Leasehold Estates Flashcards
**Estate for Years
A leasehold estate that continues for a definite period and cannot be extended. It always has a specific starting and ending date. When the estate expires, the tenant is required to vacate the premises and surrender possession to the owner. No notice is required to terminate an ESTATE FOR YEARS because the lease has a specific ending date.
Hotel room rentals are an example of an ESTATE FOR YEARS
Lease
A contract between an owner of real estate (LESSOR) and a tenant (LESSEE) to transfer LESSOR’s rights to exclusive possession and use of the property to the TENANT for a specified period of time.
Two contracts-in-one, a lease conveys possession of real estate and establishes obligations, like rent and maintenance.
The landlord retains REVERSIONARY RIGHTS
Holdover Tenancy
The creation of an ESTATE FROM PERIOD TO PERIOD when a tenant with an ESTATE FOR YEARS remains in possession (or HOLDS OVER) after the lease term expires is known as a HOLDOVER TENANCY. The landlord’s acceptance of rent is usually considered conclusive proof of the landlord’s acquiescence to the PERIODIC TENANCY.
Estate from Period to Period (Periodic Estate)
Created when a landlord and tenant enter into an agreement for an indefinite time with no specific expiration date. Most residential leases fall into this category as they contain automatic renewal clauses which continue the lease indefinitely under the original terms until proper termination notice is given (CONTINUITY).
Estate at Will
An estate (TENANCY) of indefinite duration that gives a tenant the right to possess property with the landlord’s consent for an unspecified or uncertain period of time.
A landlord giving a tenant the option to continue renting until the new tenant is ready to move as an example. ESTATE AT WILLS are rarely used in a written agreement.
Reversionary Right
The return of the RIGHT OF POSSESSION to an owner of real estate (LEASOR) from a tenant (LEASEE)
**Estate at Sufferance
An estate (TENANCY) created when a tenant who once enjoyed lawful possession of a property continues in possession after the rights expire without the landlord’s consent. It is the lowest form of interest in real estate.
Absent a HOLDOVER TENANCY clause, the landlord’s option are:
1) accept rent and create a HOLDOVER TENANCY under the terms of the original lease
2) treat tenant as TENANT AT SUFFERANCE by objecting, creating a month-to-month or PERIODIC TENANCY and accepting rent
3) begin eviction process in compliance with NOTICE TO QUIT requirements in the lease and state law
**Leasehold (Less-than-Freeehold) Estate
A tenant’s right to possess real estate for the term of a lease
**4 types of LEASEHOLD ESTATES:
1) ESTATE FOR YEARS
2) ESTATE FROM PERIOD TO PERIOD
3) ESTATE AT WILL
4) ESTATE AT SUFFERANCE
What are the 4 tests of a lease agreement?
1) CAPACITY TO CONTRACT: parties must have the legal capacity to contract
2) LEGAL OBJECTIVES: the objectives of the lease must be legal
3) OFFER AND ACCEPTANCE: the parties must reach a mutual agreement on all the terms of the contract
4) CONSIDERATION: lease must be supported by valid exchange of promises (consideration)
**Covenant of Quiet a Enjoyment
An implied covenant binding the LESSOR, as the owner of the real estate, to provide occupancy to the LESSEE without interference from the owner or anyone else.
Gross Lease
Tenant pays a fixed rental and the landlord pays all OPERATING EXPENSES or PROPERTY CHARGES (taxes, insurance, mortgage payments, repairs, utilities). Residential and commercial office leases are most often gross leases.
Net Lease
Tenant pays all or most of the OPERATING EXPENSES in addition to rent. Most large commercial or industrial leases are NET leases.
Percentage Lease
A lease where rent is based on a minimum fixed rental fee plus a percentage of the gross or net income received by the tenant doing business on the leases property. Can apply to either a GROSS or NET LEASE.
When is a lease discharged?
1) At contract termination
2) By operation of law (Ex: Bankruptcy or Condemnation proceeding)
3) By mutual agreement
Breach of Lease
When a TENANT violates any lease provision. The landlord may sue to obtain a JUDGMENT for financial or material damages.
