Renting Real Property CHAPTER THIRTY

Copyright © Houghton Mifflin Company. All rights reserved.30 | 2 Landlord – Tenant Relationship Landlord: the person who owns the property and rents or leases it to the tenant. Tenant: the person who occupies the property for a rental or lease charge. A lease may be oral or written. Under the statute of frauds a lease of more than one year must be in writing. A lease in writing is always advisable in the event of any disagreements between the landlord and tenant

Copyright © Houghton Mifflin Company. All rights reserved.30 | 3 Types of Tenancy Tenancy for years –A tenant leases the property for a period of time such as one year. –At the end of the lease possession of the property reverts to the landlord. The tenant may have the option to renew the lease for another year by giving the landlord notice.

Copyright © Houghton Mifflin Company. All rights reserved.30 | 4 Types of Tenancy (continued) Periodic tenancy – Similar to a tenancy for years The tenancy is for a specific period of time. The tenancy automatically renews for periods of time equal to the original lease period. A periodic tenancy can be month to month or year to year depending upon the original lease term. State statutes will often determine when a notice of cancellation must be given.

Copyright © Houghton Mifflin Company. All rights reserved.30 | 5 Types of Tenancy (continued) Tenancy at will –The lease is for an indefinite time period. –Either the landlord or the tenant may cancel at any time. Tenancy at sufferance –This occurs when a lease ends and the landlord allows the tenant to remain on the premises. –This tenancy normally lasts as long as the period of the original lease. –If the tenant does not vacate the premises by the last day of the lease, the landlord can hold the tenant to another year’s lease.

Copyright © Houghton Mifflin Company. All rights reserved.30 | 6 Nature and Elements of a Lease A lease is a form of contract. Although no special form is required for the lease contract, it should be in writing with all terms stated clearly to resolve any future disputes. The lease should clearly spell out the rights and duties of both the landlord and the tenant.

Copyright © Houghton Mifflin Company. All rights reserved.30 | 7 Nature and Elements of a Lease (continued) The lease should contain the following information: Names and addresses of the landlord and tenant The amount of rent to be paid Where and when the rent must be paid The signatures of the parties The lease should clearly spell out the rights and duties of the landlord and tenant, including –Who will be responsible for payment of utilities –Who will be responsible for payment of property taxes

Copyright © Houghton Mifflin Company. All rights reserved.30 | 8 Rights and Duties of Landlord and Tenant (continued) Who is responsible for redecoration and repairs to the inside and outside of the premises The amount of the security deposit, and what damages a tenant may be responsible for (typically any damage beyond normal wear and tear.) Where and when rent will be paid and any late charges to be assessed for late payment

Copyright © Houghton Mifflin Company. All rights reserved.30 | 9 Rights and Duties of Landlord and Tenant (continued) What happens if the premises are destroyed by fire or natural disaster Who is responsible for fixtures in the premises The appropriate and expected use of the property If the tenant is able to sublease or assign his or her lease rights to a third party

Copyright © Houghton Mifflin Company. All rights reserved.30 | 10 Rights and Duties of Landlord and Tenant (continued) Who is responsible for the payment of utilities such as heat, air conditioning, gas, electricity, and water. If the lease is silent on who is responsible as to who would pay real estate taxes they are the landlord’s responsibility. –In business leases it is a common practice to have a tax escalator clause which requires the tenant to pay real estate taxes above a certain base amount.

Copyright © Houghton Mifflin Company. All rights reserved.30 | 11 Additional Elements of a Lease In the event of condemnation of the property by the government the lease can and should provide for the rights of both the landlord and tenant. Leases will often outline a landlord’s remedies if the tenant does not pay the rent. Those remedies include: –Suit by the landlord to collect rent due. –Eviction, physical removal, of the tenant

Copyright © Houghton Mifflin Company. All rights reserved.30 | 12 How a Lease Is Terminated A lease may terminate: –By expiration of the lease term –By agreement between the landlord and tenant –By agreement spelled out in the lease –By condemnation by the government of the entire leased property –By operation of law (For example, if the property can’t be used for a specific purpose because the law prevents that use. A zoning law may change, thereby changing the legal uses for the premises.)

Copyright © Houghton Mifflin Company. All rights reserved.30 | 13 How a Lease Is Terminated (continued) Leases often include provisions to terminate the lease when certain events occur, such as: –Bankruptcy of the tenant –Failure to follow rules established by the landlord A breach by the landlord must be substantial in nature –Substantial breaches are actions that make the premises uninhabitable, such as failure to provide heat for two weeks in winter, or –Whatever makes the tenant’s possession of the property difficult or impossible.

Copyright © Houghton Mifflin Company. All rights reserved.30 | 14 How a Lease Is Terminated (continued) There are two situations where a lease may be terminated regardless of what the lease provides: –Many states allow a residential lease to be terminated by a tenant over a certain age who enters a health care facility, adult care facility, or housing project. –The Service Members Civil Relief Act of 2003 allows a tenant who occupied a premises under a lease entered into prior to a call to active military service to terminate a lease. The tenant must give notice of termination to the landlord and provide proof of the call to active duty.

Copyright © Houghton Mifflin Company. All rights reserved.30 | 15 Obligations to Third Parties If a visitor to the premises is injured during his/her visit both the landlord and the tenant may be liable for the visitor’s damages. –Usually the lease governs who is responsible If the injury occurred in an area in control of the tenant, it would generally be the tenant’s responsibility. If the injury occurred in an area in control of the landlord, it would generally be the landlord’s responsibility.