Property I - Leaseholds

Types of Leaseholds

1. Term of years

2. Periodic tenancy

3. Tenancy at will

4. Tenancy at sufferance

Term of Years

• Lasts for a fixed period of time, the beginning and ending dates for which can be calculated

• Language required to create a TY is language indicating a fixed period: “To T for 10 years.”

• No notice required to terminate a term of years lease.

Periodic Tenancy

• Lasts for a fixed period that repeats until notice of termination is given by the landlord or tenant

• Created with language suggesting a repeating fixed period — e.g., “to T for month to month” or “to T for year to year.”

• Notice required to terminate:

  • Common law: notice required is equal to the length of the period, but no longer than 6 months. Tenancy must terminate at the end of the period

  • Statutory law: 30 days notice required. Most states do not require the tenancy to terminate at the end of the period.

Tenancy at Will

• Tenancy that exists for an unspecified duration, but can be terminated at any time by either LL or T.

• Terminable at the will of either the LL or the T.

  • If the language of the lease indicates that it is terminable by only one party, some courts will imply that it is terminable by both parties.

  • If the language of the lease indicates it is terminable only at the will of the tenant, tenant may have a life estate determinable.

• Tenancy terminates at the death of either party

• Attempt to assign terminates the tenancy

Tenancy at Will - Part 2

• If periodic rent is required, lease is generally considered a periodic tenancy (measured by the period for rent due) and not a tenancy at will.

• Can arise by express agreement or by operation of law (i.e., because of a holdover tenant)

• At common law, no notice required to terminate. Statutory law requires notice in many jurisdictions (3-7 days).

Examples:

• On January 1, 2021, L leases Blueacre “to T for month to month.”

  • What must T do to move out on June 15, 2021, under the common law?

    • Give a month’s notice and pay at the end of May.

  • What must TO do to move out on June 15, 2021, under Modern Law?

    • Give 30 days’ notice, don’t have to pay util the end of the period.

• On January 1, 2021, L leases Blueacre “To T for year to year.”

  • What must T do to move out o June 15, 2022, under the common law?”

    • Give at least 6 months notice, continue to pay rent until the end of the year.

  • What must T do to move out on June 15, 2022, under Modern Law?

    • Give notice on June 30th (6 months until the end)

More example problems

On January 1, 2021, L leases Blueacre “To T at an annual rent of $2400, payable $200/month on the first of each month.” What type of tenancy has been created?

Year to year periodic tenancy.

Another Problem - Rental Rights

On January 1, 2020, L agrees to lease Blueacre “to T for so long as T and L desire.” T moves out on July 15, giving notice that day. At common law, what are L’s rights against T?

L has no rights under these circumstances.

Problem - Entitlement to Payment

On January 1, 2020, L agrees to lease Blueacre, “To T for so long as T and L desire.” T agrees to pay a monthly rent of $600. T moves out on July 15, giving notice that day. What are L’s against T?

Common law: L is entitled to payment until August 30.

Modern law: L is entitled to payment through August 15.

Tenancy at Sufferance

1. Occurs when a tenant holds over after the termination of a TY, PT, or TW

2. Landlord has choice of whether to evict or agree to creation of new tenancy

   • If eviction, tenant must move out

   • If LL accepts rent, acceptance may create a new tenancy

     • Agreement to a new tenancy may be express or implied

     • Type of tenancy created varies by jurisdiction

Terms of New Tenancy

1. New tenancy usually subject to same terms as old lease.

2. Some states allow LL’s to charge double rent for hold overs.

3. Some states say that T is liable for “reasonable value” of use and occupation of the premises.

Delivery of Physical Possession

• English rule

  • Implied duty to delivery physical possession

• American rule

  • No implied duty to deliver physical possession; landlord need only delivery the legal right to possession

Burden of Eviction

• English rule

  • Landlord bears the burden of eviction

• American rule

  • Tenant bears the burden of eviction

Problems 8-9

On January 1, 2020, LL leases Blueacre to “T1 for one year.”

On Dec. 15, 2020, LL leases Blueacre “To T2 for one year, beginning Jan 1, 2021.”

• May LL lease to T2? Why?

  • Yes, because the LL has to give the legal right to possession and LL has the legal right to possession.

Assume on January 1, 2021, T1 is still in possession.

• Has LL delivered legal possession?

  • Yes

• Has LL delivered physical possession?

  • No—American rule, tenant must evict T1; English rule, LL must evict T1.

Problem 10

• On Jan 1, 2021, LL leases Blueacre “to T1 for month to month.”

• On April 1, 2021, LL leases Blueacre “To T2 for one year.”

• T2 enters and finds T1 on the premises.

  • Has LL delivered physical possession?

    • No, because T1 is on the land.

  • Has LL delivered legal possession?

    • No, because LL would have to give notice to end month to month lease—do not assume they did.

Assignment v. Sublease

• Assignment:

  • Entire lease term is transferred; no reversionary interest remains in the transferring intent

• Sublease:

  • Partial lease term is transferred; reversionary interest is created in the transferring intent

Interpreting New Lease

• Traditional rule

  • Look solely to the instrument to determine whether an assignment or sublease has been created

• Modern rule

  • Determine the intent of the parties in light of surrounding circumstances

Privity

1. Privity of Contract

   • Allows parties to the contract to sue on the contract

2. Privity of Estate

   • A mutual or successive relationship to the same right in property (e.g., TC/JT or LL/T or possessory estate/future interest relationships)

   • Parties in privity of estate may sue based on that relationship

3. Third-party Beneficiary Contract

   • A person who is not party to the contract, but who parties intend to receive the benefit of the contract may sue on the contract, even though there is no privity

4. Importance of privity

   • Identifies which parties the landlord can pursue for rent.

Who Can LL Sue for Breach of Contract?

Approach:

1. Identify parties in privity of contract

2. Identify parties in privity of estate

3. Identify beneficiary of third-party contract, if any

4. Ask: is the lease between T1 and T2 an assignment or a sublease

Landlord’s Right to Withhold Consent to Assignments and Subleases

• Traditional rule

  • LL can arbitrarily withhold consent

• Modern rule

  • LL cannot arbitrarily withhold consent; LL must have commercially reasonable objections