LEASE
lease,n.1. A contract by which a rightful possessor of real property conveys the right to use and occupy the property in exchange for consideration, usu. rent. • The lease term can be for life, for a fixed period, or for a period terminable at will. [Cases: Landlord and Tenant 20. C.J.S. Landlord and Tenant §§ 27, 202(1, 2, 3, 4, 5, 9, 10), 203.] 2. Such a conveyance plus all covenants attached to it. 3. The written instrument memorializing such a conveyance and its covenants. — Also termed lease agreement; lease contract. 4. The piece of real property so conveyed. 5. A contract by which the rightful possessor of personal property conveys the right to use that property in exchange for consideration. [Cases: Bailment 1. C.J.S. Bailments §§ 2–13, 15, 19, 22–24, 31.]
assignable lease.A lease that the lessee can transfer to a successor. See SUBLEASE. [Cases:
Landlord and Tenant 74. C.J.S. Landlord and Tenant §§ 30, 53.]
building lease.A long-term lease of land that includes a covenant to erect or alter a building
or other improvement. Cf. ground lease.
capital lease.See LEASE-PURCHASE AGREEMENT.
commercial lease.A lease for business purposes. [Cases: Landlord and Tenant 20. C.J.S.
Landlord and Tenant §§ 27, 202(1, 2, 3, 4, 5, 9, 10), 203.]
community lease.A lease in which a number of lessors owning interests in separate tracts
execute a lease in favor of a single lessee.
concurrent lease.A lease that begins before a previous lease ends, entitling the new lessee to be paid all rents that accrue on the previous lease after the new lease begins, and to remedies against the holding tenant.
“A landlord who has granted a lease may nevertheless grant another lease of the same land for all or some of the period of the first lease. The second lease does not deprive the lessee under the first lease of the right to possession of the property, but is, in reality, a lease of the reversion. Because the two leases operate concurrently during at least some part of their respective durations, they are known as ‘concurrent leases.’ ” Peter Butt, Land Law 233 (2d ed. 1988).
consumer lease. 1. A lease of goods by a person who is in the business of selling or leasing a product primarily for the lessee’s personal or household use. UCC § 2A-103(1)(e). [Cases: Bailment 2. C.J.S. Bailments §§ 5, 14, 16–18.] 2. A residential — rather than commercial — lease.
derivative lease.See SUBLEASE.
durable lease.A lease that reserves a rent payable annually, usu. with a right of reentry for
nonpayment.
edge lease.Oil & gas. A lease located on the edge of a field.
finance lease.A fixed-term lease used by a business to finance capital equipment. • The lessor’s service is usu. limited to financing the asset, and the lessee pays maintenance costs and taxes and has the option of purchasing the asset at lease-end for a nominal price. Finance leases strongly resemble security agreements and are written almost exclusively by financial institutions as a way to help a commercial customer obtain an expensive capital item that the customer might not otherwise be able to afford. UCC § 2A-103(1)(g). — Also termed full payout lease; tripartite lease. [Cases: Bailment 2. C.J.S. Bailments §§ 5, 14, 16–18.]
“By carving out the ‘finance lease’ for special treatment, the drafters of Article 2A have recognized a distinct species of lease that is written almost exclusively by financial institutions and — although treated as a true lease — does not normally carry with it certain of the responsibilities that the typical lessor bears under Article 2A.” 2 James J. White & Robert S. Summers, Uniform Commercial Code § 13-3, at 4 (4th ed. 1995).
“A finance lease is the product of a three-party transaction. The supplier manufactures or supplies the goods pursuant to the lessee’s specification, perhaps even pursuant to a purchase order, sales agreement, or lease agreement between the supplier and the lessee. After the prospective finance lease is negotiated, a purchase order, sales agreement, or lease agreement is entered into by the lessor (as buyer or prime lessee) or an existing order, agreement, or lease is assigned by the lessee to the lessor, and the lessor and the lessee then enter into a lease or sublease of the goods. Due to the limited function usually performed by the lessor, the lessee looks almost entirely to the supplier for representations, covenants, and warranties. If a manufacturer’s warranty carries through, the lessee may also look to that. Yet, this definition does not restrict the lessor’s function solely to the supply of funds; if the lessor undertakes or performs other functions, express warranties, covenants, and the common law will protect the lessee.” UCC § 2A-102 cmt. at 14–15 (Proposed Final Draft, 30 Apr. 1999).
full-service lease.A lease in which the lessor agrees to pay all maintenance expenses, insurance premiums, and property taxes. [Cases: Landlord and Tenant 148(1), 156. C.J.S.
Landlord and Tenant §§ 374–376, 378–386.]
graduated lease.A lease in which rent varies depending on future contingencies, such as
operating expenses or gross income.
gross lease.A lease in which the lessee pays a flat amount for rent, out of which the lessor
pays all the expenses (such as fuel, water, and electricity).
ground lease.A long-term (usu. 99-year) lease of land only. • Such a lease typically involves commercial property, and any improvements built by the lessee usu. revert to the lessor. — Also termed ground-rent lease; land lease. [Cases: Estates in Property 13. C.J.S. Estates §§ 159–192.]
headlease. See HEADLEASE.
index lease.A lease that provides for increases in rent according to the increases in the
consumer price index. [Cases: Landlord and Tenant 200.7.] land lease.See ground lease.
leveraged lease.A lease that is collateral for the loan through which the lessor acquired the leased asset, and that provides the lender’s only recourse for nonpayment of the debt; a lease in which a creditor provides nonrecourse financing to the lessor (who has substantial leverage in the property) and in which the lessor’s net investment in the lease, apart from nonrecourse financing, declines during the early years and increases in later years. — Also termed third-party equity lease; tax lease. master lease.A lease that controls later leases or subleases, particularly of parts of the leased
property.
