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A leasehold estate is an
ownership Ownership is the state or fact of legal possession and control over property, which may be any asset, tangible or intangible. Ownership can involve multiple rights, collectively referred to as title, which may be separated and held by different ...
of a temporary right to hold land or
property Property is a system of rights that gives people legal control of valuable things, and also refers to the valuable things themselves. Depending on the nature of the property, an owner of property may have the right to consume, alter, share, r ...
in which a
lessee A lease is a contractual arrangement calling for the user (referred to as the ''lessee'') to pay the owner (referred to as the ''lessor'') for the use of an asset. Property, buildings and vehicles are common assets that are leased. Industria ...
or a tenant holds rights of
real property In English common law, real property, real estate, immovable property or, solely in the US and Canada, realty, is land which is the property of some person and all structures (also called improvements or fixtures) integrated with or aff ...
by some form of
title A title is one or more words used before or after a person's name, in certain contexts. It may signify either generation, an official position, or a professional or academic qualification. In some languages, titles may be inserted between the f ...
from a lessor or
landlord A landlord is the owner of a house, apartment, condominium, land, or real estate which is rented or leased to an individual or business, who is called a tenant (also a ''lessee'' or ''renter''). When a juristic person is in this position, t ...
. Although a tenant does hold rights to real property, a leasehold estate is typically considered
personal property property is property that is movable. In common law systems, personal property may also be called chattels or personalty. In civil law systems, personal property is often called movable property or movables—any property that can be moved fr ...
. Leasehold is a form of land tenure or property tenure where one party buys the right to occupy land or a building for a given length of time. As a lease is a legal estate, leasehold estate can be bought and sold on the open market. A leasehold thus differs from a freehold or
fee simple In English law, a fee simple or fee simple absolute is an estate in land, a form of freehold ownership. A "fee" is a vested, inheritable, present possessory interest in land. A "fee simple" is real property held without limit of time (i.e., pe ...
where the ownership of a property is purchased outright and thereafter held for an indeterminate length of time, and also differs from a tenancy where a property is let (rented) on a periodic basis such as weekly or monthly. Terminology and types of leasehold vary from country to country. Sometimes, but not always, a residential tenancy under a lease agreement is colloquially known as renting. The leaseholder has the right to remain in occupation for a fixed period, generally measured in months or years. Terms of the agreement are contained in a lease, which has elements of
contract A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tr ...
and
property law Property law is the area of law that governs the various forms of ownership in real property (land) and personal property. Property refers to legally protected claims to resources, such as land and personal property, including intellectual pro ...
intertwined.


History

Laws governing landlord-tenant relationships can be found as far back as the
Code of Hammurabi The Code of Hammurabi is a Babylonian legal text composed 1755–1750 BC. It is the longest, best-organised, and best-preserved legal text from the ancient Near East. It is written in the Old Babylonian dialect of Akkadian, purportedly by Hamm ...
. However, the
common law In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omniprese ...
of the landlord-tenant relation evolved in England during the
Middle Ages In the history of Europe, the Middle Ages or medieval period lasted approximately from the late 5th to the late 15th centuries, similar to the post-classical period of global history. It began with the fall of the Western Roman Empire ...
. That law still retains many archaic terms and principles pertinent to a
feudal Feudalism, also known as the feudal system, was the combination of the legal, economic, military, cultural and political customs that flourished in medieval Europe between the 9th and 15th centuries. Broadly defined, it was a way of structur ...
social order and an
agrarian economy An agrarian society, or agricultural society, is any community whose economy is based on producing and maintaining crops and farmland. Another way to define an agrarian society is by seeing how much of a nation's total production is in agricultu ...
, where land was the primary economic asset and ownership of land was the primary source of rank and status. See also
Lord of the Manor Lord of the Manor is a title that, in Anglo-Saxon England, referred to the landholder of a rural estate. The lord enjoyed manorial rights (the rights to establish and occupy a residence, known as the manor house and demesne) as well as seig ...
. The tenancy was essential to the feudal hierarchy after English law prohibited
subinfeudation In English law, subinfeudation is the practice by which tenants, holding land under the king or other superior lord, carved out new and distinct tenures in their turn by sub-letting or alienating a part of their lands. The tenants were termed ...
(the creation of new feudal estates by existing feudal landholders) in the late 13th Century; a lord would own land and the tenants became
vassals A vassal or liege subject is a person regarded as having a mutual obligation to a lord or monarch, in the context of the feudal system in medieval Europe. While the subordinate party is called a vassal, the dominant party is called a suzera ...
. Leasehold estates can still be
Crown land Crown land (sometimes spelled crownland), also known as royal domain, is a territorial area belonging to the monarch, who personifies the Crown. It is the equivalent of an entailed estate and passes with the monarchy, being inseparable from it ...
today. For example, in the
Australian Capital Territory The Australian Capital Territory (commonly abbreviated as ACT), known as the Federal Capital Territory (FCT) until 1938, is a landlocked federal territory of Australia containing the national capital Canberra and some surrounding township#Aust ...
, all private land "ownerships" are actually leaseholds of Crown land.


