automatically renews for an additional, equal period of time
o
o
Tenancy (or “Estate”) at will – may be terminated at any time by either party. In
Texas, courts assume it is a periodic estate (another name for Estate from period
to period) and that reasonable notice must be given to terminate
Tenancy (or “Estate”) at sufferance – an illegal holdover from an expired valid
lease agreement. Legal action is required to evict tenants (the landlord must sue
for possession).

Ground Lease – unimproved land is leased for an extended period of time (50 – 99
years, typically). Tenant needs assurances that they will have use of land for a
sufficiently long period of time to justify constructing specialized improvements for
manufacturing, retail, etc. Improvements become property of landowner at the end of
the lease.

By Method of Rent Payment
o Gross Lease – Fixed amount of rent to be paid during the life of the lease. The
burden of expenses, taxes, etc., falls upon the landlord. (Today, utilities are
generally paid by the tenant.)
o Net Lease – Tenant pays a fixed amount of rent, but shares in the costs of
operation. The risk (uncertainty) of operating expenses is therefore shifted to the
tenant. A net net (or, double net) lease requires the tenant to pay insurance in
addition to operating expenses. A net net net (or, triple net) lease also requires
the tenant to pay real estate taxes.
o Graduated (or step-up) Rent Lease – Rental payment is fixed for an initial period,
but increases by specified percentages at fixed intervals. When increase is tied
to an index such as the Consumer Price Index (CPI) it is called an index lease.
o Reappraisal Lease – the increase in rent is tied to increases in the appraised
value of the property
o Percentage Lease – Rent is based upon some percentage of sales made on the
premises. Typically used in retail shopping centers with a fixed base rate plus a
percentage of sales
Other leases include agricultural leases, hunting leases, oil and gas leases.
A lease should explicitly state who pays for what expenses with regard to maintenance, property
taxes, insurance and utilities. Landlord is generally responsible for “normal” wear-and-tear in
maintenance as well as taxes and insurance. Commercial leases will often have expense
stops, or limits, on the maximum operating expenses that the landlord must pay. The remainder
must be paid by proportionately by the tenants.
Assignment – allows tenant to transfer all rights to a new tenant although still liable if tenant
does not pay rent
Sublease – transfer of a portion of the rights under a lease. The new tenant pays rent to the
first tenant who then pays the landlord.
Security deposits – required to give the landlord protection if damages occur, tenant breaks
lease or fails to pay rent
Improvements – unless they can be removed easily, improvements by tenants become fixtures
and remain with the property when the lease terminates
Landlord has the right to enter premises only to protect the property – relates to covenant of
enjoyment that accompanies the leasing of this property right to the tenant. The tenant, of
course, has the obligation to protect the value of the property since it will revert to the landlord
upon expiration of the lease
Warranty of habitability – Landlord has the obligation to ensure that the premises are
maintained in reasonable condition. If it is not kept habitable, the tenant can move out and
claim constructive eviction by the owner. Common areas must also be maintained (In
commercial leases, the cost of common area maintenance is often shared by the tenants.)