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, and what the tenant holds is 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, while 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 is different again. It arises when a person who entered lawfully stays after the right to possess ends, without a new agreement, and that person is a holdover tenant. A lease longer than one year normally needs a subscribed writing under the Statute of Frauds. For a holdover after a term longer than one month, the landlord may seek lawful removal. If the landlord instead accepts rent for a later period, RPL Section 232-c ordinarily creates a month-to-month tenancy unless the parties agreed otherwise.

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, and 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 from a general statutory right. For no other purpose is a narrow use clause. Any lawful purpose is broader, though zoning and other law still control. A gross lease includes stated costs in rent, a net lease shifts named costs, and 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. Every residential lease must also disclose FEMA floodplain status, prior natural-flood damage the landlord knows or reasonably should know about, and the statutory renter flood-insurance notice.

Exam rule

An assignment transfers the tenant's whole 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 new party or duty and release the one replaced. Under RPL Section 226-b, a residential assignment needs the owner's written consent unless the lease grants a greater right, and if the owner refuses without a sound reason, the tenant may request release on thirty days' notice. For a covered lease in a building with four or more homes, the tenant has a qualified right to sublet. Advance written consent cannot be unreasonably withheld. The landlord may ask for reasonable extra facts within ten days of the mailed request, and the response must give consent or reasons for refusal. It is due within thirty days after the request, or after the later mailing of the extra facts reasonably sought. Missing that deadline counts as consent. After an unreasonable refusal the tenant may sublet as requested, and bad faith can support an award of costs and attorney fees. Public housing, units with legal admission criteria and cooperative proprietary leases are excluded from this section. Rent-regulated units also have separate rules. The prime tenant remains liable. RPL Section 235-f protects lawful apartment sharing, and the unit must remain a primary residence. The lease, consent rules and law govern improvements and removal.

Exam rule

Every home rental includes the warranty of habitability, and a tenant cannot waive it. The lease also includes quiet enjoyment. Actual eviction means physical exclusion, while 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, give inspection rights, and 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, and 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. A landlord must include or attach the Good Cause coverage notice in an initial or renewal lease, stating whether the unit is covered and, if exempt, why.

Exam rule

An express contract states its terms in words, while 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, and 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, and an unenforceable agreement may have the needed bargain yet 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 it 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, and 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, and seeking that remedy in court is not automatically a refusal to perform. In Princes Point, the Court of Appeals required a clear, unequivocal repudiation and reversed the earlier appellate ruling on that point. Reformation corrects a writing that fails to state the proven agreement, where the cause is 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. 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, property condition and casualty risk. If improvements are underway, the parties should address mechanics’ liens and discharge at closing. Lien Law Section 13(5) may require a deed covenant holding sale consideration in trust for improvement costs. It states the effect of default, liquidated damages and any limit on seller liability. An integration or entire-agreement clause, often called a merger clause, treats the signed writing as the final agreement rather than earlier negotiations. Merger into the deed is a different rule about what survives closing. Contract terms may merge into the deed, but clear intent to preserve a term or a collateral undertaking can prevent that result. A survival clause makes the intended post-closing duty clear. Every clause should be read with its riders. A sales contract is the final agreement when the required terms, signatures and intent are present. Earlier purchase offers and binders can also create enforceable duties if they meet those requirements. An installment land contract spreads payment over time and commonly delays delivery of the deed until the buyer completes the duties in the agreement. An option gives the holder a choice to buy on stated terms, while a right of first refusal depends on the owner deciding to sell.

Exam rule

New York contract practice varies by region. Downstate, the seller’s attorney commonly prepares the first formal contract after an accepted offer, and the buyer’s attorney reviews it. Upstate, a buyer may first sign a broker-completed form, often subject to attorney approval. The form’s terms, signatures, delivery and attorney clause determine when either party is bound. 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. Consideration can support an option. New York also has a specific rule in GOL Section 5-1109: a signed written offer that states it is irrevocable for a fixed time cannot be revoked during that time merely because no consideration was paid to keep it open. If the signed writing states no period, the statute supplies a reasonable time. A right of first refusal waits until the owner chooses to sell. A lease with an option to buy joins a leasehold with a separate right to purchase on stated terms, so the lease governs occupancy and the option governs the purchase. Contracts affecting a broker include employment contracts, listing or buyer-representation agreements, sales contracts and leases. Look to the brokerage agreement and any other binding compensation promise to determine who owes the broker and when payment is due.

Exam rule

New York practice varies by region. Downstate, the seller's attorney commonly prepares the first formal contract after an accepted offer, and 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, and the signed form, delivery rule and attorney clause decide when rights vest. A broker may enter authorized business facts on a proper form. A broker 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, and 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, because traditional, FHA, VA, purchase-money and assumable financing each 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, and some agreements use no escrow holder at all, 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, and 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. The Fund is not transaction insurance.