The Four Leasehold or Nonfreehold Estates

Question 1

What is a leasehold?

Answer 1

A leasehold is an estate in land, under which the tenant has a present possessory interest in the lease premises and the landlord has a future interest (reversion, i.e., right of entry).

Question 2

What are the 4 leasehold estates?

Answer 2

(1) Tenancy for years
(2) Periodic tenancy
(3) Tenancy at will
(4) Tenancy at sufferance

Question 3

What is a tenancy for years?

Answer 3

A lease that is for a fixed, determined period of time

Question 4

How may a tenancy for years be terminated?

Answer 4

(1) Automatically at the termination date
(2) Any breach of the lease’s covenants, including failure to pay rent (in most jurisdictions)
(3) Surrender by the tenant, if the landlord accepts (same formalities required for creation are required for surrender, e.g., a writing if for > 1 year)

Question 5

When must a tenancy for years be contained in a written lease?

Answer 5

If the term is for longer than 1 year (Statute of Frauds)

Question 6

What is a periodic tenancy?

Answer 6

A lease which continues for successive intervals (e.g., month to month) until either the landlord or the tenant gives proper notice of termination (i.e., it is continuous until properly terminated)

Question 7

How is a periodic tenancy created?

Answer 7

(1) Expressly - the parties agree from the outset that it will be a periodic tenancy
(2) By implication/operation of law

Question 8

How many a periodic tenancy be created by implication or operation of law?

Answer 8

(1) Land is leased with no mention of duration, but provision is made for by the payment of rent at set intervals
(2) An oral term of years in violation of the Statute of Frauds creates an implied periodic tenancy measured by the way rent is tendered
(3) In a residential lease, if a landlord elects to hold over a tenant who has wrongfully stayed on past the conclusion of the original lease, an implied periodic tenancy arises measured by the way rent is now tendered

Question 9

How is a period tenancy terminated?

Answer 9

Usually, written notice must be given at least equal to the length of the period itself, unless otherwise agreed.

Usually, the notice must be timed to terminate the lease at the end of a period (e.g., the usual month-to-month tenancy can end only on the last day of the month).

Under the common law, if tenancy is for a year or longer, 6 months’ notice is required

Under the Restatement (AND FOR THE BAR), ONE MONTH

NOTE: Parties may lengthen or shorten the notice period by private agreement.

Question 10

What is a tenancy at will?

Answer 10

A tenancy of no fixed period of duration, terminable at will of either the landlord or the tenant (e.g., “To T for as long as L or T desires.”).

Question 11

How is a tenancy at will created?

Answer 11

Generally, a tenancy at will must be created by an express agreement that the lease can be terminated at any time.

Unless the parties expressly agree to a tenancy at will, the payment of regular rent will cause a court to treat the tenancy as an implied periodic tenancy.

If the lease gives only the landlord the right to terminate, a similar right will be implied in favor of the tenant. However, if only the tenant has a right to terminate, a similar right will NOT be implied in favor of the landlord.

Question 12

How may a tenancy at will be terminated?

Answer 12

In theory, by either party at any time.

The modern view in most states is that notice and reasonable time to quit (i.e., vacate) are required.

Alternatively, a tenancy at will can be terminated by operation of law (e.g., due to death or commission of waste)

Question 13

What is a tenancy at sufferance?

Answer 13

Created when a tenant wrongfully holds over, meaning they remain in possession past the expiration of the lease. The wrongdoer is given a tenancy at sufferance to permit the landlord to recover rent.

Question 14

How is a tenancy at sufferance terminated?

Answer 14

The landlord must either evict the tenant or hold the tenant to a new tenancy. No notice of termination is required.

Question 15

What is the hold-over doctrine? (4 major things)

Answer 15

If a tenant continues in possession after their right to possession has ended (i.e., their lease has been lawfully terminated), the landlord may:
(1) evict the tenant, or

(2) bind the tenant to a new periodic tenancy

The length of the new tenancy generally depends on the way the rent was computer under the prior lease. In other words, if the rent was computed on a monthly basis, a new month-to-month periodic tenancy is created.

The maximum tenancy that can be created by the election to hold a tenant to another term is a year-to-year tenancy.

Promises made by the landlord and the tenant under the original lease become part of the tenancy for the additional term.

Question 16

How are commercial and residential tenants at sufferance treated differently?

Answer 16

Commercial tenants may be held to a new year-to-year tenancy if the original lease term was for one year or more. If less than one year, the new tenancy is typically month-to-month.

Residential tenants are generally held to a new month-to-month tenancy regardless of the original term. If the landlord notifies the tenant before the lease expires that occupancy after termination will be at an increased rent, the holdover tenant is held to have agreed to the new terms. (holding over = assent)

Question 17

Are there exceptions to the hold-over doctrine?

Answer 17

If:
(1) the tenant remains in possession for only a few hours after termination or leaves a few articles of personal property, or

(2) the delay is NOT the tenant’s fault (e.g., severe illness),

the landlord cannot bind the tenant to a new tenancy.

Question 18

The landlord can terminate the lease for _______.

The tenant can terminate the lease when _______.

Answer 18

(1) nonpayment of rent

(2) the landlord breaches the covenant of quiet enjoyment or the implied warranty of habitability

Question 19

What is an option to purchase?

Answer 19

An option to purchase real property is a separate contract supported by consideration that is a continuing offer to sell the land at a specified price.

As long as the option is contained within the lease itself, the consideration for the lease supports the option.

Because it is an interest in land, an option must be evidenced by a signed writing to satisfy the Statute of Frauds.

Question 20

How is an option to purchase exercised?

Answer 20

Absent a contrary provision, the option lasts as long as the lease.

The method of exercise is determined by the agreement. Generally, the party granting the option may keep the consideration regardless of whether the option is exercised.

Question 21

How is an option to purchase enforced?

Answer 21

The Rule Against Perpetuities applies to options unless they are attached to leases. In other words, if an option is attached to a lease, it is enforceable even if it would otherwise violate the Rule Against Perpetuities.

The usual remedy for enforcement of an option to purchase is specific performance, but damages are also available.