Leasehold Estates - DOC

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					LEASEHOLD ESTATES ♦ TERM OF YEARS  Fixed period of time or period computable by formula.  Only terminable earlier than the number of years upon the happening of some event or condition.  No notice of termination necessary, because both parties are responsible to the estate for the pre-agreed number of years. ♦ PERIODIC TENANCY  Fixed duration that continues for succeeding periods until either party gives notice of termination (month to month, year to year, etc.)  Notice must terminate tenancy on the final day of the term.  If no notice of termination is given, the tenancy is automatically extended for another term: COMMON LAW: Year to year, 6 months notice. Less than a year, notice must be given within a period of time equal to the term, not to exceed 6 months. MAJORITY: Notice need only be given within 30 days of the end of the term, regardless of its length.

♦ TENANCY AT WILL  No fixed period.  Tenancy endures as long as both parties desire.  Ends either when one party terminates it or when one party dies.  Notice of termination is required, but varies by statute.

To T ―for as long as T desires to stay on the land.‖ Ends at T’s will or at his death. Exception: ½ tenancy at will is help up in most courts it tenant has the power. If land owner has the power courts split. (Note 1, p. 450) Majority—Lease giving the tenant sole power to terminate tenancy is enforceable. Minority—If the tenant is given unilateral power to terminate, so must the landlord.

Garner v. Gerrish 1984: Decedent rented house to Defendant set to run until the date of Gerrish’s choice. Estate argues that the tenancy ended with the death of the landlord. Rule: Contract law—the lease expressly granted the Defendant the sole right of termination, so Gerrish can stay.

♦ TENANCY AT SUFFERANCE  Arises when a tenant remains in possession after the termination of tenancy.  Options for the landlord (2): 1. Treat the tenant as a trespasser and evict, or 2. Consent, expressly or by implication, to the creation of a new tenancy. That new term cannot exceed a year b. Once you have chosen one of the other you cannot switch. c. If the landlord does not pick either of the two options you have a periodic tenancy. What is the period 1. Some courts say it is they way the rent is computed (i.e. if it is month to month it is month to month; if it is money then it is money) 2. Other courts say it is up to one year Majority—Consent to a holdover creates a periodic tenancy; with the same unit term as the previous tenancy, not to exceed one year. The new tenancy is usually subject to the same terms and conditions within the original lease.
Crechale and Polles, Inc. v. Smith 1974: Near end of five year lease, Defendant sought a month to month extension while his new home was being completed. Landlord denied any oral agreement about a holdover extension, but accepted a check for the additional month. Rule: Once a landlord elects to treat a tenant as a trespasser but fails to eject him and accepts a check—he agrees to a month to month tenancy .

POLICY: COURTS PREFER TO NOT FORCE A PERIODIC TENANCY IN A HOLDOVER. Note Cases: Guy who left office equipment in building after the end of lease does not have holdover to periodic tenancy because the presence of the equipment did not obstruct the landlord’s use of the property. If a tenant did leave equipment it might be a holdover. Woman who stayed over two days because she was ill and her doctor has ordered her to not move. Court found no hold over because the tenant did not stay on the premises by her own will. THE LEASE Questions to ask to determine if a lease exists:

◦ Do you have an exclusive right of possession? Leases transfer a right to possession to a particular space with a right to exclude for a particular amount of time. ◦ Is the lease assignable? Leases are generally assignable. ◦ Can the lease be terminated at any time? If so, it is probably a license, not a lease. ◦ If the lease is for longer than a year, is it in writing?