mineral lease.A lease in which the lessee has the right to explore for and extract oil, gas, or other minerals. • The rent is usu. based on the amount or value of the minerals extracted. [Cases:
Mines and Minerals 56–81. C.J.S. Mines and Minerals §§ 194–325, 442.]
mining lease.A lease of a mine or mining claim, in which the lessee has the right to work the mine or claim, usu. with conditions on the amount and type of work to be done. • The lessor is compensated in the form of either fixed rent or royalties based on the amount of ore mined. [Cases:
Mines and Minerals 62–71. C.J.S. Mines and Minerals §§ 200–232.]
month-to-month lease.A tenancy with no written contract. • Rent is paid monthly, and usu. one month’s notice by the landlord or tenant is required to terminate the tenancy. See periodic tenancy under TENANCY. [Cases: Landlord and Tenant 113. C.J.S. Landlord and Tenant §§
130(1, 2), 131, 145, 151–155.]
net lease.A lease in which the lessee pays rent plus property expenses (such as taxes and
insurance).
net-net-net lease.A lease in which the lessee pays all the expenses, including mortgage interest and amortization, leaving the lessor with an amount free of all claims. — Also termed triple-net lease.
oil-and-gas lease.A lease granting the right to extract oil and gas from a specified piece of land. • Although called a “lease,” this interest is typically considered a determinable fee in the minerals rather than a grant of possession for a term of years. [Cases: Mines and Minerals 73–81.
C.J.S. Mines and Minerals §§ 210, 233, 238–283, 285–325, 442.]
operating lease.A lease of property (esp. equipment) for a term that is shorter than the property’s useful life. • Under an operating lease, the lessor is typically responsible for paying taxes and other expenses on the property. Cf. LEASE-PURCHASE AGREEMENT.
“or” lease.Oil & gas. A mineral lease with a drilling-delay rental clause structured so that the lessee promises to start drilling operations or to pay delay rentals from time to time during the primary term. • If the lessee fails to do one or the other, the lease does not automatically terminate, but the lessee is liable for the delay-rental amount.
parol lease (p<<schwa>>-rohlorpar-<<schwa>>l). A lease based on an oral agreement; an
unwritten lease. [Cases: Landlord and Tenant 23. C.J.S. Landlord and Tenant § 211(2).]
percentage lease.A lease in which the rent is based on a percentage of gross (or net) sales or
profits, typically with a set minimum rent. [Cases: Landlord and Tenant 200.2.]
perpetual lease. 1. An ongoing lease not limited in duration. 2. A grant of lands in fee with a reservation of a rent in fee; a fee farm. [Cases: Landlord and Tenant 87. C.J.S. Landlord and
Tenant § 61.]
perpetually renewable lease.Hist. A lease that a tenant may renew for another period as often as it expires, usu. by making a payment upon exercising the right. • In 1922, this type of lease was effectively abolished in England by the Law of Property Act, which provided for the conversion of existing and future perpetually renewable leases to term-of-years leases, and set the maximum term at 2,000 years.
proprietary lease.A lease between a cooperative apartment association and a tenant. reversionary lease.A lease that will take effect when a prior lease terminates.
sandwich lease.A lease in which the lessee subleases the property to a third party, esp. for more rent than under the original lease. [Cases: Landlord and Tenant 74. C.J.S. Landlord and
Tenant §§ 30, 53.] short lease.A lease of brief duration, often less than six months.
sublease. See SUBLEASE.
synthetic lease.A method for financing the purchase of real estate, whereby the lender creates a special-purpose entity that buys the property and then leases it to the ultimate user (usu. a corporation). • A synthetic lease is treated as a loan for tax purposes and as an operating lease for accounting purposes, so that the “lessee” can deduct the property’s depreciation and the loan’s interest yet keep both the asset and the debt off its balance sheet.
tax lease. 1. The instrument or estate given to the purchaser of land at a tax sale when the law does not permit the sale of an estate in fee for nonpayment of taxes but instead directs the sale of an estate for years. 2. See leveraged lease.
third-party equity lease.See leveraged lease.
timber lease.A real-property lease that contemplates that the lessee will cut timber on the
leased premises. [Cases: Logs and Logging 3. C.J.S. Logs and Logging §§ 9, 20.]
top lease.Oil & gas. A lease granted on property already subject to an oil-and-gas lease. • Generally, any rights granted by a top lease are valid only if the existing lease ends. [Cases: Mines and Minerals 56. C.J.S. Mines and Minerals §§ 194–195, 233.]
tripartite lease.See finance lease. triple-net lease.See net-net-net lease.
“unless” lease.Oil & gas. An oil-and-gas lease with a drilling-delay rental clause structured as a special limitation to the primary term. • Unless delay rentals are paid or drilling operations are started from time to time as specified, an “unless” lease automatically terminates, and the lessee has no liability for its failure to perform. [Cases: Mines and Minerals 78.1(3, 9).C.J.S. Mines and Minerals §§ 260–263, 269–270.]
lease,vb.1. To grant the possession and use of (land, buildings, rooms, movable property, etc.) to another in return for rent or other consideration <the city leased the stadium to the football team>. [Cases: Bailment 1; Landlord and Tenant 20. C.J.S. Bailments §§ 2–13, 15, 19, 22–24, 31; Landlord and Tenant§§ 27, 202(1, 2, 3, 4, 5, 9, 10), 203.] 2. To take a lease of; to hold by a lease <Carol leased the townhouse from her uncle>.
[Blacks Law 8th]