The Contract of Sales and Leases

Exam rule

A lease gives a lessee, or tenant, the right to possess property owned by the lessor, or landlord. The tenant holds a leasehold estate. An express lease states its terms in words. An implied lease can arise from conduct, subject to any writing rule. An estate for years has fixed start and end dates. A periodic estate renews for equal periods until proper notice ends it. An estate at will has no fixed end and continues while the parties consent. A tenancy at sufferance arises when a person who entered lawfully stays after the right to possess ends, without a new agreement. The person is a holdover tenant. A lease longer than one year normally needs a subscribed writing under the Statute of Frauds.

Exam rule

Contract law governs lease formation, meaning and enforcement. A sound lease identifies competent parties and the demised premises. Its demising clause grants possession. It states the term, annual rent, payment date, use, security, repairs, improvements, default, renewal and termination rules. Under the syllabus default, rent is due in arrears unless the lease sets another time. The plain language rule in GOL Section 5-702 requires a covered residential lease to use clear words and useful section titles. A lease need not be notarized unless it will be recorded. A commercial option to renew comes from the lease, not a general statutory right. For no other purpose is a narrow use clause. Any lawful purpose is broader, but zoning and other law still control. A gross lease includes stated costs in rent. A net lease shifts named costs. A triple-net lease usually shifts taxes, insurance and maintenance. Graduated rent follows a schedule, index rent follows an index and percentage rent follows sales. A ground lease, also called a landlease, covers land. A proprietary lease gives a cooperative shareholder the right to occupy a unit.

Exam rule

An assignment transfers the tenant's entire remaining leasehold. A sublease transfers less, so the tenant keeps a reversion. Neither transfer releases the original tenant by itself. A novation does because the required parties agree to a substitution and release. Under RPL Section 226-b, a residential assignment needs written owner consent. An owner who unreasonably refuses may have to release the tenant after the required request and 30 days' notice. In a building with four or more residential units, a tenant has a qualified right to sublet with advance written consent that cannot be unreasonably withheld. The prime tenant remains liable. RPL Section 235-f protects lawful apartment sharing and requires the unit to remain a primary residence. Lease terms, consent rules and law control tenant improvements and removal.

Exam rule

Every home rental includes the warranty of habitability. A tenant cannot waive it. The lease also includes quiet enjoyment. Actual eviction means physical exclusion. Constructive eviction means serious wrongful interference, followed by the tenant leaving the affected space. Residential security is trust money. GOL Sections 7-107 and 7-108 cap most covered deposits and advances at one month's rent. They give inspection rights. They also require a list of deductions and return of the balance within 14 days after the tenant leaves. Rent-stabilized tenants usually choose a one-year or two-year renewal. They also get rent, service and eviction rights. High-rent and high-income deregulation ended in 2019. Good Cause is required in New York City and optional elsewhere, with exemptions. RPL Section 226-c requires 30, 60 or 90 days' notice before nonrenewal or a rent increase of at least 5 percent. Occupancy and lease length set the time.

Exam rule

An express contract states its terms in words. An implied contract is inferred from conduct. A bilateral contract exchanges promises. A unilateral offer asks for an act as acceptance. An executed contract is fully performed. An executory contract still has duties left. A valid contract meets the legal requirements. A void agreement has no legal effect. A voidable contract works unless a protected party avoids it. An unenforceable agreement may have the needed bargain but cannot be enforced because a defense applies. UCC Article 2 governs transactions in goods, not the land itself. Movable personal property included in a real estate deal may require separate attention.

Exam rule

A valid contract needs competent parties, mutual agreement, a lawful objective, consideration and any writing the law requires. An offer must show definite terms and intent to contract. Acceptance must match the offer, be made while it is open and be communicated as required. A changed term is a counteroffer and ordinarily rejects the original offer. Consideration is bargained-for value. It can be money, a promise, an act or lawful forbearance. Earnest money can support an offer, but it cannot replace mutual assent or definite terms. A competent principal may give an agent authority through a valid power of attorney. An act within that authority can bind the principal.