SELECTION OF TENANT General rule: In the sale or rental of property, one cannot discriminate on the basis of race, religion, national origin, sex, handicap, or familial status. Otherwise, a landlord can discriminate on any other basis not prohibited by statute. CIVIL RIGHTS ACT OF 1866 Prohibits private and public discrimination on the basis of race in the purchase, lease, sale, holding, or conveyance of property. (CRA only covers race**) Exception(s): You cannot discriminate when it is a room in your house. You cannot discriminate or place preference in an add. [Ads are never exempt under FHA]. FHA standard of review for discrimination in ads: whether or not the ad would suggest to an ordinary reader that a particular race was preferred or dispreferred. (What would a common person read the ad as) Under FHA, landlord could avoid liability for discrimination if he could show that his disparate action was taken in pursuit of a bona fide government or business purpose with not less discriminatory path available.
Soules v. HUD 1992: Single mom brings action against landlord who she claimed denied her rental of apartment in discrimination on basis of familial status. Rule: FHA 3604. H: For landlord. Although Plaintiff was within a protected group, qualified for the housing and was denied, the landlord was motivated by permissible considerations—she did not like the Plaintiff’s attitude and she had not intent to discriminate against her class (offered to rent to other single moms).  It is okay to discriminate in the sale or rental of housing unless the law says that you cannot. o It is unlawful to:  Refuse to rent or sell  Unlawful to discriminate on terms, conditions of facilities

 Make statements ads or notices that make preferences or notices.  Say that housing is not available when it is o 3603 exemptions (does not apply to adds)  [renting whole house] if a sale or rental of single family house by the owner, do not own more than three houses, do not use a broker, then you can discriminate. Still cannot advertise and discriminate  [part of house] Ms. Murphy exemption which is owner occupied renting out room or unit but it has to four families or fewer. o How is civil rights act different?  it bars are racial exemptions. In some ways it is narrower because it only covers race and does not cover ads. Note: you have to make sure that if the D had reason it was not pretext. Or she did not go through the motions and use a different excuse that is just pretext.  It is okay to limit the number of people  not okay to fluctuate depending upon age (i.e. one unit has 4 adults but 2 adults and 2 children not rented to  violation)  Refusing to rent based on marital status is okay (not in CA)  FHA does not prohibit discrimination based upon sexual preference (CA does)  Cannot make different terms of privileges based on sex.  You cannot discriminate against a person who has AIDS or you think they have AIDS since they are gay.  You do not need to rent to people whose condition offers a direct threat (i.e. a mental person who makes threats) You do have to show that the threat is reasonable  FHA will allow roommate to look for another roommate who is a certain gender but you are not supposed to advertise it.

DELIVERY OF POSSESSION MAJORITY: English Rule—In absence of stipulation to the contrary, an implied covenant exists on the part of the landlord that premises will be open to entry by the tenant at the time fixed by the lease for the beginning of the term.  You can sue for damages and trespass. You can kill the lease or say that you still want the lease and oust the old tenant. MINORITY: American Rule—The landlord is not bound to put the tenant into actual possession, but is bound to put him in legal possession.  When new tenant fails to take actual possession because a former tenant holds over, his remedy is against the holdover and not the landlord.  Tenant, without actual possession, is not obligated to pay rent for time during which he was kept out of possession and may sue for rescission of the lease.
Hannan v. Dusch 1930: Plaintiff leased real estate from Defendant to begin 1/1; when he arrived, someone else was living there. Rule: American rule. Landlord has no liability.

DEFAULTING TENANT ♦ TENANT HAS ABANDONED ▪ Landlord Retaking Possession UNIVERSAL: If tenant has abandoned, landlord has clear right to retake possession. MAJORITY: If tenant has not abandoned, but has violated a lease which contains a clause enabling the landlord to reenter and take possession, the landlord may rightfully use self-help to retake premises if:  He is legally entitled to possession, and  His means of re-entry are either: 1. Peaceable, or 2. With force that is reasonably necessary. MINORITY: If tenant has not abandoned but has violated lease, landlord must resort to judicial process only—even if the lease contained a clause allowing re-entry.
Berg v. Wiley 1978: Tenant violated lease by remodeling restaurant without permission of landlord. Lease contained a provision allowing the landlord to retake the premises if the lessee were to fail to meet its conditions. Tenant closed restaurant for remodeling and sent away her employees. Landlord changed locks denying tenant access. Rule: Court held that premises had not been abandoned and that the landlord’s re-entry was not accomplished in a peaceable manner. (The only reason there was not a fight when he changed the locks, was because the Plaintiff was not around.)

