Ch.24 Leasehold Interests Flashcards
Leasehold Interests
Arises when landowner grants possession of land to another for fixed period of time
Either expressed or implied contract
Lessor
landlord
Lessee
tenant
Lease
agreement that constitutes a grant of possession of property for a fixed term in return for the payment of rent
Tenancy
relationship between parties governed by a lease
Creation of tenancy creates two interests in land:
- Leasehold - tenant’s right to exclusive possession
- Reversion - return of the right to possession to the landlord at the end of the lease
At expiration of lease, the two interests (possession and title) merge
Anything attached to land is part of leasehold interest
Commercial leases:
- Negotiated and terms set forth in the contract
Creation of a Tenancy
Lease contract:
Made between landlord and tenant
Gives tenant exclusive possession of the property for a specified term
Not the same as a license
- Lease exclusive possession and interest in land
- License grants right to use property in common with others and no interest in land
- Test: one of intention
Express agreement (verbal or written) or implied from conduct of parties
Terms set out specific rights and duties of parties
Cannot override certain parts of legislation
Elements of contract required for validity:
- Offer and acceptance
- Consideration
- Legality of object
- Parties must have capacity to contract and intention to create legal relationship
Legislation in provinces:
Distinction between residential vs. commercial leases
Residential tenancies:
- Provide greater security for tenant
- Additional obligations on landlord
Commercial and other tenancies:
- Common Law rules for landlord and tenant
- Legislation pertaining to tenancy relationship
Characteristics of a Lease
Term certain
Periodic tenancy
Sub-tenancy
Term certain
fixed term of a lease
Periodic tenancy
lease that automatically renews at the end of each rent period until notice of termination
Sub-tenancy
lease of leased premises by a tenant-in-chief to another tenant for a shorter term than the original lease
Landlord and tenant specify rights and duties in lease agreement
Binding for duration of lease
Rent is the amount paid by the tenant
Form is up to the parties
Time for payment
Up to the parties
Damage or Destruction
Common law - usually tenant liable for rent even if damage to buildings
Quiet Possession
Possession undisturbed by persons claiming a right to the property through or under the landlord
Landlord has restrictions on entering the land
Repairs
Usually set out in lease
Legislation requires landlord to make habitable and safe
Sublet
lease of leased premises by a tenant-in-chief to another tenant for a shorter time than the original tenancy
Allowed unless specifically prohibited in lease
- Common law - tenant allows to assign lease
- Tenant still liable under express covenants in lease
- Normal practice is right to assign lease with consent of landlord
In absence of express covenant, landlord obliged to cover municipal taxes and insurance
If tenant pays taxes, can deduct expenses from rent payable
Municipal charges for property improvements are responsibility of landlord
Insurance may be express term in lease
Most tenants insure own chattels and provide liability insurance
Landlord insure buildings to protect from loss or damage
Chattels brought onto premises by tenant usually can be taken at end of term of lease unless part of realty
Trade fixtures - chattels attached to leased premises by a commercial tenant that may be removed at the end of the tenancy by the tenant
- Minor damage in removal must be repaired
Trade fixtures
chattels attached to leased premises by a commercial tenant that may be removed at the end
Type of remedy of landlord depends on nature of breach committed by tenant
Most common breach is failure to pay rent
- Commercial lease - breach by landlord does not allow tenant to withhold rent
- Residential lease - certain beaches by landlord allows tenant to withhold rent
Remedies for failure to pay rent:
- Action on the covenant - institute legal proceedings
- Distress/distrain
- Re-entry
Second remedy for failure to pay rent:
Distress (to distrain) - act of a landlord to move into possession of leased property
- Similar to claim of a lien
- Can sell the goods to cover the rent and sue for any deficiency
- Some provinces right of distress not allows in residential tenancies
Distress (to distrain)
right of a landlord to seize and sell the chattels of a tenant if arrears of rent are not paid
Third remedy for failure to pay rent:
Re-entry - act of a landlord to move into possession of leased property
- Governed by legislation in most provinces
Effect is to terminate the tenancy - An alternative to the right of distress
- Landlord cannot re-enter and distrain against the goods at the same time (act of re-enter terminates tenancy and with it the right of distress
- Landlord must distrian first, then later re-enter or choose between the two remedies
In commercial tenancies, if tenant’s breach is for breaches except failure to pay rent, landlord may:
Give notice to tenant to correct breach
Failure to correct allows landlord to regain possession
Court allow relief against forfeiture
Court can order an injunction
Eviction
- court ordered removal of a tenant from leased premises
If landlord fails to comply with covenants, tenant has three remedies:
- Action for damages
- Injunction
- Terminate the lease
Lease may be terminated in different ways:
Fixed term - when the term ends
Surrender - agreement by parties to terminate lease
Parties replace existing lease with new lease
Tenant voluntarily gives up possession to new tenant; new tenant takes possession
Periodic tenancy - by giving proper notice to quit
Surrender
agreement by parties to terminate lease
Notice to terminate lease must be given properly
Commercial leases:
Notice given must be a full tenancy period
Must be given before the end of one tenancy period to be effective at the end of the next tenancy period
Notice to terminate lease must be given properly
Residential leases:
Different notice requirements depending on province
Specific procedures for termination in lease
Shopping Centre Leases
More complex form of commercial lease:
Provides for greater landlord involvement in tenant’s business
Landlords seek desirable mix of retailer tenants
Covers use of premises outside retailing area
Participation of landlord in profits
Designated hours of operation
Use and type of products clause
Also includes common commercial lease clauses
