Lease Flashcards
Lease - Concept
A contractual agreement by which one party conveys an estate in property to another party, for a limited period, subject to various conditions, in exchange for something of value, but still retains ownership.
Lease - Gral
- Tenant: receives a non-freehold possessory estate with the land. Right to use the property for period of time in exchange for rent.
- LL retains reversionary interest at the end
Lease - Types of tenancy (4)
1) Term Tenancy
2) Periodic Tenancy
3) Tenancy at will
4) Tenancy at sufferance
Term Tenancy
- definitive term - no tight to renew term
- Terminates of last day (pre-death of T passes ot his heir)
- SOF if over 1 year
- Treated as periodic if: a) oral agreement, and b) when negotiations to renew exceed term.
Periodic Tenancy
- Default
- w/defined period which repeats if no notice of termination
- Duration: as stated, if not - in accordance to payments
- Termination: Requires notice similar period to payments (30 days is standard)
Tenancy at will
- No duration (“by permission”)
- Terminate “at will” by either party w/reasonable time to vacate
- SOF violation - default turns into Periodic Tenancy
Tenancy at Sufferance
- Tenant holds-over but not as trespasser bc of original possession
- LL can choose to:
1) Start new periodic tenancy
2) File eviction action + dx
Duties for LL (5)
1) Delivery of possession + control
2) Implied covenant of quiet enjoyment
3) Repairs
4) Deposits
5) Non-retaliatory eviction
Duties LL - Delivery of possession + control - elements (2)
1) Fitness of Premises: CL - LL mades no implied warranties of habitability
* - T has a duty to inspect and take “as is” and LL liable for knowledge of serious hidden defect not disclosed
2) Implied Warranty of Residential Habitability: only for residential leases
* - CL include electricity, heat, water services
Duties LL - Remedy for breach (for T) of delivery of possession and control (5)
1) Vacate and terminate + dx
2) Remain + dx (equal to the difference btwn rent and actual value in such conditions)
3) Equitable Relief: specific performance to make comply with housing code
4) Repair to restore habitability: discount from rent (not for ordinary maintenance)
5) Withhold rent + defend from eviction: usually required to pay in escrow
Duties LL - Implied Covenant of Quiet Enjoyment
- LL promises not to interfere with T’s use + enjoyment
- Breach can be actual/constructive - i.e. Eviction
Duties LL - Implied Covenant of Quiet Enjoyment - Eviction as breach
- Actual: as physical ouster
- Constructive: when LL interferes with T’s personal use OR where LL fails to keep promises in required condition of habitability
- Acts by 3rd parties usually not constructive (unless when in common areas or for other T causing Nuisance)
Duties LL - Remedy for breach to Implied Covenant of Quiet Enjoyment
- Vacate + Terminate + and owe no further rents - Exercised within reasonable time (some states require notice to allow for cure.
- T needs to vacate in order to have a constructive eviction, if he remains obligation to pay rent continues and possible claim
Duties LL - Repairs
- Old CL rule: LL no duty
- Modern rule (Restatement): LL duty to repair and liable for negligent repair and tort liable for dx caused repairs
Duties LL - Deposits
- Treatment depends on type of deposits:
1) Security: use only for repairs and return balance
2) Last month rent: retained by LL and applied to last month rent
3) “non- refundable fee”: LL retained - for prepare and accept lease
Duties LL - No retaliatory eviction
- in restatement + many states
- Deemed when eviction within 90-180 days from certain acts - i.e. report housing code violations
Duties for T (5)
- gral: not enforceable by 3rd parties
1) Pay rent
2) Comply with use restrictions
3) Maintain premises
4) Non-disturbance
5) Tort Liability
Duties T - Pay Rent
- on time + utilities
- Breach by LL of his duties is not excuse
- “LL provision”: included in lease contracts allows for LL to evict T for-non payment w/prior notice
Duties T - Pay Rent - Exceptions to duty (4)
1) T and LL agree to terminate lease
2) LL accepts surrender or intention tu surrender the premises by T (SOF req)
3) Eviction actual or constructive
4) Bc of offset of repairs (related with warranty of habitability)
Duties T - Comply with use restriction
- Binding provision on lease to T
Duties T - Maintain premises obligations (6)
- Even if non-express covenants - CL rules
1) Day-to-day ordinary repairs (usually included in leases, even with liability to persons injured from failure to repair or N repair)
2) No Waste (duty not beyond ordinary “wear and tear”)
3) No-tax or Insurance of premises duty: unless agreed on.
4) Alteration + restoration
5) Property removal
6) Responsible for guests
Duties T - Maintain premises obligations - No Waste
- Duty no dx beyond ordinary “wear and tear”
- Dx beyond lease life - liable when intentional/N - duty similar one to life-T not to injure/deplete LL’s reversion.