▪ Landlord Mitigating Damage OLD RULE: Landlord under no duty to mitigate damage caused by defaulting tenant. Policy—Tenant had estate; no business of landlord when tenant chooses to abandon. MAJORITY: Landlord has duty to mitigate damages by keeping abandoned apartment in stock of available apartments so that it can be rented again.
 New Rule: A landlord has to use reasonable diligence in renting the apartment. He just has to treat it like the other apartments (it is in his stock).

Burden of proving reasonable diligence in attempting to re-let premises: 1. Majority: Tenant has burden to show L did not mitigate; L is presumed to have mitigated.

2. Minority: Landlord has burden to show that he mitigated; L is presumed to have not mitigated. Proof of mitigation: ad in paper, using realtor—do what is normal to other appt. ▪ Surrender Elements: 1. Tenant offers to end tenancy. 2. If L accepts offer, lease is terminated. Intent test of Landlord in implied surrender: Landlord’s actions inconsistent with or repugnant to continuation of original lease (not just putting ad in paper). WHEN SURRENDER IS NOT CLEAR, FIGURE VALUE OF RENT OWED TWO WAYS: → After surrender, tenant is no longer liable for future rent but is liable for accrued rent. → If no surrender, tenant continues to be liable for rent until the end of lease. If the next tenant is paying less than the abandoned tenant, than abandoned tenant must pay the difference until his lease ends. Consequences of failure to mitigate:  Recover no rent subsequent to abandonment, or  Recover difference between agreed rent and amount of loss that could have been avoided. a. If the LL had used due diligence what could he have collected – what the lease was for. How can LL protect himself  Security deposits or calling them advanced rents  Liquidated damages: if you move out early were are fixing what the damages are.  Rent acceleration or a clause that says if you terminate early you will have the pay the entirely of the lease. LANDLORD’S REMEDIES ♦ RENT AND DAMAGES

1. When tenant in possession fails to pay rent or breaches lease duty, L may sue for back rent and damages or terminate lease and recover possession. 2. Doctrine of Anticipatory Breach—When tenant abandons, L may recover back rent, other damages, and the present value of amount of unpaid rent which exceeds amount of subsequent lease for balance of term. ♦ SECURITY DEPOSITS Most often characterized as advance rent or liquidated damage; but if bear no relation to actual damages, court will hold as an illegal penalty. COVENANT OF QUIET ENJOYMENT: ALL LEASES Ensures tenant’s beneficial use and possession of property without interference by landlord; can be waived as to particular defects at time lease is formed. ♦ DOCTRINE OF CONSTRUCTIVE EVICTION History: Early common law: Because provisions of lease were independent, L’s breach gave tenant a cause of action for damages but not right to suspend rent payments or terminate tenancy. Exception: Tenant’s obligation to pay ended when landlord disturbed his possession. Elements: Wrongful act or omission by landlord in breach of express promise in lease or covenant of quiet enjoyment = constructive eviction, when conduct: ▪ Renders the property substantially unsuitable for purpose it was leased, or ▪ Seriously interferes with the beneficial enjoyment of premises. → Interference need not be permanent but must be regular and serious. → Right is waived if tenant does not leave within a reasonable time. [LL have to maintain common areas]

Reste Realty v. Cooper 1969: Commercial property floods due to defect in driveway (common area); L argues that tenant did not leave in reasonable time and defect was not permanent; Rule: condi tion of road was permanent defect, and tenant left within 10 days of worst flooding.




 There is only a breech if there is a covenant. Courts imply warranty even at tenancy at will.

