USA – ALABAMA Law and Practice Contributed by: Adam J. Sigman, Crystal H. Walls, Nathan Stotser, Katie Sinclair and Courtney Bradshaw, Dentons
6. Commercial Leases 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time A real property’s fee owner may grant a lease - hold estate or licence to permit others to occupy and use the owner’s real property for a limited timeframe. Leasehold estates allowing a tenant to occupy and use real estate without buying it outright are generally categorised into the fol - lowing types. • A tenancy for years is a leasehold estate “lim - ited to endure for a definite and ascertained period, fixed in advance” . See Waldrop v Siebert, 237 So 2d 493, 494 (Alabama 1970). • A periodic tenancy is one where the lease has no stated duration and periodic rent is reserved or paid. See Gulf Coast Realty Co, Inc v Prof’l Real Estate Partners, Inc, 926 So 2d 992, 1007 (Alabama 2005). If no time for termination is stated, the law construes the term to be from December 1st to December 1st (Section 35-9-3). • A tenancy at will or at sufferance is a lease “for an indefinite and uncertain term” and is sometimes called a tenancy from month to month. See Melson v Cook, 545 So 2d 796, 796 (Alabama Civil Appeal 1989). If a lease is specified as a tenancy at will, it may be terminated by either party at will by giving ten days’ notice in writing (Section 35-9-3). 6.2 Types of Commercial Leases There are no formal, legal distinctions between different types of commercial leases; how - ever, commercial leases are generally divided between “net” leases and “gross” leases. In a net lease, a landlord charges its tenant a base rent plus additional rent for pass-through items, such as common area maintenance, insurance
Corporation Governance For corporations, including REITs, governance is set forth in their articles of incorporation and their by-laws. The articles of incorporation are a filed, public document containing certain statu - torily required information, such as the name, registered office and registered address of the corporation. The by-laws govern: • how shareholders vote for the members of the board of directors; • how the board elects officers; • the duties of the officers; • the frequency of shareholder meetings; • the frequency of board of directors’ meetings; and • other routine matters. In most corporations, all day-to-day decisions are made by the officers without the approval of owners who are not officers. Certain decisions outside the normal course of business will be made by the board of directors, again without input from owners who are not part of the board. Unless an owner is a director or officer, its only governance right is to periodically vote for mem - bers of the board or in connection with certain statutorily required matters, such as merger transactions. 5.6 Annual Entity Maintenance and Accounting Compliance Maintenance and costs are variable and will depend on ownership/accounting structure. Cer - tain entities must pay an annual Business Privi - lege Tax in accordance with Sections 40-14A- 21 through -29. The rate will vary depending on taxable income and net worth. See Section 40-14A-22.
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