Leasehold estate
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- For the movie by Roman Polanski, see: The Tenant
A leasehold estate is an ownership interest in land in which a lessee or a tenant holds real property by some form of title from a lessor or landlord.
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[edit] History
The common-law of the landlord-tenant relation evolved in the United Kingdom since the dawn of the Middle Ages. That law still retains many archaic terms and principles pertinent to a feudal social order and an agrarian economy, where land was the primary economic asset and ownership of land was the primary source of rank and status. See also Lord of the Manor.
Modern leasehold estates can take one of forms — the fixed-term tenancy or tenancy for years, the periodic tenancy, the tenancy at will, and the tenancy at sufferance, all discussed below. Forms no longer used include socage and burgage.
When a landowner allows one or more persons, called "tenants," to use his land in some way for some fixed period of time, the land becomes a leasehold, and the resident (or worker) - landowner relation is called a "tenancy." A tenant pays rent (a form of consideration) to the landowner. The leasehold can include buildings and other improvements to the land. The tenant can do one or more of: farm the leasehold, live on it, or practice a trade on it.
Tenancy was essential to the feudal hierarchy; a lord would own land and his tenants became his vassals. However, it still happens today in many parts of the world. In the U.S.A., there are food co-ops which supply tenants with a place to grow their own produce. Rural tenancy is also a common practice. Under a rural tenancy, a person buys a large amount of land and the rural community uses it agriculturally as a source of income.
[edit] Fixed-term tenancy or tenancy for years
A fixed-term tenancy or tenancy for years lasts for some fixed period of time. Despite the name tenancy for years, such a tenancy can last for any period of time — even a tenancy for one week would be called a tenancy for years. The duration need not be certain, but may be conditioned upon the happening of some event, (e.g. "until the crops are ready for harvest", "until the war is over"). In either case, the lease expires automatically upon the running of the specified time, or the occurrence of the specified event. If the lease is more than a year, the agreement to create it must generally be executed in writing, to satisfy the Statute of Frauds. If a lease is purported to be a tenancy for years of more than one year, and it is not put in writing, then it automatically becomes a periodic tenancy, with a rental period equal to the period between lease payments, but of no more than a year.
[edit] Termination of a fixed-term tenancy
The landlord and tenant can agree to terminate the lease at any time, which is called a surrender of the lease. Like the lease itself, if the term remaining on the lease at the time of the surrender exceeds one year, then the surrender must be executed in writing. A tenancy for years can also be terminated by the tenant's breach of any leasehold covenants, including the failure to pay promised rent, or allowing the land to waste.
[edit] Periodic tenancy
A periodic tenancy, also known as a tenancy from year to year, month to month, or week to week, is an estate that exists for some period of time determined by the term of the payment of rent. An oral lease for a tenancy of years that violates the Statute of Frauds (by committing to a lease of more than a year without a writing) actually creates a periodic tenancy, the term being the term paid for in the first payment from tenant to landlord.
[edit] Termination of a periodic tenancy
The landlord may terminate the lease at any time by giving the tenant notice as required by statute. Typically, the landlord must give six months' notice to terminate a tenancy from year to year. Tenants of lesser durations must typically receive notice equal to the period of the tenancy - for example, the landlord must give a months' notice to terminate a tenancy from month to month. However, many jurisdictions have varied these required notice periods, and some have reduced them drastically.
The notice must also state the effective date of termination, which must be on the last day of the payment period. In other words, if a month-to-month tenancy began on the 15th of the month, the termination can not be on the 20th of the following month, even though this would give the tenant more than the required one month's notice.
[edit] Tenancy at will
A tenancy at will is a leasehold such that either the landlord or the tenant may terminate the tenancy at any time by giving reasonable notice. It usually occurs in the absence of a lease, or where the tenancy is not for consideration. Under the modern common law, tenancy at will is very rare, partly because it can only come about if the parties expressly agree that the tenancy is at will and not for rent. However, tenancy at will is common where a family member is allowed to live in the home (a nominal consideration may be required) without any formal arrangements. ***In most residential tenancies for consideration, the tenant may not be removed except for cause, even if there is no written lease.**** (this contradicts what's written above, that a tenancy at will can be terminated at any time by giving reasonable notice.)
If a lease exists at the sole discretion of the landlord, it grants the tenant by operation of law a reciprocal right to terminate the lease at will. However, a lease that explicitly exists at the will of the tenant (e.g. "for as long as the tenant desires to live on this land") does not imply that the landlord may terminate the lease, even for cause; rather, such language may be interpreted as granting the tenant a life estate or even a fee simple.
A tenancy at will is broken, again by operation of law, if the:
- Tenant commits waste against the property;
- Tenant attempts to assign his tenancy;
- Landlord transfers his interest in the property;
- Landlord leases the property to another person;
- Tenant or landlord dies.
[edit] Tenancy at sufferance
A tenancy at sufferance (sometimes called a holdover tenancy) exists when a tenant remains in possession of property after the expiration of his lease, and until the landlord acts to eject the tenant from the property. Although the tenant is technically a trespasser at this point, and possession of this type is not a true estate in land, authorities recognize the condition in order to hold the tenant liable for rent. The landlord may evict such a tenant at any time, and without notice.
