Ch.24 Leasehold Interests

Question 1

Leasehold Interests

Answer 1

Arises when landowner grants possession of land to another for fixed period of time

Either expressed or implied contract

Question 2

Lessor

Answer 2

landlord

Question 3

Lessee

Answer 3

tenant

Question 4

Lease

Answer 4

agreement that constitutes a grant of possession of property for a fixed term in return for the payment of rent

Question 5

Tenancy

Answer 5

relationship between parties governed by a lease

Question 6

Creation of tenancy creates two interests in land:

Answer 6

1. Leasehold - tenant’s right to exclusive possession
2. 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

Question 7

Creation of a Tenancy

Lease contract:

Answer 7

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

Question 8

Express agreement (verbal or written) or implied from conduct of parties

Answer 8

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

Question 9

Legislation in provinces:

Answer 9

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

Question 10

Characteristics of a Lease

Answer 10

Term certain
Periodic tenancy
Sub-tenancy

Question 11

Term certain

Answer 11

fixed term of a lease

Question 12

Periodic tenancy

Answer 12

lease that automatically renews at the end of each rent period until notice of termination

Question 13

Sub-tenancy

Answer 13

lease of leased premises by a tenant-in-chief to another tenant for a shorter term than the original lease

Question 14

Landlord and tenant specify rights and duties in lease agreement

Answer 14

Binding for duration of lease

Question 15

Rent is the amount paid by the tenant

Answer 15

Form is up to the parties

Question 16

Time for payment

Answer 16

Up to the parties

Question 17

Damage or Destruction

Answer 17

Common law - usually tenant liable for rent even if damage to buildings

Question 18

Quiet Possession

Answer 18

Possession undisturbed by persons claiming a right to the property through or under the landlord

Landlord has restrictions on entering the land

Question 19

Repairs

Answer 19

Usually set out in lease

Legislation requires landlord to make habitable and safe

Question 20

Sublet

Answer 20

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

Question 21

In absence of express covenant, landlord obliged to cover municipal taxes and insurance

Answer 21

If tenant pays taxes, can deduct expenses from rent payable

Municipal charges for property improvements are responsibility of landlord

Question 22

Insurance may be express term in lease

Answer 22

Most tenants insure own chattels and provide liability insurance

Landlord insure buildings to protect from loss or damage

Question 23

Chattels brought onto premises by tenant usually can be taken at end of term of lease unless part of realty

Answer 23

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

Question 24

Trade fixtures

Answer 24

chattels attached to leased premises by a commercial tenant that may be removed at the end

Question 25

Type of remedy of landlord depends on nature of breach committed by tenant

Answer 25

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

Question 26

Remedies for failure to pay rent:

Answer 26

1. Action on the covenant - institute legal proceedings 2. Distress/distrain 3. Re-entry

Question 27

Second remedy for failure to pay rent:

Answer 27

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

Question 28

Distress (to distrain)

Answer 28

right of a landlord to seize and sell the chattels of a tenant if arrears of rent are not paid

Question 29

Third remedy for failure to pay rent:

Answer 29

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

Question 30

In commercial tenancies, if tenant’s breach is for breaches except failure to pay rent, landlord may:

Answer 30

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

Question 31

Eviction

Answer 31

- court ordered removal of a tenant from leased premises

Question 32

If landlord fails to comply with covenants, tenant has three remedies:

Answer 32

1. Action for damages 2. Injunction 3. Terminate the lease

Question 33

Lease may be terminated in different ways:

Answer 33

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

Question 34

Surrender

Answer 34

agreement by parties to terminate lease

Question 35

Notice to terminate lease must be given properly Commercial leases:

Answer 35

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

Question 36

Notice to terminate lease must be given properly Residential leases:

Answer 36

Different notice requirements depending on province Specific procedures for termination in lease

Question 37

Shopping Centre Leases

Answer 37

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