1. 50 - 1 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Chapter 49 Landlord-Tenant Relationship and Land Use Regulation Business Law Legal, E-Commerce, Ethical, and International Environments

2. 50 - 2 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Landlord-Tenant Relationship A relationship created when the owner of a freehold estate (landlord) transfers a right to exclusively and temporarily possess the owner’s property to another (tenant).

3. 50 - 3 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Landlord-Tenant Relationship (continued) Nonfreehold Estate – an estate in which the tenant has a right of possession of the property but not title to the property. Leasehold – a tenant’s interest in the property Landlord – the owner who transfers the leasehold Tenant – the party to who the leasehold is transferred

4. 50 - 4 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman The Lease A transfer of the right to the possession and use of the real property for a set term in return for certain consideration. –Rental agreement between a landlord and a tenant Types of tenancy –Tenancy for years –Periodic tenancy –Tenancy at will –Tenancy at sufferance

5. 50 - 5 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Types of Tenancy Type of Tenancy Description Tenancy for Years Continues for the duration of the lease and then terminates automatically without notice. It does not terminate by the death of either party. Periodic Tenancy Continues from payment interval to payment interval. It may be terminated by either party with adequate notice. It does not terminate upon the death of either party.

6. 50 - 6 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Types of Tenancy ( continued ) Type of Tenancy Description Tenancy at Will Continues at the will of the parties. It may be terminated by either party at any time with adequate notice. It terminates upon the death of either party. Tenancy at Sufferance Arises when a tenant wrongfully occupies real property after the expiration of another tenancy or life estate. It continues until the owner either evicts the tenant or holds the tenant over for another term. It terminates upon the death of the tenant.

7. 50 - 7 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Landlord’s Duty to Deliver Possession of the Leased Premises Duty to Deliver Possession –A lease grants the tenant exclusive possession of the leased premises (1) for the term of the lease or (2) until the tenant defaults on the obligations under the lease. –A landlord may not enter leased premises unless the right is specifically reserved in the lease.

8. 50 - 8 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Landlord’s Duties The landlord owes the tenant a duty to: –Deliver possession –Not to interfere with the tenant’s right to quiet enjoyment –Maintain the leased premises

9. 50 - 9 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Duty Not to Interfere with the Tenant’s Right to Quiet Enjoyment The law implies a covenant of quiet enjoyment in all leases. The landlord may not interfere with the tenant’s quiet and peaceful possession, use, and enjoyment of the leased premises. –Wrongful eviction if landlord actually evicts tenant. –Constructive eviction if landlord allows premises to become unfit.

10. 50 - 10 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Landlord’s Duty to Maintain the Leased Premises State and local municipalities have enacted building codes –Statutes that impose specific standards to maintain and repair premises –Provide minimum standards for heat, light, water

11. 50 - 11 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Tenant’s Duties The tenant owes the landlord a duty: –Not to use leased premises for illegal or nonstipulated purposes –Not to commit waste –Not to disturb other tenants –To pay rent

12. 50 - 12 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Tenant’s Duty to Pay Rent A commercial or residential tenant owes duty to pay the agree-upon amount of rent for the leased premises to the landlord at the agree-upon time and terms. Common commercial rental arrangements: –Gross lease –Net lease –Double net lease –Net, net, net lease (triple net lease) Unlawful detainer action

13. 50 - 13 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Implied Warranty of Habitability A warranty that provides that the leased premises must be fit, safe, and suitable for ordinary residential use. If landlord’s breach affect’s tenant’s use or enjoyment of premises, tenant may: –Withhold amount from rent reflecting this loss of value. –Repair defect and deduct expenses from rent. –Cancel lease if it constitutes a constructive eviction. –Sue for damages for amount leasehold value reduced.

14. 50 - 14 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Premises Liability The liability of landlords and tenants to persons injured on their premises.

15. 50 - 15 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Tenant’s Duty of Reasonable Care A tenant owes a duty of reasonable care to persons who enter upon the leased premises. –If a tenant’s negligence causes injury to a third person, the tenant is liable in tort for any damages.

16. 50 - 16 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Landlord’s Duty of Reasonable Care Landlords owe a duty of reasonable care to tenants and third parties not to negligently cause them injury. –This duty is based on the foreseeability standard of ordinary negligence actions. –Landlord who breaches duty is liable for tort damages.

17. 50 - 17 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Transfer of Rights to Leased Property Landlords may sell, gift, devise, or otherwise transfer their interests in the leased property. –If complete title is transferred, the property is subject to the existing lease. The tenant’s right to transfer possession of the leased premises to another depends on the terms of the lease. –Assignment –Sublease

18. 50 - 18 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Assignment of a Lease A transfer by a tenant of his or her rights and duties under a lease to another. The party who transfers the rights is the assignor. The party to whom rights have been transferred is the assignee. The assignor remains responsible for his or her obligations under the lease.

19. 50 - 19 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Sublease Occurs when a tenant transfers only some of his or her rights under the lease. The sublessor transfers those rights to the sublessee. No legal relationship is formed between the landlord and the sublessee.

20. 50 - 20 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Rent Control Rent control ordinances stipulate the amount of rent a landlord can charge for residential housing. Rent is fixed a a specific amount. Minor annual increases are provided for. Upheld by the U.S. Supreme Court. –Yee v. City of Escondido, California, 112 S.Ct. 1522 (1992)

21. 50 - 21 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Land Use Control Generally, the ownership of property entitles the owner to use that property as the owner wishes. Land use control is the collective term for the laws that regulate the possession, ownership, and use of real property. –Private regulation of land use –Public regulation of land use

22. 50 - 22 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Zoning Local laws that are adopted by municipalities and local governments to regulate land use within their boundaries. Adopted and enforced to protect the health, safety, morals, and general welfare of the community. Zoning is the primary form of land use regulation in the United States.

23. 50 - 23 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Zoning (continued) Zoning ordinances generally: 1.Establish use districts within the municipality (e.g., residential, commercial, or industrial) 2.Restrict the height, size, and location of buildings on a building site 3.Establish aesthetic requirements or limitations for the exterior of buildings

24. 50 - 24 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Zoning (continued) Variance An exception that permits a type of building or use in an area that would not otherwise be allowed by a zoning ordinance. Nonconforming Uses Uses and buildings that already exist in the zoned area that are permitted to continue even though they do not fit within new zoning ordinances.

25. 50 - 25 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Civil Rights Act A federal statute that prohibits racial discrimination in the transfer of real property. These laws usually prohibit discrimination based on race, color, national origin, sex, or religion. –Age –Sexual preference –Persons receiving government assistance

26. 50 - 26 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman The Fair Housing Act Federal statute that makes it unlawful for a party to refuse to rent or sell a dwelling to any person on the basis of race, color, national origin, sex, or religion. Prohibits discrimination by real estate brokers, mortgage lenders, and advertisers concerning the sale or rental of real property.

27. 50 - 27 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Title III of the Americans with Disabilities Act A federal statute that prohibits discrimination on the basis of disability in places of public accommodation by private entities. Does not generally apply to residential facilities. New construction and alterations must be made so as to be readily accessible to and usable by disabled persons.

28. 50 - 28 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Compensable Taking of Real Property Eminent Domain- The taking of private property by the government for public use, provided just compensation is paid to the private property holder. Just Compensation Clause- Requires the government to compensate the property owner, and possibly others, when the government take property under its power of eminent domain.