Exam rule

GOL Section 5-703 covers a contract to sell New York real property and a lease longer than one year. The contract or a sufficient memorandum must express the consideration and be subscribed by the party being charged, or by that party's agent authorized in writing. The party to be charged is the person against whom enforcement is sought. The statute preserves a court's equitable power in a proper part-performance case. New York law generally gives an electronic signature the same effect as a handwritten one unless another law says otherwise. Use remains voluntary. The signature rule is not a notarization rule. A lease is ordinarily notarized only when acknowledgment is needed for recording.

Exam rule

Performance completes the promised duties. A material breach may support damages or a contract remedy. Specific performance can order a land conveyance when the claimant is ready, willing and able to close. Rescission unwinds the deal. Reformation corrects a writing that fails to state the proven agreement because of mutual mistake or another sufficient ground. Liquidated damages are enforceable when the amount reasonably fits a hard-to-estimate loss. A grossly excessive sum is a penalty. Assignment transfers rights but does not release duties. Novation does. A time-is-of-the-essence clause makes timely performance material. New York contract actions usually have a six-year limitations period, subject to accrual rules and exceptions. Caveat emptor means buyer beware, but it does not excuse fraud, active concealment, a disclosure law or a contract promise.

Exam rule

A sales contract should state the date and identify the parties and the land with a legal description. It lists included or excluded personal property, the price, consideration, down payment and payment terms. It addresses existing mortgages taken subject to or assumed, the deed type, closing time and place, possession, broker provisions and the mortgage contingency. It allocates taxes, rent and other apportionments. It covers title, liens, the Lien Law, property condition and casualty risk. It states the effect of default, liquidated damages and any limit on seller liability. A merger clause treats the writing as the final agreement. Duties normally end at closing unless a survival clause keeps them alive. Every clause should be read with its riders.

Exam rule

A purchase offer states the buyer's proposed terms. A buyer's broker may complete a proper offer form with authorized facts. Earnest money may accompany it, but money alone does not create a contract. A binder or other preliminary writing can bind if it contains the material terms, is properly subscribed and shows present intent to be bound. An installment land contract lets the buyer pay over time while the seller usually keeps legal title until the stated duties are complete. It can ease the buyer's cash flow and may spread a seller's taxable gain, but tax advice belongs to a tax professional. An option gives its holder the power to buy on fixed terms during a stated period. A right of first refusal waits until the owner chooses to sell. Contracts affecting a broker include employment contracts, listing or buyer-representation agreements, sales contracts and leases. The employment agreement, not the sales contract, creates the broker's right to compensation.

Exam rule

New York practice varies by region. Downstate, the seller's attorney commonly prepares the first formal contract after an accepted offer. The buyer's attorney reviews and negotiates it. Upstate, a buyer may sign a broker-completed form first, often with an attorney-approval clause. The buyer commonly signs first because the paper functions as an offer. The seller reviews every fact and rider before signing. Delivery can occur at a sit-down meeting, by mail or by another agreed method. The signed form, delivery rule and attorney clause decide when rights vest. A broker may enter authorized business facts on a proper form but may not draft custom legal language or give legal advice. The parties' attorneys handle riders, title, remedies and legal consequences. Agency disclosure under RPL Section 443 is a separate form with its own timing. It is not the sales contract. Federal lead rules cover most pre-1978 housing, not housing built after 1978.

Exam rule

Contract preparation starts with reliable facts. Check legal names, the prior deed, title policy, survey, certificate of occupancy, tax bills and filed-map or tax-map data. Reconcile the legal description, whether it uses metes and bounds, a filed-map lot or another accepted method. A street address alone may not identify the full parcel. Match the mortgage contingency to the planned loan. Traditional, FHA, VA, purchase-money and assumable financing need different terms. State the amount, application duty, appraisal terms, commitment date and notice method. New York custom does not replace the signed contract on the deposit amount. The contract may place the down payment with the listing broker, the seller's attorney or another named escrow agent. Some agreements use no escrow holder, so the signed instructions control. At signing, deliver the down payment to the holder the contract names. GBL Section 778-a requires a home-purchase escrow clause to name the agent and bank. The agent must segregate and safeguard the money. An attorney escrow can add possible Lawyers Fund protection for an eligible loss caused by lawyer dishonesty, but the Fund is not transaction insurance.