Real Estate Glossary L [Part 2]


Continued from…

:point_right: Real Estate Glossary L [Part 1]


A legal instrument that grants a restricted permission to utilize a property. The document normally specifies all lease conditions as well as permissible use.

the formal agreement that allows one party to utilize another’s property in exchange for a fee.

A contract that grants the lessor (the tenant) the right of possession for a set amount of time in exchange for the lessee paying rent (the landlord).

A lease agreement for the use of rented property.

A written or unwritten contract that gives someone the right to own and use real estate for a certain amount of time. The lessor (landlord) gives the lessee (tenant) the right to use the property, but he or she can take it back after the lease term is over (reversionary right). In practice, the lease is both a deed (which transfers the right to live in a place) and a contract (to pay rent and assume other obligations). In exchange for rent, you get to use the land and make money from it. The right to get back the contract rent and the reversion is what makes up the lessor’s leased fee estate. The lessee’s interest is called the leasehold estate, and it includes the right to use and live in the leased estate without sharing it with anyone else. An “agreement for a lease” means that a lease will be signed at a later date.

In the past, landlord-tenant relationships grew out of early agricultural leases. Under these leases, the landlord’s only responsibility was to let the tenant live in peace. In exchange, the tenant agreed to pay rent. The landlord wasn’t expected to help run the land, and leased land was in the sole control of the tenant. The landlord wasn’t allowed to get in the way. In the simplest terms, the relationship between a tenant and a landlord was just one of possession and payment. If a tenant didn’t pay their rent, they would be kicked out. This was a good plan for a place in the country.

Today, contract law decides whether or not a lease is valid. Even though no special words are needed to make a landlord-tenant relationship, a lease should be written down. If it isn’t, the law will tell the people involved what to do. The lease can be written, spoken, or implied, depending on the situation. However, the laws of the state in which the property is located must be followed. As the owner of the property, the lessor is usually bound by an implied covenant to let the lessee enjoy the property in peace. By this agreement, the lessor says that the lessee can’t be kicked out by someone who claims to be the real owner of the property and has a better title than the lessor. A valid lease has the same requirements as a contract, which are, in general, the following:

Capacity to contract: Both parties must have the legal right to make a deal. (It’s important to note, though, that a minor can usually sign binding contracts for necessities, and housing may be seen as one of the most important ones.)

Mutual agreement: Both sides must agree on the same thing and back it up with valid consideration.

Legal goals: The goals of the lease must be legal. For example, it is usually against the law to rent a building to make and sell methamphetamines, so a lease with that goal would be invalid.

Act against frauds: Most state laws about fraud apply to leases. They usually say that leases for more than one year (one year plus one day) or leases that can’t be fully carried out within one year of the date they were made must be in writing. A one-year lease might not meet the requirements of the statute of frauds if the first day of the lease starts after the date the agreement is made. In the same way, a lease for less than a year may be covered by the statute of frauds if more than a year goes by between the date it was signed and the date it ends. No matter how long the lease is, it should be written down to avoid disagreements and misunderstandings. Most of the time, a lease that doesn’t follow the statute of frauds isn’t enforceable.

Signatures: The landlord (and his wife in a dower state) must sign the lease because the courts see it as a transfer of real estate. Even though it’s a good idea for the lessee to sign the lease, they don’t have to because taking possession of the property and paying rent shows that they agree to the terms of the lease. When two or more tenants sign a lease, they become jointly and severally liable. The only way to avoid this is to sign separate leases that spell out what each tenant has to do.

Description of the leased property: A clear description of the leased property should include only the street address and/or apartment number for homes, apartments, and small commercial properties. Large commercial site leases, on the other hand, must be more detailed and include things like a floor plan, total square footage, storage areas, parking, and so on. If the lease has to do with land, like a ground lease, it should have a legal description.

Use of the property: The lessor can put rules in the lease about how the leased property can be used. This is especially important when the property is a store or a commercial space. For example, a lease might say that the property can only be used for “a Big Belt buster Burger Bonanza Bazaar drive-in restaurant, and nothing else.” If the lease doesn’t say what the property can be used for, the tenant can use it for any legal purpose.

Term of lease: The term of the lease is the length of time the lease will be in effect. It should be stated clearly, preferably with the start and end dates of the term as well as the total length of the lease “for a period of 30 years, from June 1, 1968, to May 31, 1998.”

