Law for Business and Personal Use © South-Western Publishing G O A L S Types of Leases Describe the legal characteristics of a lease Identify the parties to a lease Describe the various leasehold estates LESSON 22-1

Law for Business and Personal Use © South-Western Publishing What is a Lease? A lease is an agreement in which one party receives temporary possession of another’s real property in exchange for rent. Rent – the consideration given in return for temporary possession.

Law for Business and Personal Use © South-Western Publishing What is a Lease? Landlord – The lease creates a relationship between the person conveying possession or realty. Also called a Lessor. Tenant – The person receiving possession of realty. Also called a Lessee. Leasehold Estate – Ownership interest of the tenant.

Law for Business and Personal Use © South-Western Publishing What is a Lease? When a written document describes the rental transaction, the document is called the lease or rental agreement. Leases may be oral. However, leases that extend more than one year must be in writing or courts may refuse to enforce them.

Law for Business and Personal Use © South-Western Publishing 4 Types of Leasehold Estates Periodic Tenancy Tenancy for Years Tenancy at Sufferance Tenancy at Will

Law for Business and Personal Use © South-Western Publishing Periodic Tenancy Arises when the leasehold is for a renewable period of time with rent due at stated intervals. Example – Parties may agree that the rent is $300 per month payable in advance. When rent is paid by the month, it is called Tenancy from Month to Month.

Law for Business and Personal Use © South-Western Publishing Tenancy for Years When a leasehold is for a definite period of time – such as six months, one year, or ninety-nine years – it creates tenancy for years. At the end of the lease period, a tenancy for years terminates automatically without a requirement of notice.

Law for Business and Personal Use © South-Western Publishing Tenancy at Sufferance Tenants often have a hard time leaving the rented property before the day when the lease ends. If a tenant remains in possession after the lease has expired, a tenancy at sufferance arises. The tenant is then called a holdover tenant. They can be evicted – forcibly removed from the property by the sheriff.

Law for Business and Personal Use © South-Western Publishing Tenancy at Will If a party possesses land with the owner’s permission but without an agreement as to the term of the lease or the amount of the rent, a tenancy at will results. Such a leasehold may be terminated at any time by either party with minimal notice.

Law for Business and Personal Use © South-Western Publishing G O A L S Tenant’s Rights and Duties Explain the tenant’s right to use the property Tell how a lease can be transferred Explain the duty to pay rent LESSON 22-2

Law for Business and Personal Use © South-Western Publishing Tenant’s Rights Right of Possession Right to Use the Property Right to Assign the Lease or to Sublet

Law for Business and Personal Use © South-Western Publishing Right of Possession The tenant has the right to the possession of the real property starting at the time agreed upon in the lease. Eviction occurs if the landlord blocks the tenant from possession of all the real property.

Law for Business and Personal Use © South-Western Publishing Right of Possession Constructive eviction occurs if the landlord fails to perform certain duties as defined in the lease or imposed by statute and if the tenant abandons the premises because of such a breach.

Law for Business and Personal Use © South-Western Publishing Right to Use the Property The tenant is allowed to use the leased property in the manner specified in the lease. If a particular use is not mentioned in the lease, the tenant may use the property for any purpose for which it is designed or customarily used.

Law for Business and Personal Use © South-Western Publishing Right to Assign the Lease or to Sublet Unless restricted by the terms of the lease, assignment of a lease takes place when the tenant transfers his/her entire interest in the lease to a third person. New tenant becomes liable to the landlord and the original tenant also remains liable.

Law for Business and Personal Use © South-Western Publishing Right to Assign the Lease or to Sublet Subletting occurs when the tenant does either of the following: Leases all of the property to a third person for a period of time less than that remaining on the lease Leases part of the property to a third person for part or all of the term remaining. Original tenant is liable to the landlord

Law for Business and Personal Use © South-Western Publishing Tenant’s Duties Duty to Pay Rent Duty to Take Care of the Property Torts Duty

Law for Business and Personal Use © South-Western Publishing Tenant’s Duties Duty to Pay Rent The most important duty is to pay the agreed-upon rent when it is due. Usually a fixed sum of money, but may consist of a share of the crops of a farm or a % of the profit of a business. Tenant may be evicted for failure to pay rent.