Contemporary practice


Australia


Leasehold land

Leasehold land is a land holding leased to a person or company by the relevant state (as the Crown); however, all mineral rights are reserved to the Crown. There are different types of leasehold tenure from state to state.
Pastoral lease A pastoral lease, sometimes called a pastoral run, is an arrangement used in both Australia and New Zealand where government-owned Crown land is leased out to graziers for the purpose of livestock grazing on rangelands. Australia Pastoral lease ...
s cover about 44% of
mainland Australia Mainland Australia is the main landmass of the Australian continent, excluding the Aru Islands, New Guinea, Tasmania, and other Australian offshore islands. The landmass also constitutes the mainland of the territory governed by the Commonw ...
, mostly in arid and semi-arid regions and the tropical
savannah A savanna or savannah is a mixed woodland-grassland (i.e. grassy woodland) ecosystem characterised by the trees being sufficiently widely spaced so that the canopy does not close. The open canopy allows sufficient light to reach the ground to ...
s. There are three types of leasehold tenure in Australia: *Term lease – usually 1–50 years, for a specified purpose. *Perpetual lease, or lease in perpetuity – may be used only for a specified purpose. *Freeholding lease – after approval is granted to convert a lease to freehold, and the lessee pays the purchase price in instalments. This is an interim tenure; freehold title is not issued until the all purchase costs have been paid. All land in the
Australian Capital Territory The Australian Capital Territory (commonly abbreviated as ACT), known as the Federal Capital Territory (FCT) until 1938, is a landlocked federal territory of Australia containing the national capital Canberra and some surrounding township#Aust ...
(ACT) is leasehold, issued with
99-year lease A 99-year lease was, under historic common law, the longest possible term of a lease of real property. It is no longer the law in most common law jurisdictions today, yet 99-year leases continue to be common as a matter of business practice and ...
s. The rent on the leases was abolished by the Gorton Government in 1970, with the leasehold system now "almost identical in operation" to the freehold tenure typical of residential properties in other Australian jurisdictions.


Residential tenancies

Residential tenancies differ from state to state, governed by local legislation.


England and Wales

Modern leasehold estates in
England England is a country that is part of the United Kingdom. It shares land borders with Wales to its west and Scotland to its north. The Irish Sea lies northwest and the Celtic Sea to the southwest. It is separated from continental Europe ...
and
Wales Wales ( cy, Cymru ) is a country that is part of the United Kingdom. It is bordered by England to the east, the Irish Sea to the north and west, the Celtic Sea to the south west and the Bristol Channel to the south. It had a population in ...
(Scotland has different laws and in Scots Law it has been forbidden by statute since 1974 to create a lease of a dwelling lasting longer than 20 years, or to grant any other lease of over 175 years) can take one of four forms—the ''fixed-term tenancy'' or ''tenancy for years'', the ''periodic tenancy'', the ''tenancy at will'', and the ''tenancy at sufferance''. Forms no longer used include socage and burgage. When a landowner allows one or more persons, called "tenants", to use the land in some way for some fixed period of time, the land becomes a leasehold, and the resident- (or worker-) landowner relation is called a "tenancy". A tenant pays
rent Rent may refer to: Economics *Renting, an agreement where a payment is made for the temporary use of a good, service or property *Economic rent, any payment in excess of the cost of production *Rent-seeking, attempting to increase one's share of e ...
(a form of
consideration Consideration is a concept of English common law and is a necessity for simple contracts but not for special contracts (contracts by deed). The concept has been adopted by other common law jurisdictions. The court in '' Currie v Misa'' declar ...
) to the landowner. The leasehold can include buildings and other improvements to the land. The tenant can do one or more of: farm the leasehold, live on it, or practise a trade on it. Typically, leasehold estates are held by tenants for a specific period of time. In England in recent years, some new homes and apartments have been sold by large housebuilders with a leasehold where the
ground rent As a legal term, ground rent specifically refers to regular payments made by a holder of a leasehold property to the freeholder or a superior leaseholder, as required under a lease. In this sense, a ground rent is created when a freehold piece ...
payable doubles every 10 to 25 years, with consequently a very high price to buy out the lease. This has caused some recently built homes to be extremely difficult to sell. In 2017, the British government launched a consultation on legal reforms to end such exploitative schemes.