"Courts don’t like leases that last forever and will rule that such leases are not valid unless the words of the lease and the circumstances around it make it clear that this is what the parties wanted. The laws of each state govern leases and they must be in line with those laws. Some state laws limit the length of agricultural leases and leases for 100 years or more. Most of the time, neither the landlord nor the tenant’s death changes the length of the lease.

Possession of rented property: In most states, the landlord has to let the tenant live in or have control over the rented property. So, if the premises are occupied by a holdover tenant or an adverse claimant on the date of a new lease, the landlord has a duty to the new tenant to take whatever action is necessary to regain possession and pay the costs of this action. In a few states, though, the landlord is only required to give the tenant the right to possession. It is then up to the tenant to go to court if necessary to get actual possession. This right to have the property all to yourself is what makes a lease different from a simple license to use property.

Consideration: Paying rent isn’t necessary as long as consideration was given when the lease was made, but some courts have said that rent is any support for the lease, not just a set amount paid each month. Once a lease is signed, most courts will not enforce an agreement to lower or raise the rent during the term for which it was written. Most courts see the lease as a contract, which means it can’t be changed unless the changes are put in writing and both parties agree to them. Most modern leases say that rent should be paid ahead of time. Most land leases and long-term leases require the tenant to pay all property charges, like real estate taxes, special assessments, water and sewer taxes, and all insurance premiums needed to protect the property, in addition to the rent. Most leases include some kind of security, like putting a lien on the tenant’s property, requiring the tenant to pay a portion of the rent in advance, requiring the tenant to post security, or requiring a third party to guarantee the rent payment.

There are three main types of leases, which are:

  1. Leases based on the type of property, such as office leases, ground leases, proprietary leases, and residential leases.

  2. Leases that are put into categories based on how long they last, like short-term and long-term leases. Most short-term leases are gross leases, which mean that the landlord is responsible for all taxes, fees, and operating costs (such as most apartment leases). Long-term leases (usually ten years or more) are usually net leases that give the tenant more rights and responsibilities. Especially in long-term leases, both parties should pay attention to their rights if the leased space is taken away by the government.

  3. Different types of leases based on how rent is paid.

Generally, leases can be recorded in the county where the leased property is located. However, most leases are not recorded unless they are for a long time (three years or more) or are security for a mortgage.

Unless the lease says otherwise, a lessee can give the lease to someone else or rent the property to someone else. When a tenant gives away the whole remaining lease term, they assign the lease. When they give away most of the term but not all of it, they sublet. Most leases say that the tenant can’t give or take over the lease without the landlord’s permission. When a lease is transferred, the new owner becomes the main debtor, and the original lessee becomes a surety.

If the landlord sells the property, the new owner takes over the lease and is responsible for all of the lease’s rules. When renters make changes to a landlord’s property, they usually do it for the landlord’s benefit. If these changes are considered fixtures, they become part of the real estate. But the terms of the lease may allow a tenant to put in trade fixtures or chattel fixtures. It is common for the lease to say that trade fixtures can be taken out by the tenant before the end of the lease, as long as the tenant puts the building back in the same condition it was in when the tenant took over.

In leases for agricultural land, the courts have said that even if the tenant damages or destroys the improvements, they still have to pay rent until the end of the lease. Most states have made this rule apply to leases of land on which the tenant has built a building or leases that give the tenant full possession of a building. Since the tenant is renting the whole building, the courts have decided that the tenant is also renting the land where the building is. When the leased premises are only a part of the building, like an office or business space or an apartment in an apartment building, the tenant doesn’t have to pay rent after the leased premises are destroyed. Also, in some states, if the landlord was careless and caused damage to the property, the tenant can sue the landlord for damages. Most commercial and industrial leases say that the renter is responsible for keeping the inside and, often, the outside of the building in good shape.

You can get out of a lease by

  • when the term is up;
  • the leasehold and fee estates were combined;
  • destroying or condemning the building;
  • abandonment;
  • both parties agree (surrender);
  • Forfeiture because the tenant didn’t pay rent or broke the terms of the lease (note that tenant bankruptcy is no longer a valid reason for default under the federal Bankruptcy Act); and
  • commercially useless, like if the proposed use is made illegal (but not if the tenant cannot obtain a needed business license).

A formal agreement between a landlord and a tenant to rent out a portion of their property.