Law for Business and Personal Use © South-Western Publishing Tenant’s Duties Duty Take Care of the Property A tenant owes a duty of reasonable care to return the property in substantially the same condition it was in when the lease began. Includes making minor repairs Not responsible for wear and tear caused by ordinary use. Responsible for misuse or negligence

Law for Business and Personal Use © South-Western Publishing Tenant’s Duties Tort Duty A business or residential tenant in possession of leased property has a duty of care to those who enter the property. Lessees assume liability for injuries to themselves and to others (torts) that occur on the leased property. Exception would be defective conditions

Law for Business and Personal Use © South-Western Publishing G O A L S Landlord’s Rights and Duties Describe the lessor’s rights when rent is not paid and the lessor’s duties to maintain the premises Tell when the lessor is liable for injuries on the property Describe the lessor’s duties under the Fair Housing Act LESSON 22-3

Law for Business and Personal Use © South-Western Publishing Landlord’s Rights and Duties Right to Rent Right to Regain the Realty and Fixtures Duty to Maintain the Premises Tort Duty Duty to Pay Property Taxes Fair Housing Act Duties Duty on Voluntary Termination

Law for Business and Personal Use © South-Western Publishing Right to Rent The Landlord’s primary right is to the rent agreed upon in the lease. If the tenant fails to pay the rent, the landlord may take legal action to recover and evict the tenant. Tenant Vacates Early – Tenant remains liable for the unpaid rent if the leave before the end of the lease.

Law for Business and Personal Use © South-Western Publishing Right to the Rent Tenant Vacates Early – Tenant remains liable even if landlord allows the property to remain empty in some states. Other states require the landlord to make a good-faith effort to re-rent the property. Called duty to mitigate or keep damages to a minimum. If not rented, original tenant is liable for lease term.

Law for Business and Personal Use © South-Western Publishing Right to the Rent Tenant Fails to Vacate – If tenant fails to pay rent and remains in possession, the landlord may sue to evict the tenant. Landlord may include overdue rent in the same suit. Landlord can’t take the law into his/her hands by personally evicting the tenant and placing the belongings on sidewalk. Court order directing the sheriff to evict must be obtained.

Law for Business and Personal Use © South-Western Publishing Right to Regain the Realty and Fixtures At the end of the lease term, the lessor is entitled to regain possession of the real property. If tenant has added fixtures to the property, they belong to the landlord. This rule does not apply to trade fixtures added by business tenants.

Law for Business and Personal Use © South-Western Publishing Duty to Maintain the Premises Tenant has responsibility of minor maintenance. Landlord has responsibility for the exterior and common areas in a multi-purpose building. Warranty of habitability – Landlord is required to provide residential property in a condition fit for human living.

Law for Business and Personal Use © South-Western Publishing Duty to Maintain the Premises City Housing Codes make provisions for: No exposed electrical wiring Roof shall not leak Ceiling and walls free of loose plaster/wallpaper and easily cleanable. Outside doors and windows shall have screens Every unit shall have private bathroom Gas stoves shall be proper venting and connections

Law for Business and Personal Use © South-Western Publishing Torts Duty One who is injured because of the faulty condition of common areas could bring suit for damages against the landlord. A landlord may be held liable for injuries that result from defective conditions in the property in the tenants exclusive possession if conditions are concealed or not readily apparent.

Law for Business and Personal Use © South-Western Publishing Duty to Pay Property Taxes Landlord pays all property taxes and assessment on the leased property unless otherwise stated in the lease. For long-term commercial property, the tenant will commonly pay taxes, assessments, and fire insurance.

Law for Business and Personal Use © South-Western Publishing Fair Housing Act Duties Fair Housing Act makes it illegal for lessor to discriminate on the basis of race, religion, sex, national origin, handicap, or family status. Handicap persons may make reasonable modifications to the property as long as the property is returned in its original condition. Can’t discriminate against families with children unless facility is “housing for older persons”.

Law for Business and Personal Use © South-Western Publishing Duty on Voluntary Termination Lease can be terminated by agreement before the expiration of the term. Extinguishes the obligations of the parties. Tenant surrenders the lease and the Landlord accepts. Abandonment without assent is not surrender, it is breach of lease Material breach gives either party the right to terminate the lease