The landlord may also impose a new lease on the holdover tenant. For a residential tenancy, this new tenancy is month to month. For a commercial tenancy of more than a year, the new tenancy is year to year; otherwise it is the same period as the period before the original lease expired. In either case, the landlord can raise the rent, so long as the landlord has told the tenant of the higher rent before the expiration of the original lease.
[edit] Duties of the landlord and the tenant
[edit] Duties of the landlord
The landlord has two common-law duties. The first is to put the tenant in possession of the land at the outset of the lease (the 'English' rule); the second is to provide the premises in a habitable condition — there is an implied warranty of habitability. If landlord violates either, the tenant can terminate the lease and move out, or stay on the premises, while continuing to pay rent, and sue the landlord for damages (or withhold rent and use breach of implied warranty of habitability as a defense when the landlord attempts to collect rent).
The lease also includes an implied covenant of quiet enjoyment — landlord will not interfere with tenant's quiet enjoyment. This can be breached in three ways.
- Total eviction of the tenant through direct physical invasion by landlord.
- Partial eviction — when the landlord keeps the tenant off part of the leased property (even locking a single room). Tenant can stay on the remaining property without paying any rent.
- Partial eviction by someone other than landlord — where this occurs, rent is apportioned. If landlord claims to lease tenant an area of 1000 square metres but 400 square metres of the area belongs to another person, tenant only has to pay 60% of the rent.
In most areas of the United States, modern law dictates that the landlord is also under a remedial duty to mitigate his damages if a tenant abandons the leasehold - i.e. once a tenant has abandoned the leasehold, the landlord is under a duty to attempt, in good faith and with reasonable effect, to find a new tenant. This places a cap on the amount of damages a landlord can collect from a tenant who abandons the leasehold, for if the landlord fails to show reasonable mitigation, the abandoning tenant is only liable for the amount of backrent due MINUS the amount that would have been avoided by reasonable mitigation. In some areas, if a landlord fails to show reasonable mitigation, the landlord cannot collect any backrent from an abandoning tenant at all.
[edit] Landlord's tort liability
Under the common law, the landlord had no duties to the tenant to protect the tenant or the tenant's licensees and invitees, except in the following situations:
- Failure to disclose latent defects of which the landlord knows or has reason to know. Note that the landlord has no duty to repair, just to disclose.
- For a short term lease (3 months or less) of a furnished dwelling, the tenants are treated as invitees, and the landlord is liable for defects even if the landlord neither knows nor should know of them.
- Common areas under landlord's control (e.g. hallways in an apartment building), if the landlord failed to use reasonable care in maintaining them.
- Injury resulting from landlord's negligent repairs — even if the landlord used all due care.
- Public use, if the following three factors exist:
- Landlord knows or should know that the tenant makes public use of the land (e.g. the land is rented for use as a restaurant or a store);
- Landlord knows or should know that there is a defect; and
- Landlord knows or should know that the tenant will not fix the defect.
[edit] Duties of the tenant
Under the common law, the tenant has two duties to the landlord. These are to pay rent when it is due, and to avoid waste of the property.
A tenant is liable to third party invitees for negligent failure to correct a dangerous condition on the premise — even if the landlord was contractually liable.
[edit] Effects of condemnation
If land under lease to a tenant is condemned under the government's power of eminent domain, the tenant may be able to earn either a reduction in rent or a portion of the condemnation award (the price paid by the government) to the owner, depending on the amount of land taken, and the value of the leasehold property.
A partial taking of the land by the government does not release the tenant from paying full rent, but the tenant may collect a portion of condemnation award equal to the apportioned rent for property taken. For example, suppose a tenant leases land for 6 months for $1,000 per month, and that two months into the lease, and the government condemns 25% of the land. The tenant will then be entitled to take a portion of the condemnation award equal to 25% of the rent due for the remaining four months of the lease — $1,000, derived from $250 per month for four months.
A full taking, however, extinguishes the lease, and excuses all rent from that point. However, the tenant will not be entitled to any portion of the condemnation award, unless the value of the lease was greater than the rent paid, in which case the tenant can recover the difference. Suppose in the above example that the market value of the land being leased was actually $1,200 a month, but the $1,000 per month rate represented a break given to the tenant by the landlord. Because the tenant is losing the ability to continue renting the land at this bargain rate (and probably must move to more expensive land), the tenant will be entitled to the difference between the lease rate and the market value — $200 per month for a total of $800.
[edit] Effects of tenancy
However, many adverse effects come from this system. Tenants have to pay the landowner even though they are doing all of the agricultural work. In a sense, it is a cycle where the tenant is never really able to become a landowner because they constantly to pay the landowner, as well as other expenses. If a crop does not flourish, the tenant will still have to pay for the use of the land. The landowner, since he is ultimately owner of the land, also can have a say in what the tenant uses the land for or what he can or cannot grow. On the contrary, rural tenancy has advantages. If a person owns too much land for just their family to use, tenants can rent it out and make use of the land. Also, if a landowner rents out the land, it can be a source of economic income for the tenant which may not have previously existed. In poorer communities, rural tenancy can give the tenants a chance to grow crops to sell in markets and to feed their families.
[edit] See also
This article incorporates text from the Encyclopædia Britannica Eleventh Edition, a publication now in the public domain.
[edit] External links
- Social Housing Law Association Social Housing Law Association (U.K.)
- Organisation of Civic Rights South Africa's oldest and only tenants' rights resource