An agreement between a landlord and a tenant. Leases are legally binding contracts that grant the tenant exclusive use of a property in exchange for regular rent payments. (Damien Abbott’s updated Encyclopedia of Real Estate Terms)

For a set period of time, possession but not ownership of a property. The terms and conditions are outlined in a document that is signed by both the tenant and the owner.

Lease buyout

Extinguishment of a tenant’s remaining lease obligation and rights under its existing lease agreement through payment by the landlord, tenant, or third party.

Lease concession

A gift provided to a renter in order to entice him to sign a lease; usually in the form of one month or more of free rent.

Lease option

A clause in the lease that lets the renter buy the property under certain conditions. Here are some of the most important parts of a lease option:

  • It usually goes with the land, so if the lease is given to someone else, the option to buy goes with it.
  • It usually doesn’t last longer than the length of the lease.
  • The paid rent can be used as a supporting point. If the rent isn’t paid, the option could be taken away.
  • It can be given away without affecting other parts of the lease.

The person who is giving the lease or option must make sure that the deal is set up in a way that makes it more like a lease than a sale. For example, if the total payments under the lease are almost the same as the purchase price payment under the option, and if the payments apply to the purchase price, the IRS may see the deal as a sale because the lessee has no other economic choice but to exercise the option.

An option in a lease is part of the whole lease contract and can’t be separated from it. If the lease is extended, the option is usually extended as well, unless the lease says otherwise.

There is also an option to buy with a lease, but there are also options to renew and extend. Under the second option, the terms of the original lease are kept the same, including the extension clause. With an option to renew, the lessee has the right to a new lease with set terms, but not the original renewal provision.

Lease purchase agreement

A contract in which part of the rent payment goes toward a set price to buy the property. When the lessor gets the agreed-upon total price, the title passes from the lessor to the lessee.

Lease terminology

A glossary of lease-related terms.

Lease with option to purchase

A lease that grants the lessee the right to purchase the property at an agreed-upon price and within an agreed-upon time frame.

A lease that gives the lessee the right to acquire property at a certain price and on predetermined terms at a predetermined date.


The time when a real estate rental property is put on the market, leases are signed, and tenants start moving in.


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Leased fee

The lessor’s interest and rights in the property they have leased. The person who owns the property has the right to rent it out and to take it back at the end of the lease. The value of the rent payments plus the property’s value at the end of the lease period (the reversionary interest) is the leased fee interest, which can be sold or mortgaged as long as the tenant’s rights are respected. When figuring out the value of the leased fee, the appraiser usually adds the value of the land or land and building at the end of the lease term to the present value of the lessor’s income (the annuity method of capitalization). The land’s reversionary value is hard to predict, so it is usually calculated to be the same as its current value, which is then discounted to its current value by multiplying the value by the right Inwood factor.

The owner or lessor of the property grants the tenant use of the property in exchange for rent and the right to reclaim the property at the end of the lease.

The owner or lessor of the property grants the tenant use of the property in exchange for rent and the right to reclaim the property at the end of the lease.

Leased fee estate

The landlord’s collection of rights in a leased property, consisting largely of the right to receive rental payments throughout the lease period and, eventually, the right to repossess the property at the conclusion of the lease term.

Leased fee interest

The sum of what will be earned in rent plus what the property will be worth when the lease expires (reversionary interest).


Tenant’s right to leased property

A tenant owns a piece of real estate that is less than freehold. A lease gives the tenant a leasehold estate and gives the landlord a reversion estate. Estates in personal property are usually used to describe leasehold estates. Some states, on the other hand, say that certain leasehold estates are real property even though they still have some of the traits of personal property. Under common law, an estate was called a “chattel real” for a long time and was seen as a piece of personal property.

The estate for years, the periodic tenancy (estate from year to year), the tenancy at will, and the tenancy at sufferance are the four main types of leasehold estates. The estate for years runs for a certain amount of time, the periodic tenancy runs for an unspecified number of time periods, the estate at will runs for an unspecified amount of time, and the estate at sufferance runs until the landlord does something.

The leasehold is different from other ways to use land because it is a transfer of the exclusive right to possession, not just the right to use the land. So, a hotel guest is not the same as a renter. Different types of permission to use property (licenses, easements, profits, and leases) make a difference when it comes to what can be done if a contract is broken. The only way to get rid of a leasehold tenant is to follow strict legal steps, while a license can usually be taken away at any time.

