Property II

Leasehold Estate


Term of Years

A term of years, commonly known as a lease, is an estate for a limited period of time.

The words of limitation are usually some variation of "for 10 years."

A lease is a possessory right.

Types of leasehold estates:

  1. Tenancy for Years

    The tenancy for years is a tenancy for any fixed term. A tenancy for years expires on its own at the end of the fixed term, without the need for either party to give notice to terminate the lease.

  2. Periodic Tenancy

    The periodic tenancy is a tenancy that is measured by successive, identical periods of time. A periodic tenancy automatically renews for successive periods, unless one of the parties gives proper notice to terminate the tenancy. If not otherwise specified, the common law generally requires that the party seeking to terminate the tenancy must provide notice at least one period prior to the date of termination, up to a six-month max.

  3. Tenancy at Will

    The tenancy at will is a tenancy without a fixed duration and without any defined renewable periods. It lasts as long as both parties wish it to. The common law did not require advance notice to terminate a tenancy at will, but most states have now enacted statutes that require some minimal period of notice to terminate a tenancy at will.

  4. Tenancy at Sufferance

    The tenancy at sufferance really is not a tenancy. Rather, it is a label given to the situation that arises when a tenant "holds over" in possession after the lease has expired. A tenancy at sufferance only lasts until the landlord evicts the tenant or the parties agree to create a new tenancy.

Lease Transfer

Types of lease transfers:

  1. Assignment

    An assignment is when a tenant gives all of his possessory rights to an assignee.

    An assignment places the assignee in privity of estate with the landlord.

  2. Sublease

    A sublease is when a tenant gives anything less than all of his possessory rights. This then makes the tenant the landlord of the sublessee.

    A sublease does not put the sublessee in privity of estate with the landlord.

Recapture Clause

A recapture clause is where a tenant agrees to pay the landlord some or all of the profit he makes from an assignment or sublease.

Statute of Frauds

A statute of frauds is a defense that prevents the enforcement of a land transfer transaction or a lease longer than one year unless there is a signed written memorandum listing the price, parcel, and parties.

Neither a legal description of the property nor the parties' full names are required, only enough to identify them.

1L/2nd Semester/LAW 506-002 – Contracts II/R2C § 129

To enforce the covenants of a lease against a tenant, the landlord must either be in privity of contract or privity of estate with the tenant.

Waste

Waste is a tenant degrading the value or character of a property. (i.e., damaging it.)

Affirmative Waste

Affirmative waste is a change by a tenant that degrades the value of property.

Permissive Waste

Permissive waste is a tenant's failure to maintain the leased property properly.

Common Law Obligations of Landlord

Under common law, the landlord has the following duties: (page 440)

  1. Disclosure of latent defects
  2. Maintenance of the physical conditions of common areas under the landlord's control
  3. Contractually agreed repairs
  4. The physical condition of premises if agreed to be furnished
  5. The fitness of buildings under construction for the purposes for which the tenant entered into the lease
Covenant of Quiet Enjoyment

Covenant of quiet enjoyment is a landlord's promise that neither the landlord, his agents, nor people with superior title will interfere with the tenant's exclusive possession of the land.

If one of these people physically removes the tenant, it is an actual eviction.

It is breached if the landlord, his agent, or a paramount title holder actively interferes with the tenant's possession or if the landlord's inaction if the face of a legal duty to act results in interference.

If this interference is sufficiently serious so as to deprive the tenant of the benefit of his possession and he departs promptly as a consequence, the departure will escalate the breach into a constructive eviction.

An interference must be intentional (intent is usually inferred from the landlord's conduct), substantial, and permanent to support an allegation of constructive eviction.

A breach of the covenant of quiet enjoyment can be through omission or commission.

Implied Warrant of Habitability

A warranty of habitability is a covenant by the landlord, implied by law into residential leases, that the landlord will maintain the premises in condition fit for human habitation throughout the duration of the lease.

This warrants that:

  1. The premises are fit for human habitation.
  2. The condition of the premises is in accord with the uses reasonably intended by the parties.
  3. The tenants are not subject to any conditions endangering or detrimental to their life, health, or safety.

A tenant's obligation to pay rent is dependent upon the landlord's compliance with the implied warrant of habitability. A tenant may vacate the premises and terminate the lease or remain in possession and raise habitability as a defense or action respectively.

English Rule

The English rule provides that a landlord has an implied duty to place the tenant into actual possession on the first day of the lease term.

The English rule is the majority rule.

American Rule

The American rule provides that a landlord has no implied duty to place the tenant in actual possession as long as the tenant has the legal right to possession.

Self-Help

Although a few states still allow a landlord to repossess the premises following a tenant's default as lonog as he does not "breach the peace," most state forbid self-help without the tenant's consent.