Leasehold Estates

Question 1

Leasehold estates

Answer 1

An estate in which the tenant has a present possessory property interest and the landlord has a future interest (reversion)
-Four types:
1) Tenancy for years
2) Periodic tenancy
3) Tenancy at will
4) Tenancy at sufferance

Question 2

Tenancy for years

Answer 2

• Lasts for a fixed period of time
• Requires a definitive beginning and end date
• If duration is longer than one years, lease must be in writing (required under SoF)
• Terminates automatically at the end of the fixed period
  -No notice is required
• Also referred to as “estate of years” “term for years” or “fixed term tenancy”

Question 3

Periodic tenancy

Answer 3

A leasehold that is continuous for successive intervals (e.g. weeks or months) until either party gives notice of termination

Question 4

Periodic tenancy-Creation

Answer 4

Can be express, implied, or by operation of law
* Express agreement: conveyed to tenant for agreed interval
* Implication: a lease that does not specify duration, but provides for rent to be paid at set intervals
* Operation of law two situations:
1) Invalid lease: if tenant takes possession despite an invalid lease (e.g. lease violates SOF) periodic tenancy arises upon landlord’s acceptance of payment
-Period of the tenancy is determined by the period the payment covers
2) Holdover tenant, if landlord accepts rent from a holdover tenant, a periodic tenancy arises for the period the payment covers

Question 5

Periodic tenancy-Termination

Answer 5

Tenant must give proper notice, which requires:
1) Sufficient time: tenant must give notice one full period in advance; year to year tenancies require 6 month notice under common law, one month under modern view
2) Effective date: effective date of termination must be at the end of the period of the tenancy

Note: parties can agree to modify these requirements

Question 6

Tenancy at will

Answer 6

A tenancy with no fixed duration, terminable by either party at any time without notice

Question 7

Tenancy at will-Creation

Answer 7

Express agreement
-Without an express agreement, courts will treat the lease as an implied periodic tenancy

Question 8

Tenancy at will-Termination

Answer 8

By will or operation of law
* By will: either party can terminate the lease at any time without notice, but a reasonable demand to vacate the premises is usually required
* By operation of law: occurs upon any of the following:
1) Death of either party
2) Waste by the tenant
3) Assignment by the tenant
4) Transfer of title by the landlord
5) Lease by the landlord to a third party

Question 9

Tenancy at sufferance

Answer 9

A default tenancy that arises when a tenant continues to possess property after the lease expires (i.e. a holdover tenant)

Question 10

Tenancy at sufferance-Creation

Answer 10

Tenant holds possession beyond lease expiration
-The expired lease’s terms and conditions automatically carry over to the tenancy at sufferance

Question 11

Tenancy at sufferance-Landlord options

Answer 11

1) Sue to evict, or
2) Impose a new periodic tenancy
-Raised rent: landlord can demand higher rent for both the holdover period and any new periodic tenancy if he gave notice of the increase before the lease expired
-Commercial leases: if expired lease was for one year or longer, the new periodic tenancy can be year to year

Question 12

Tenancy at sufferance-Exception

Answer 12

Imposing new periodic tenancy must be reasonable
* New periodic tenancy is unreasonable if:
-Tenant only remains in possession for a few hours
-Tenant is not at fault for delay in vacating (e.g. illness)
-Seasonal leases (e.g. ski cabin, beach house)

Question 13

Tenant’s duty to repair

Answer 13

Can be largely modified by lease terms
* Tenant must maintain premises and make ordinary repairs
-Residential tenants’ duty to repair is modified by the implied warranty of habitability
* Tenant must not commit waste: 3 types
1) Voluntary: overt, harmful acts (e.g. removing fixtures)
2) Permissive: neglect
3) Ameliorative: alterations increasing property value
* Destruction of premises without fault of landlord or tenant
-Common law: tenant held liable for any loss
-Modern law: tenant can terminate lease

Question 14

Tenant’s duty to pay rent

Answer 14

Tenancy at sufferance arises upon breach

Question 15

Tenant’s duty to not use property for illegal purposes

Answer 15

If tenant uses premises for an illegal purpose, landlord may terminate lease or obtain damages and injunctive relief
-Occasional, minor illegal activities do not constitute a breach

Question 16

Tenant’s liability to third parties (in tort)

Answer 16

Tenant may be liable for injuries to third persons from the dangerous conditions within the tenant’s control

Question 17

Fixtures

Answer 17

Once-movable chattel that is annexed (i.e. affixed) to real property such that it becomes part of the realty
* Often arises with leaseholds, but applies to all real property estates
* Fixtures pass with ownership of the land
-Exceptions: a life tenant’s representative may remove annexed chattel within a reasonable time after life tenant’s death

Question 18

Determining whether chattel has become a fixture

Answer 18

• Intent controls: annexor’s intent is usually determinative
• Fixture almost always arises where annexors affix their own chattel to their own property
• Chattel integrated into a structure (e.g. heating pipes, bricks built into a wall) almost always becomes a fixture

Question 19

Fixtures-landlord/tenant

Answer 19

• Agreement between landlord and tenant is controlling, if it exists
• Tenant installation: tenant may remove chattel she installed if:
  1) Removal occurs before the lease expires; and
  2) Removal does not cause substantial harm to the property
  -If tenant impermissibly removes fixtures, she commits voluntary waste