The length of a leasehold estate depends on what it is being used for. Many residential apartment leases are short-term, lasting only one year or from month to month. On the other hand, ground leases can last 55, 75, or even more years. For an FHA leasehold-mortgage to work, the minimum length of the lease must be longer than the fixed rental term of the loan. The assignment of lease, not a deed, is used to move these long-term leases. The person who is giving away the leasehold estate and the person who is getting it must both sign the assignment of lease. This is because the assignee takes over the responsibilities of the assignor under the lease.

Under common law, the lessee’s improvements to the leased property would belong to the landlord when the leasehold estate ended. In the reversion clause of many ground leases, however, the lessee is given the right to take down all improvements at the end of the lease term. This rule makes it easier to set up financing and talk about extending or renewing a lease.

In places where leaseholds are common, like Hawaii and Maryland, it is common for leasehold estates to be subject to a recorded declaration of restrictions. This is usually done by referring to the book and page number of the recorded declaration in the lease. A buyer should look at the lease and all related documents well before the closing date so that they know exactly what they are buying.

A lease is a legal agreement between a renter and the owner of an interest or estate.

Leasehold estate

A lessee’s or tenant’s interest or rights in leased property, including possessory interests that are a transitory conveyance of the rights of exclusion, use, and enjoyment but not the right to dispose. These privileges are granted to the renter in exchange for payment of rent.

A tenant’s estate in a rented property.

Tenant, in consideration of rent, shall have the right to occupy and use the Premises during the Term.

Leasehold improvements

The changes that the person who rents the property makes to it. These changes, which are usually tax-deductible by the lessee, can be written off over the cost recovery period.

Leasehold interest

Tenant’s interest in a rented property.

Renter’s Benefits from Signing a Lease. The difference between market rent and the contract rent is discounted to determine the value of the leasehold interest.

Leasehold mortgage

A loan that is put on the lessee’s share of the leased property. Leasehold mortgage financing is a type of secondary financing that is unique because the mortgage comes after the fee owner. Life insurance companies, major mutual savings banks, and major commercial banks are the main lenders for leasehold financing.

When a big project is being built, the fee owner may rent the land to a developer and put the fee behind the leasehold mortgage. The subordination might only apply to certain types or terms of loans, like a construction loan but not a refinancing loan, or it might not happen until the proposed improvement is completely built. Most of the time, the lender tries to get the fee owner to mortgage both the fee and the leasehold mortgage.

The tenant’s interest in the property is encumbered by a lien.


A written agreement for the rental of a property.

A method of obtaining the right to use a property for a certain amount of time without taking legal possession of it.

Leasing agent

A person in charge of leasing office space in a building.

Ledger (for a structural floor)

Supports a wood structural floor by bolting to the face of the foundation wall with a wooden perimeter frame lumber member.

Ledger strip

Joists rest on a strip of lumber fastened to the bottom of a girder.

Leech field

A rural sewer system approach to sewage treatment and disposal.


On or toward the side that is out of the wind. This is the opposite of windward.


A will that gives money or property to someone else, such as a bequest. This person is called the “legatee.”

Legal age

The legal age at which a person can vote and no longer be considered a minor.

Legal description

A description of a piece of real estate that is accepted by the courts in the state where the property is located and can be used in documents to transfer the property. Most of the time, the description is detailed enough that an independent surveyor can find and name that exact piece of land. Oral testimony can’t be used to give a more detailed description of the property, unless it’s a case of fraud or a mistake. Most of the time, these descriptions are based on what a surveyor or civil engineer wrote down in the field. Lot, block, and subdivision, government survey, and metes and bounds are all ways to describe land.

All deeds, lease assignments, and mortgages, as well as most contracts for deeds, must have a legal description. Most of the time, street addresses, tax-bill descriptions, and general descriptions (like “the Smith farm”) aren’t good enough to use in recorded title documents because they might not last forever. Using these kinds of temporary descriptions could make it hard for someone to look up the chain of title or find the property in the far future. In general, any document that needs to be recorded should have a legal description. If the description is wrong, the document may not be indexed correctly. This means that, according to recording laws, the document may not give enough notice to a third party.

When legal names don’t match, there are some general rules to follow.

Monuments, whether natural or man-made, take precedence over routes and lengths.

Natural monuments triumph over man-made monuments.

Distances are set by the courses, and

The least reliable way to describe a parcel is by its acreage or area.

