Modern Real Estate Practice in Texas, 16th Edition
Chapter 21 Answer Key
1. c
2. c
3. c
4. c
5. d
6. b
7. c
8. c
9. a
10. b
A leasehold that continues for a definite period of time is an estate for years.
No notice is required to terminate the lease at the end of the lease period. It will
automatically terminate because a specific expiration date was expressly stated
in the lease.
When a landowner leases his or her real estate to a tenant, the tenant’s right to
occupy the land for the duration of the lease is called a leasehold estate. Leases
carry the implied covenant that the landlord will give the tenant exclusive
possession of the premises.
A ground lease must of necessity be for a long enough term to make the
transaction desirable to the tenant who is making the investment in the
construction of a building on the land. These leases often run for terms of 50
years or longer.
A percentage lease usually provides for a minimum fixed rental fee plus a
percentage of that portion of the tenant’s business income that exceeds a stated
minimum.
A tenant has the right to abandon the premises, called constructive eviction, if
the tenant can prove that the premises have become uninhabitable because of
the conscious neglect of the landlord. The tenant is not liable for further rent.
The net lease is a lease in which the lessee pays a “net” rent to the lessor while
assuming responsibility for most or all of the property charges (taxes, insurance,
repairs, etc.). This allows the landlord a steady income stream while not having
to handle the problems associated with management and maintenance.
The Texas Statute of Frauds requires that a lease for a term of more than one
year be written to be enforceable.
$1,200 per month × 12 months = $14,400 fixed base rent
$19,200 total rent – $14,400 base rent = $4,800 percentage rent
(That is, $4,800 of the rent came from sales over $150,000)
THUS: $4,800 ÷ 4% (.04) = $120,000 sales exceeding $150,000
$120,000 + $150,000 = $270,000 annual sales volume
In an estate for years, if the tenant remains in possession after the lease term
expires, a holdover tenancy, or tenancy at sufferance, is created. Pablo,
however, is not a tenant at sufferance because the landlord accepted the rent.
Although the original lease was for five years, it cannot automatically renew for
five years because the courts have ruled that a holdover tenancy cannot exist for
longer than one year.
Periodic estates, sometimes called estates from period to period, are created
when the landlord and the tenant enter into an agreement that continues for an
indefinite length of time without a specific expiration date. The agreement is
automatically renewed for similar succeeding periods until one of the parties
gives notice to terminate.
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Modern Real Estate Practice in Texas, 16th Edition
11. c
12. d
13. d
14. a
15. a
16. d
Under the implied covenant of quiet possession, the lessor guarantees that the
lessee may take possession of the leased premises and that he or she will not be
evicted by any person who successfully claims to have a title superior to that of
the lessor (i.e., if the owner sells the property to a third party during the period
of the lease, the lease will continue).
A tenant who remains in possession after the lease term expires is a holdover
tenant, sometimes called a tenant at sufferance. If the landlord had accepted the
tenant’s rent, the lease would have converted to a periodic estate. In this case,
the tenant remains without the landlord’s consent and is, therefore, a tenant at
sufferance.
The essentials of a valid lease include: offer and acceptance; consideration;
capacity to contract; legal objectives; and legal description. Unless the lease
is for more than three years, it generally is not recorded in Texas.
Unless the agreement prohibits it, the tenant may make improvements with the
landlord’s permission. Any such alterations are at the expense of the tenant and
generally become the property of the landlord; that is, they become fixtures.
In most cases a sublease does not relieve the original lessee (Baker) of the
obligation to make rental payments to the lessor (Adams) unless the lessor
agreed to waive such liability.
A tenant who abandons leased property remains liable for the terms of the lease,
including the rent. The TAR version of the lease [Paragraph 10(C)] gives the
required written and underlined notification to the tenant of the landlord’s right
to retain the security deposit if the tenant fails to give at least thirty days written
notice of surrender.
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