Duties T - Maintain premises obligations - Alteration + Restoration
1) T liable for costs to restore to original condition
2) For _chattels and trade fixtures remova_l, liable if dx to LL reversionary interest
3) Ameliorative waste: when T change’s nature/use of the premises. (negative/decreases value - positive/improvements increase value)
- Negative: LL can seek possible injunction to stop conversion + possible dx for cost of restoration of original use.
- Positive: No recovery/remedy possible if positive and consistent to overall change in the neighborhood
Duties T - Non disturbance
T not to create nuisance or otherwise unreasonably disturb other T
Duties T - Tort Liability
- T liable for injuries caused in areas of exclusive control
- For guests and pets (LL liable for common areas, hidden defects not disclosed and N repairs)
LL Remedies for breaches of T’s duties (3 situations)
1) Abandon property: T quits premises and defaults on lease
2) Anticipatory repudiation by T
(3) Mitigation duty)
LL Remedies for breaches of T’s duties - Abandon Property (3 options for LL)
1) Accept surrender + re-enter and take possession: T discharged of future obligations (some states require LL to court order or help from public official)
2) Hold contract valid + sue for each due rent (many states require LL to mitigate dx by re-letting)
3) Re-let property: LL release property and T held responsible for deficiency (pre-notice) in rent if no new T or new T paying less
LL Remedies for breaches of T’s duties - Anticipatory Repudiation by T
- Unequivocal by T
- LL can terminate lease + suit for past due rent
- some states allow for future rents until end of lease - “Acceleration clause”
- Other states: “Accrual rule”: dx only for executory part of contract
- creates duty for LL to make reasonable effort to re-lease property - deducing rent obtained from Dx by T
LL Remedies for breaches of T’s duties - Mitigation Duty
- LL duty to mitigate by re-lease
- But no obligation to rent for other uses or unacceptable T
Assignment and Sublease - Gral
- Ok unless prohibited
- Assign/Sublease are independent rights
- If prohibition exists and LL receives rent from assignee/sublessee - right to enforce prohibition is deemed waived
T assignment - Gral
- As transfer of T’s right over entire space/property
- Original T remains liable to LL, UNLESS release.
- Assignee T: comes into privity - directly liable to LL - under 3rd party beneficiary
- liable for what “touches the land”: i.e. pay rent, insure, repair, maintain, etc.
LL Assignment of lease (Rent Assignment)
- Assign rights to receive rent to 3rd party
- T’s need to receive notice to start paying to 3rd party
LL Sale of premises
- Right to receive rent and future reversion assigned with transfer of property
- T’s need to receive notice to start paying to new owner
- Gral rule: doesn’t affect lease UNLESS sale as condition subsequent in lease deed
LL mortgage’s property - gral + effects on T’s rights (pre-post)
- LL gives mortgage to lender assigning rents if default in payment of mortgage
- T’s bound and must pay to lender after notice
- Pre-mortgage T’s: rights not affected by LL default to pay mortgage
- Post-mortgage T’s: can be dispossessed + lease cancelled if LL defaults on mortgage payment
T subleases property - gral
- Original T retains reversion (doesnt give away all thespace/time/rent to sublessee)
- Sub-lessee no direct obligation with LL
- Original lessee remains liable to LL for default of sublesee UNLESS release is given
Lease termination - Gral causes (6)
1) Premises surrender before term (gral cause)
2) Non-renewal of term (gral cause)
3) Frustration of purpose
4) Condemnation by eminent domain
5) Mortgage foreclosure
6) Merger
Lease (termination) - Frustration of purpose
- T discharged of lease obligations when is impractical/impossible to use the premises for planned purpose
- i.e. use becomes illegal
Lease termination - Premises surrendered before time
- physical abandon + expressed intention not to continue - T liable for rent for remainder of term BUT LL with mitigation duty
Lease termination - Non-renewal of term
- Most states require X number of days of notice prior
Lease termination - Condemnation by eminent domain
- If over the entire property - lease terminated - If over part of property (partial): T not discharged of entire obligation
- Award distributed among LL and T according to their interest
- T’s portion is equal to difference btwn lease commercial value and T’s obligation in the lease (usually ward when lease is for bargain rate or T has fixed purchase option lower than the award OR when T can prove lost business value that comes from moving to new location)
Lease termination - Mortgage foreclosure
- When mortgage pre-dates lease
- New owner can force T to surrender premises and quit the property
Lease termination - Merger (2)
- T purchases property OR
- LL purchases lease
- If property taken by condemnation : interests for leasehold and reversion both merge in taker