A property description that allows it to be located on government surveys or documented maps.

Legal life estate

A life estate formed through legal action.

Legal name

The first name plus the last name, also called the family name. Under common law, a middle name or initial is not important to the validity of a conveyance document if it is added, left out, or misspelt.

When applying for a state exam or license to be a real estate salesperson or broker, most people have to give their full legal name. It is not a good idea to use only initials, especially for common last names like Smith, Lee, Brown, and the like. This policy is meant to stop applicants with similar names from being confused with each other or wrongly identified.

For formal reasons, this is the name.

Legal notice

Notice that is implied or required by law because someone has property or because a document has been recorded. When deeds are recorded, the information in them is made known to anyone who buys the property afterward. Under the law about recording, legal notice is another name for constructive notice.

Other parties must be notified using the means authorized by law.

Legal rate of interest

The rate of interest set by state law, which takes effect if there is no other agreement about the rate. For example, a state law might say that money due after a promissory note’s due date must be paid with interest of 6%. The amount of interest that is legal is called the usury limit.

Legal title

Property ownership; in the case of real estate, a legal claim supported by evidence of ownership.

Legally permissible

As part of the highest-and-best-use analysis, the property must be used in a way that is allowed by the law.


A person who inherits property through a will.

One who inherits money or property from a will.


A description of the symbols, colors, and styles used on a map or plan, generally in the form of a box adjacent to the map or plan.

Legend stock

A security certificate that has a note on it saying that it can’t be given to just anyone. Most of the time, these stocks can’t be sold until a certain time has passed or until they are registered. Securities that don’t need to be registered with the SEC under the intrastate exemption or the private offering exemption must have a note saying that they can’t be sold to just anyone.


A person or company that loans money to a borrower in exchange for a fee and expects to be repaid in the future.

Lender’s mortgage insurance (LMI)

The borrower pays insurance to safeguard the lender in the event that the borrower defaults on the loan.

As long as you agree to take out mortgage insurance, some lenders will give you up to 95% of the money you need for a loan (LMI). This is a one-time payment that is usually made at the time of the deal being done. The figure is based on things like the amount of money you owe, the value of your home, and the exact LVR (i.e. the figure between 80 percent & 95 percent ). This payment lets the lender get back the unpaid principal if the borrowers don’t pay, and the mortgage insurance company takes over the debt.

Lender’s yield

The implicit discount rate, or rate of return, on a loan, given all cash inflows and outflows to the lender.

Less-than-freehold estate

The property that someone who rents or leases property owns. In this group are an estate for years, an estate at will, an estate at sufferance, and a periodic tenancy.


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The person who has a leasehold interest in a property. A renter is a general term for a person who rents out their home.

The person who rents out a property.

The person who rents or leases a piece of property. In most residential leases, this person is called a tenant.

The occupant of a leased property.

Tenant - Individual who has rented or leased property. Someone who rents a space from a landlord.

A person who has the right to use or occupy a property under the terms of a lease agreement.


A property owner who distributes some rights to a renter for a short time. A landlord is a general term for a person who owns property.

the person or entity who grants a lease

In a lease agreement, the landlord.

The one who rents or leases out property to another. In the case of residential leasing, such a person is commonly referred to as a landlord.

The person who grants a lessee a lease.

One who lets out their property to tenants. Similar to a landlord in that one is responsible for renting out property.

The owner of the property who rents it out.


To be rented out.

Letin brace

In this case, nominal boards were inserted into notched studs diagonally.

Letter of credit

A letter of credit is an agreement or promise made by a bank (the issuer) to a customer (the account party) that the bank will honor draughts or other demands for payment from third parties (the beneficiaries) as long as the conditions in the letter of credit are met. With its letter of credit, the bank promises to pay the seller’s draught, which means that the bank’s credit will be used instead of the buyer’s. This is usually done by sending a letter from a bank in one part of the country to a bank or business in another part of the country, naming the person, vouching for the customer, and stating how much money should be loaned.

A letter of credit is only given to customers with the best credit ratings and comes with a small fee every year. Letters of credit are not like direct loans in that the bank does not have to report letter of credit obligations as liabilities on its financial statements. The bank also does not have to keep a certain amount of cash on hand to back up its letter of credit obligations.

Letters of credit are covered in depth in Article 5 of the Uniform Commercial Code.


Continued at…
:point_right: Real Estate Glossary L [Part 3]