 ♦ REMEDY ◦ IF HE STAYS, can sue for DAMAGES equal to difference between value of property with breach and value without breach. ◦ IF HE LEAVES, he is RELIEVED OF LIABILITY FOR FUTURE RENT and entitled to recover DAMAGES (loss to possessions or costs in finding new facilities). IMPLIED WARRANTY OF HABITABILITY: RESIDENTIAL LEASES ONLY Ensures premises are safe, clean, and habitable; cannot be waived—no assumption of the risk on the part of tenant in relation to patent/latent defects. Steps for tenant in asserting IWH: 1. Tenant discovers serious defect which interferes with safety or health, → Check first to see if there is code violation. 2. Notify landlord, and 3. Give landlord reasonable time for repair. 4. Move out and seek rescission and damages or 5. Stay and pursue reformation or specific performance and damages. ♦ REMEDY

DAMAGE: Discomfort/annoyance, punitive, rent reduction (Value of dwelling as warranted – Value as is; if equal, then IWH is waived.)  RESCISSION: Tenant moves out and lease ends.  REFORMATION: Alter lease by withholding rent or ―repair and deduct.‖ You are not paying here. This makes the LL sue the tenant. Puts shoe on other foot.  SPECIFIC PERFORMANCE – YOU HAVE TO COMPLY WITH WARRANTY IN THE LEASE OR MAKES THE PREMIESES HABITABLE.

Hilder v. St. Peter 1984: Defendant failed to repair apartment despite repeated requests; sewage in basement, window broken, plaster falling in back room. Rule: violation of IWH, tenant stayed and paid rent, court refunded all rent paid as damages—estimated Fair Market Value to be zero. Differences Between CQE and IWH - Tenant can withhold rent until fixed by the LL - You cannot waive remedies under IWH - IWH is only for residential leases. - You can waive CQE - You can’t withhold rent under CQE nut you can under IWH - Can get more damages under IWH - Cannot repair and deduct under CQE

ILLEGAL LEASE DOCTRINE When landlord violates code provisions, of which he had actual or constructive knowledge, that existed before the lease was made, the lease is illegal. Tenant under illegal lease is a tenant at sufferance; landlord entitled to receive reasonable value of premises in their condition. RETALIATORY EVICTION Majority—Forbid retaliatory evictions by landlords against tenants asserting their rights (Example: IWH). You cannot kick someone out for saying that the apartment sucks. Rebuttable presumption of retaliatory purpose if landlord seeks to terminate, increase rent, or decrease service within given time period after a good-faith complaint by tenant about condition of premises.

LANDLORD’S TORT LIABILITY Majority: Tort liability can be contracted around and is limited to specific exceptions to the common law rule that landlord has no duty to provide suitable premises; Exceptions: 1. Duty to maintain common area 2. Duty to disclose latent defect 3. ―Public use exception‖: duty to disclose latent defects at start of lease when landlord knows tenant is going to open property to use of public. 4. Duty to keep furnished apartments habitable. and 5. Duty to undertake promised repairs.

If there is an illegal action against a tenant, if the LL has taken reasonable steps to prevent the action then he is not liable. However if he has not then he could be found liable. Ii.e. doorman or locks on front door in a high risk crime area] Minority (CA): Tort liability cannot be contracted around; a general standard of care of negligence liability imposed on landlord. TENANT’S DUTIES ♦ WASTE: REPAIR Residential COMMON LAW: Tenant has duty to repair. Commercial Tenant has duty to repair.

MAJORITY: Tenant has no duty to repair, SPLIT: Some courts require tenant to but must notify landlord of problem to rebuild, but some only require repair. avoid permissive waste. *BASIC RULE IS THAT THE SHORTER THE LEASE OR THE RENTAL PERIOD, THE LL IS


♦ DAMAGED PREMISES Residential No duty to pay rent for damaged premises; landlord may seek negligence damages, if damage was tenant’s fault. Commercial IF RENTING PART OF PREMISES and that part is destroyed, tenant does not have to pay. EXCEPTION: If destruction was tenant’s fault, then tenant must keep paying. Third Party – the tenant will still have to pay rent if damage by a third party.

IF RENTING WHOLE PREMISES and the whole is destroyed, tenant must still pay rent for the land.

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