Lease

See also: leasing and renting

A lease is a contract conferring a right on one person (called a tenant or lessee) to possess property belonging to another person (called a landlord or lessor) to the exclusion of the owner landlord, and all others except with the invitation of the tenant. It is a rental agreement between landlord and tenant. The relationship between the tenant and the landlord is called a tenancy, and the right to possession by the tenant is sometimes called a leasehold interest. A lease can be for a fixed period of time (called the term of the lease) but may be terminated sooner. The consideration for the lease is called rent or the rental.

A lease should be contrasted to a license, which may entitle a person (called a licensee) to occupy property, but which is subject to termination at the will of the owner of the property (called the licensor).

Under normal circumstances, owners of property are at liberty to do what they want with their property, including dealing with it or handing over possession of the property to a tenant for a limited period of time. However, if an owner has surrendered possession to another (ie the tenant) then any interference with the quiet enjoyment of the property by the tenant in lawful possession is itself unlawful.

Similar principles apply to real property as well as to personal property, though the terminology would be different. Similar principles apply to sub-leasing, that is the leasing by a tenant in possession to a sub-tenant. The right to sub-lease can be expressly prohibited by the main lease.

Types of tenancies

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. At Common law the duration did not need to be certain, but could be conditioned upon the happening of some event, (e.g. "until the crops are ready for harvest", "until the war is over"). In many jurisdictions that possibility has been partially or totally abolished.

A fixed term tenancy comes to an end automatically when the fixed term runs out, or, in the case of a tenancy that ends on the happening of an event, when the event occurs.

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—depending on the jurisdiction—one year without being in writing) may actually create a periodic tenancy, the construed term being dependent on the laws of the jurisdiction where the leased premises are located. In many jurisdictions the "default" tenancy, where the parties have not explicitly specified a different arrangement, and where none is presumed under local or business custom, is a month-to-month tenancy.

The landlord may terminate a periodic tenancy 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 month's 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, in many jurisdictions, 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, in such a jurisdiction the termination could not be on the 20th of the following month, even though this would give the tenant more than the required one month's notice.

Tenancy at will

A tenancy at will is a tenancy which either the landlord or the tenant may terminate 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. Alternatively, a tenancy at will may be used for a temporary period where a tenant wishes to take possession of a property urgently, but there is insufficient time in which to negotiate and complete a new lease. In this case, the tenancy at will is terminated as soon as the new lease is completed and is usually agreed on the basis that if the new lease fails to complete within a reasonable time period, then the tenant must vacate the premises.

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.

Subject to any notice requirements, a tenancy at will also comes to an end when either the landlord or tenant act inconsistently with a tenancy. For example, the changing of locks by the landlord is an indication of the end of the tenancy, as is the vacation of the premises by the tenant.

Tenancy at sufferance

A tenancy at sufferance (sometimes called a holdover tenancy) exists when a tenant remains in possession of a property after the expiration of a 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.

Formalities of a lease

The formal requirements for a lease are determined by the law and custom of the jurisdiction in which real property is located. In the case of personal property, it is determined by the law and custom of the jurisdiction in which the rental agreement is made.

A tenancy for a duration greater than one year must be in writing in order to satisfy the Statute of Frauds.

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Term of a lease

The term of the lease may be fixed, periodic or of indefinite duration.

If it is for a specified period of time, the term ends automatically when the period expires, and no notice needs to be given, in the absence of legal requirements.

The term's duration may be conditional, in which case it lasts until A specified event occurs, such as the death of a specified individual.

A periodic tenancy is one which is renewed automatically, usually on a monthly or weekly basis.

A tenancy at will lasts only as long as the parties wish it to, and may be terminated by either party without penalty.

It is common for a lease to be extended on a "holding over" basis, which normally converts the tenancy to a periodic tenancy on a month by month basis.

It is also possible for a tenant, either expressly or impliedly, to give up the tenancy to the landlord. This process is known as a surrender of the lease.

Rent

Rent is a requirement of leases in some common law jurisdiction, but not in civil law jurisdiction. In England it was held in the case of Ashburn Anstalt v Arnold that rent was not a requirement for there to be a lease, however the court will more often construe a licence where no rent is paid as it is seen as evidence for no intention to create legal relationship. There is no requirement for the rent to be a commercial amount. "Pepper corn" rent or rent of some nominal amount is adequate for this requirement.

Land lease

A land lease or ground lease is a lease in which the tenant rents and uses the land, but owns the temporary or permanent buildings and other objects placed upon it.

History

Over the centuries, leases have served many purposes and the nature of legal regulation has varied according to those purposes and the social and economic conditions of the times. Leases, for example, were mainly used for agricultural purposes until the late 18th century and early 19th century when the growth of cities in industrialised countries had made leases an important form of landholding in urban areas.

The modern law of landlord and tenant in common law jurisdictions retains the influence of the common law and, particularly, the laissez-faire philosophy that dominated the law of contract and property law in the 19th century. With the growth of consumerism, consumer protection legislation recognised that common law principles, which assume equal bargaining power between the contracting parties, create hardships when that assumption is inaccurate. Consequently reformers have emphasised the need to assess residential tenancy laws in terms of protection they provide to tenants. Legislation to protect tenants is now common.

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References

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See also

• Leasehold
• Leasehold estate
• Leasehold valuation tribunal
• Recital (law)
• Rental agreement personal and real property rental
• Leveraged lease
• Capital lease
• Operating lease
• Finance lease
• Vehicle leasing
• Sublease

External links

• UK Government LVT website
• Summaries and Analysis of LVT decisions