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. [ases! Landlord and "enant #$. .%.S.
Landlord and "enant && #', #$#(1, #, ), *, +, ,, 1$-, #$).. #. Such a conveyance plus all covenants
attached to it. ). The written instrument memorializing such a conveyance and its covenants.
Also termed lease agreement; lease contract. *. "he piece of real property so conveyed. +. A
contract by which the rightful possessor of personal property conveys the right to use that property
in exchange for consideration. [ases! /ail0ent 1. .%.S. /ail0ents && #11), 1+, 1,, ##1#*, )1..
LEASE23L4
leasehold,n. A tenant5s possessory estate in land or pre0ises, the four types being the tenancy
for years, the periodic tenancy, the tenancy at will, and the tenancy at sufferance. Although a
leasehold has so0e of the characteristics of real property, it has historically been classified as a
chattel real. 6 Also ter0ed leasehold estate7 leasehold interest. See "E8A89. f. :;EE23L4.
[ases! Landlord and "enant '$, 11), 11'. .%.S. Landlord and "enant && #<, 1)$(1, #-, 1)1, 1*+,
1+111+<, #$#(), ,-..
assignable lease. A lease that the lessee can transfer to a successor. See S=/LEASE. [ases!
Landlord and "enant '*. .%.S. Landlord and "enant && )$, +)..
building lease. A long>ter0 lease of land that includes a covenant to erect or alter a building
or other i0prove0ent. f. ground lease.
capital lease. See LEASE>?=;2ASE A@;EEAE8".
co00ercial lease. A lease for business purposes. [ases! Landlord and "enant #$. .%.S.
Landlord and "enant && #', #$#(1, #, ), *, +, ,, 1$-, #$)..
co00unity lease. A lease in which a nu0ber 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 re0edies
against the holding tenant.
BA landlord who has granted a lease 0ay nevertheless grant another lease of the sa0e land
for all or so0e of the period of the first lease. "he 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.
/ecause the two leases operate concurrently during at least so0e part of their respective durations,
they are Cnown as Dconcurrent leases.E F ?eter /utt, Land Law #)) (#d ed. 1,GG-.
consu0er lease. 1. A lease of goods by a person who is in the business of selling or leasing a
product pri0arily for the lessee5s personal or household use. = & #A>1$)(1-(e-. [ases!
/ail0ent #. .%.S. /ail0ents && +, 1*, 1<11G.. #. A residential 6 rather than co00ercial 6
lease.
derivative lease. See S=/LEASE.
durable lease. A lease that reserves a rent payable annually, usu. with a right of reentry for
nonpay0ent.
edge lease. 3il H gas. A lease located on the edge of a field.
finance lease. A fixed>ter0 lease used by a business to finance capital eIuip0ent. "he
lessor5s service is usu. li0ited to financing the asset, and the lessee pays 0aintenance costs and
taxes and has the option of purchasing the asset at lease>end for a no0inal price. :inance leases
strongly rese0ble security agree0ents and are written al0ost exclusively by financial institutions
as a way to help a co00ercial custo0er obtain an expensive capital ite0 that the custo0er 0ight
not otherwise be able to afford. = & #A>1$)(1-(g-. 6 Also ter0ed full payout lease7 tripartite
lease. [ases! /ail0ent #. .%.S. /ail0ents && +, 1*, 1<11G..
B/y carving out the Dfinance leaseE for special treat0ent, the drafters of Article #A have
recogniJed a distinct species of lease that is written al0ost exclusively by financial institutions
and 6 although treated as a true lease 6 does not nor0ally carry with it certain of the
responsibilities that the typical lessor bears under Article #A.F # %a0es %. Khite H ;obert S.
Su00ers, =nifor0 o00ercial ode & 1)>), at * (*th ed. 1,,+-.
BA finance lease is the product of a three>party transaction. "he supplier 0anufactures or
supplies the goods pursuant to the lessee5s specification, perhaps even pursuant to a purchase order,
sales agree0ent, or lease agree0ent between the supplier and the lessee. After the prospective
finance lease is negotiated, a purchase order, sales agree0ent, or lease agree0ent is entered into
by the lessor (as buyer or pri0e lessee- or an existing order, agree0ent, 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.