Question 20

Landlord remedies for tenant breach

Answer 20

If tenant breaches his leasehold duties, landlord’s options depend on whether tenant retains possession (i.e. remains on premises)

Question 21

Landlord remedies for tenant breach-tenant retains possession

Answer 21

Landlord may:
a) File for notice of eviction, or
b) Continue the lease and sue for rent due

Question 22

Landlord remedies for tenant breach-tenant abandons premises

Answer 22

Landlord may:
a) Surrender: treat the abandonment as tenant’s surrender and accept it, releasing the tenant from the lease,
b) Ignore (minority rule): hold tenant liable for unpaid rent, or
c) Re-let (majority rule): lease premises to new tenants and hold the breaching tenant liable for any losses

Question 23

Landlord remedies for tenant breach-no self help

Answer 23

Landlord may not engage in self help upon the tenant’s breach (e.g. forcibly removing tenant or tenant’s belongings, changing locks, etc.)

Question 24

Landlord remedies for tenant breach-security deposit

Answer 24

Required at the beginning of most leases to secure landlord against damages and/or abandonment
* Landlord must return deposit to tenant once lease terminates
-Landlord may subtract damages she has suffered

Question 25

Landlord remedies for tenant breach-retaliatory eviction

Answer 25

Landlord is prohibited from retaliatory eviction if a tenant lawfully reports housing code or other violations

Question 26

Landlord’s duties and warranties

Answer 26

1) Duty to deliver possession on first day of lease
* Majority (English rule): actual possession
-Landlord must delivery physical possession to tenant
* Minority (American rule): legal possession (i.e. right to possess)
-New tenant is responsible for evicting a holdover tenant
-Tenant’s remedy for breach = money damages

2) Implied covenant of quiet enjoyment
3) Implied warranty of habitability
4) Tort liability

Question 27

Implied covenant of quiet enjoyment

Answer 27

A tenant has an implied right to quiet use and enjoyment of the premises, without interference from the landlord
-Breach may occur by actual or contructive eviction
-Breach may occur by landlord’s wrongful conduct causing loss of use and enjoyment by tenant

Question 28

Implied covenant of quiet enjoyment-actual eviction

Answer 28

Landlord wrongfully evicts or excludes tenant from property

Question 29

Implied covenant of quiet enjoyment-constructive eviction

Answer 29

Landlord’s actions or inactions render the property uninhabitable or unsuable
-Elements:
1) Breach of duty: landlord breached a duty to the tenant
2) Substantial interference: major and/or chronic problems (e.g. leaky roof) are caused by landlord’s wrongful conduct;
3) Notice: tenant must inform landlord and give him a reasonable opportunity to repair; landlord must fail to act meaningfully; and
4) Vacate: tenant must vacate within a reasonable period after the landlord fails to repair

Question 30

Implied warranty of habitability

Answer 30

Residential property must be fit for basic human dwelling
-Charaterisitics:
* Residential only: not applicable to commercial leases
* Absolute duty: cannot be modified by lease terms
* Local code or case law specifies the standard for a breach
* E.g. no heat in winter, no plumbing, no water, etc. are types of problems that could give rise to violation of the implied warranty of habitability

Question 31

Implied warranty of habitability-tenant’s remedies

Answer 31

After giving notice to landlord, tenant can:
1) Move: vacate premises and terminate the lease
2) Repair: make reasoable repairs and deduct costs from future rent
3) Reduce or withold rent: reduce rent or stop payment until a court determines the fair rental value given the breach
-Tenant must place withheld rent in escrow
4) Remain: remain in possession and seek money damages

Question 32

Landlord tort liability to tenant

Answer 32

A landlord may be liable to tenant for injuries occurring on leased property-liable for injuries involving:

1) Common areas: duty of reasonable care
-Landlord must exercise reasonable care in maintaining and repairing common areas (e.g. hallways, stairs)
2) Latent defects: duty to disclose
-Landlord has a duty to disclose hidden defects he should reasonably know of
3) Assumption of repairs: negligence standard
-Landlord is liable for harm caused by negligent repairs he chooses to undertake
4) Public use: landlord is liable for known defects if he knows the property is for public use and tenant is unlikely to repair
(e.g. concert hall, convention center)
5) Seasonal or short term lease of a furnished dwelling
-Landlord is liable for defects that cause harm to tenant

Question 33

Assignments and Subleases

Answer 33

• Unless restricted by lease terms, a tenant may transfer her leasehold interest in whole (assignment) or in part (sublease)
• Provisions: construed against landlord
  -Lease provisions restricting assignment or sublease are enforceable, but generally construed against landlords
  -Once landlord gives a tenant permission to assign or sublet, such provisions are thereafter waived

Question 34

Assignment

Answer 34

Entire leasehold (both duration and physical area) transfers from tenant to assignee
* Assignee is in privity of estate with landlord: the two are bound by all covenants that run with the land
* Assignor remains in privity of contract with landlord
* Assignee owes rent directly to landlord, but assignor remains liable for unpaid rent unless landlord expressly releases tenant (novation)

Question 35

Sublease

Answer 35

Partial leasehold transfers from sublessor to sublessee
* Sublessor is in privity of estate and contract with landlord (i.e., relationship between tenant and landlord is unchanged)
-Sublessee pays rent to sublessor as her tenant
* Sublessee is not liable to landlord for rent and is not bound by any lease covenants unless expressly assumed