4ue to the li0ited function usually perfor0ed by the lessor, the lessee looCs al0ost entirely to the
supplier for representations, covenants, and warranties. Lf a 0anufacturer5s warranty carries
through, the lessee 0ay also looC to that. 9et, this definition does not restrict the lessor5s function
solely to the supply of funds7 if the lessor undertaCes or perfor0s other functions, express
warranties, covenants, and the co00on law will protect the lessee.F = & #A>1$# c0t. at 1*11+
(?roposed :inal 4raft, )$ Apr. 1,,,-.
full>service lease. A lease in which the lessor agrees to pay all 0aintenance expenses,
insurance pre0iu0s, and property taxes. [ases! Landlord and "enant 1*G(1-, 1+<. .%.S.
Landlord and "enant && )'*1)'<, )'G1)G<..
graduated lease. A lease in which rent varies depending on future contingencies, such as
operating expenses or gross inco0e.
gross lease. A lease in which the lessee pays a flat a0ount for rent, out of which the lessor
pays all the expenses (such as fuel, water, and electricity-.
ground lease. A long>ter0 (usu. ,,>year- lease of land only. Such a lease typically involves
co00ercial property, and any i0prove0ents built by the lessee usu. revert to the lessor. 6 Also
ter0ed ground>rent lease7 land lease. [ases! Estates in ?roperty 1). .%.S. Estates && 1+,11,#..
headlease. See 2EA4LEASE.
index lease. A lease that provides for increases in rent according to the increases in the
consu0er price index. [ases! Landlord and "enant #$$.'..
land lease. See ground lease.
leveraged lease. A lease that is collateral for the loan through which the lessor acIuired the
leased asset, and that provides the lender5s only recourse for nonpay0ent of the debt7 a lease in
which a creditor provides nonrecourse financing to the lessor (who has substantial leverage in the
property- and in which the lessor5s net invest0ent in the lease, apart fro0 nonrecourse financing,
declines during the early years and increases in later years. 6 Also ter0ed third>party eIuity lease7
tax lease.
0aster lease. A lease that controls later leases or subleases, particularly of parts of the leased
property.
0ineral lease. A lease in which the lessee has the right to explore for and extract oil, gas, or
other 0inerals. "he rent is usu. based on the a0ount or value of the 0inerals extracted. [ases!
Aines and Ainerals +<1G1. .%.S. Aines and Ainerals && 1,*1)#+, **#..
0ining lease. A lease of a 0ine or 0ining clai0, in which the lessee has the right to worC the
0ine or clai0, usu. with conditions on the a0ount and type of worC to be done. "he lessor is
co0pensated in the for0 of either fixed rent or royalties based on the a0ount of ore 0ined. [ases!
Aines and Ainerals <#1'1. .%.S. Aines and Ainerals && #$$1#)#..
0onth>to>0onth lease. A tenancy with no written contract. ;ent is paid 0onthly, and usu.
one 0onth5s notice by the landlord or tenant is reIuired to ter0inate the tenancy. See periodic
tenancy under "E8A89. [ases! Landlord and "enant 11). .%.S. Landlord and "enant &&
1)$(1, #-, 1)1, 1*+, 1+111++..
net lease. A lease in which the lessee pays rent plus property expenses (such as taxes and
insurance-.
net>net>net lease. A lease in which the lessee pays all the expenses, including 0ortgage
interest and a0ortiJation, leaving the lessor with an a0ount free of all clai0s. 6 Also ter0ed
triple>net lease.
oil-and-gas lease. A lease granting the right to extract oil and gas fro0 a specified piece of land.
Although called a Blease,F this interest is typically considered a determinable fee in the
minerals rather than a grant of possession for a term of years. [ases! Aines and Ainerals ')1G1.
.%.S. Aines and Ainerals && #1$, #)), #)G1#G), #G+1)#+, **#..
operating lease. A lease of property (esp. eIuip0ent- for a ter0 that is shorter than the
property5s useful life. =nder an operating lease, the lessor is typically responsible for paying
taxes and other expenses on the property. f. LEASE>?=;2ASE A@;EEAE8".
BorF lease. 3il H gas. A 0ineral lease with a drilling>delay rental clause structured so that the
lessee pro0ises to start drilling operations or to pay delay rentals fro0 ti0e to ti0e during the
pri0ary ter0. Lf the lessee fails to do one or the other, the lease does not auto0atically ter0inate,
but the lessee is liable for the delay>rental a0ount.
parol lease (pMMschwaNN>rohlorpar>MMschwaNNl-. A lease based on an oral agreement; an
unwritten lease. [ases! Landlord and "enant #). .%.S. Landlord and "enant & #11(#-..
percentage lease. A lease in which the rent is based on a percentage of gross (or net- sales or
profits, typically with a set 0ini0u0 rent. [ases! Landlord and "enant #$$.#..
perpetual lease. 1. An ongoing lease not li0ited in duration. #. A grant of lands in fee with a
reservation of a rent in fee7 a fee far0. [ases! Landlord and "enant G'. .%.S. Landlord and
"enant & <1..
perpetually renewable lease.2ist. A lease that a tenant 0ay renew for another period as often
as it expires, usu. by 0aCing a pay0ent upon exercising the right. Ln 1,##, this type of lease was
effectively abolished in England by the Law of ?roperty Act, which provided for the conversion of
existing and future perpetually renewable leases to ter0>of>years leases, and set the 0axi0u0
ter0 at #,$$$ years.
proprietary lease. A lease between a cooperative apart0ent association and a tenant.
reversionary lease. A lease that will tae effect when a prior lease terminates.
sandwich lease. A lease in which the lessee subleases the property to a third party, esp. for
0ore rent than under the original lease. [ases! Landlord and "enant '*. .%.S. Landlord and
"enant && )$, +)..
short lease.A lease of brief duration, often less than six 0onths.
sublease. See S=/LEASE.
synthetic lease.A 0ethod for financing the purchase of real estate, whereby the lender creates
a special>purpose entity that buys the property and then leases it to the ulti0ate user (usu. a
corporation-. A synthetic lease is treated as a loan for tax purposes and as an operating lease for
accounting purposes, so that the BlesseeF can deduct the property5s depreciation and the loan5s
interest yet Ceep both the asset and the debt off its balance sheet.
tax lease. 1. "he instru0ent or estate given to the purchaser of land at a tax sale when the law
does not per0it the sale of an estate in fee for nonpay0ent of taxes but instead directs the sale of an
estate for years. #. See leveraged lease.
third>party eIuity lease. See leveraged lease.
ti0ber lease. A real>property lease that conte0plates that the lessee will cut ti0ber on the
leased pre0ises. [ases! Logs and Logging ). .%.S. Logs and Logging && ,, #$..
top lease. !il " gas. A lease granted on property already subOect to an oil>and>gas lease.
@enerally, any rights granted by a top lease are valid only if the existing lease ends. [ases! Aines
and Ainerals +<. .%.S. Aines and Ainerals && 1,*11,+, #))..
tripartite lease.See finance lease.
triple>net lease.See net>net>net lease.
BunlessF lease. 3il H gas. An oil>and>gas lease with a drilling>delay rental clause structured as
a special li0itation to the pri0ary ter0. =nless delay rentals are paid or drilling operations are
started fro0 ti0e to ti0e as specified, an BunlessF lease auto0atically ter0inates, and the lessee
has no liability for its failure to perfor0. [ases! Aines and Ainerals 'G.1(), ,-..%.S. Aines
and Ainerals && #<$1#<), #<,1#'$..
lease,vb.1. "o grant the possession and use of (land, buildings, roo0s, 0ovable property, etc.-
to another in return for rent or other consideration Mthe city leased the stadiu0 to the football
tea0N. [ases! /ail0ent 17 Landlord and "enant #$. .%.S. /ail0ents && #11), 1+, 1,, ##1#*,
)17 Landlord and "enant&& #', #$#(1, #, ), *, +, ,, 1$-, #$).. #. "o taCe a lease of7 to hold by a
lease Marol leased the townhouse fro0 her uncleN.
LEASE A@;EEAE8"
lease agree0ent.See LEASE()-.
LEASE A84 ;ELEASE
lease and release.2ist. A 0ethod of transferring seisin without livery, whereby the owner and
the transferee would enter into a lease for a ter0 of years, to taCe effect only when the transferee
entered the property, whereupon the owner would release all interest in the property to the
transferee by written instru0ent. 3nce the transferee owned both the ter0 and the freehold
interest, the two interests would 0erge to for0 one estate in fee si0ple. "his lease>and>release
procedure was fully acceptable to the courts, on the theory that livery of seisin to one already
occupying the land was unnecessary.
LEASE/AP
leasebacC,n. "he sale of property on the understanding, or with the express option, that the
seller 0ay lease the property fro0 the buyer i00ediately upon the sale. 6 Also ter0ed sale and
leasebacC. [ases! Landlord and "enant #$. .%.S. Landlord and "enant && #', #$#(1, #, ), *, +,
,, 1$-, #$)..
LEASE 38";A"
lease contract.See LEASE()-.
LEASE :3; LL:E
lease for life.2ist. A lease of land for the duration of a specified nu0ber of lives instead of for
a specified ter0 of years. =nliCe a tenant for a ter0 of years, a lessee for life could recover the
land if dispossessed.
B"he rent payable was usually fairly s0all, but a fine was paid when the lease was granted7 a
further fine was payable when, on the ter0ination of the lives, the tenant exercised the right the
lease gave hi0 to replace the0 and so extend the lease. Lf the lessor was a corporation such as a
0onastery or college, the fines were treated as inco0e by the then 0e0bers of the corporation, to
the disadvantage of their successors. Leases for life finally lost their popularity when legislation in
the first half of the nineteenth century co0pelled corporations to add such fines to their capital.F
;obert E. Aegarry H A.?. "ho0pson, A Aanual of the Law of ;eal ?roperty )$< (<th ed. 1,,)-.
LEASE :3; 9EA;S
lease for years. See tenancy for a ter0 under "E8A89.
LEASE23L4
leasehold,n. A tenant5s possessory estate in land or pre0ises, the four types being the tenancy
for years, the periodic tenancy, the tenancy at will, and the tenancy at sufferance. Although a
leasehold has so0e of the characteristics of real property, it has historically been classified as a
chattel real. 6 Also ter0ed leasehold estate7 leasehold interest. See "E8A89. f. :;EE23L4.
[ases! Landlord and "enant '$, 11), 11'. .%.S. Landlord and "enant && #<, 1)$(1, #-, 1)1, 1*+,
1+111+<, #$#(), ,-..
LEASE23L4E; ;39AL"9
leaseholder royalty.See landowner5s royalty under ;39AL"9(#-.
LEASE23L4 LA?;3QEAE8"S
leasehold i0prove0ents./eneficial changes to leased property (such as a parCing lot or
driveway- 0ade by or for the benefit of the lessee. "he phrase is used in a conde0nation
proceeding to deter0ine the share of co0pensation to be allocated to the lessee.
LEASE23L4 L8"E;ES"
leasehold interest. 1.LEASE23L47 esp., for purposes of e0inent do0ain, the lessee5s
interest in the lease itself, 0easured by the difference between the total re0aining rent and the rent
the lessee would pay for si0ilar space for the sa0e period. [ases! E0inent 4o0ain 1*'. .%.S.
E0inent 4o0ain && 1)111)#, 1+).. #. A lessor5s or lessee5s interest under a lease contract. = &
#A>1$)(0-. ).K3;PL8@ L8"E;ES". [ases! Landlord and "enant #$. .%.S. Landlord and
"enant && #', #$#(1, #, ), *, +, ,, 1$-, #$)..
LEASE23L4 A3;"@A@E
leasehold 0ortgage.See A3;"@A@E.
LEASE23L4>A3;"@A@E /384
leasehold>0ortgage bond.See /384()-.
LEASE23L4 ;39AL"9
leasehold royalty.See landowner5s royalty under ;39AL"9(#-.
LEASE23L4 QAL=E
leasehold value."he value of a leasehold interest. "his ter0 usu. applies to a long>ter0 lease
when the rent paid under the lease is lower than current 0arCet rates. So0e states per0it the lessee
to clai0 the leasehold interest fro0 the landlord in a conde0nation proceeding, unless the lease
prohibits such a clai0. 3ther states prohibit these clai0s by statute. See LEASE23L4
L8"E;ES" 7 83>/38=S LA=SE.
LEASE L8S=;A8E
lease insurance.See L8S=;A8E.
LEASE>LE84
lease>lend. See LE84>LEASE.
LEASE>?=;2ASE A@;EEAE8"
lease>purchase agree0ent.A rent>to>own purchase plan under which the buyer taCes
possession of the goods with the first pay0ent and taCes ownership with the final pay0ent7 a lease
of property (esp. eIuip0ent- by which ownership of the property is transferred to the lessee at the
end of the lease ter0. Such a lease is usu. treated as an install0ent sale. =nder a capital lease, the
lessee is responsible for paying taxes and other expenses on the property. 6 Also ter0ed
lease>to>purchase agree0ent7 hire>purchase agree0ent7 capital lease. f. operating lease under
LEASE. [ases! /ail0ent #7 /ills and 8otes ##. .%.S. /ail0ents && +, 1*, 1<11G7 /ills and
8otes7 Letters of redit & #$..