United States

In the US, there are food co-ops that supply tenants with a place to grow their own produce.
Rural tenancy Rural tenancy refers to a type of sharecropping or tenancy arrangement that a landowner can use to make full use of property he may not otherwise be able to develop properly. A "tenant" or non-landowner will take residency on the property of the la ...
is also a common practice. Under a rural tenancy, a person buys a large amount of land and the rural community uses it agriculturally as a source of income. The term estate for years appears to be a US term. This refers to a leasehold estate for any specific period of time (the word "years" is misleading, as the duration of the lease could be a day, a week, a month, etc.). An estate for years is not automatically renewed.


Terminology


Fixed-term tenancy or tenancy for years

A "fixed-term tenancy" or
tenancy for years A lease is a contractual arrangement calling for the user (referred to as the ''lessee'') to pay the owner (referred to as the ''lessor'') for the use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial ...
lasts for some fixed period of time. Despite the name, such a tenancy can last for any period of timeeven 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.


Termination or expiration

The tenancy will come 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. 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. A tenancy may also come to an end when and if the tenant accepts a buyout agreement from their landlord. The landlord is able to offer to buy the property back from their tenant for a negotiated price as long as the deal is agreed upon by both parties. Depending on the laws in force in a particular jurisdiction, different circumstances may legally arise where a tenant remains in possession of property after the expiration of a lease.


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 The Statute of Frauds (29 Car 2 c 3) (1677) was an Act of the Parliament of England. It required that certain types of contracts, wills, and grants, and assignment or surrender of leases or interest in real property must be in writing and si ...
(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 the month-to-month tenancy.


Tenancy at will

A tenancy at will or estate at will is a leasehold such that either the landlord or the tenant may terminate the tenancy at any time by giving reasonable notice. It usually occurs in the absence of a lease, or where the tenancy is not for
consideration Consideration is a concept of English common law and is a necessity for simple contracts but not for special contracts (contracts by deed). The concept has been adopted by other common law jurisdictions. The court in '' Currie v Misa'' declar ...
. Under the modern common law, tenancy at will can arise under the following circumstances: * the parties expressly agree that the tenancy is at will and not for rent. * a family member is allowed to live at home without formal arrangement. A nominal consideration may be required. * a tenant wishes to occupy the property urgently, but there was insufficient time to negotiate and execute a lease. The tenancy at will terminates in this case as soon as a written lease is completed. If a lease fails to be realized, the tenant must vacate the property. In a residential lease for consideration, a tenant may not be removed except for cause, even in the absence of a written lease. If a landlord can terminate the tenancy at will, a tenant by
operation of law The phrase "by operation of law" is a legal term that indicates that a right or liability has been created for a party, irrespective of the intent of that party, because it is dictated by existing legal principles. For example, if a person dies wi ...
is also granted a reciprocal right to terminate at will. However, a lease that expressly continues at the will of the tenant ("for as long as the tenant desires to live on this land") does not automatically provide the landlord with a reciprocal right to terminate, even for cause. Rather, such language may be construed to convey to the tenant a life estate or even a
fee simple In English law, a fee simple or fee simple absolute is an estate in land, a form of freehold ownership. A "fee" is a vested, inheritable, present possessory interest in land. A "fee simple" is real property held without limit of time (i.e., pe ...
. A tenancy at will terminates by
operation of law The phrase "by operation of law" is a legal term that indicates that a right or liability has been created for a party, irrespective of the intent of that party, because it is dictated by existing legal principles. For example, if a person dies wi ...
, if: * the tenant commits
waste Waste (or wastes) are unwanted or unusable materials. Waste is any substance discarded after primary use, or is worthless, defective and of no use. A by-product, by contrast is a joint product of relatively minor economic value. A waste pr ...
against the property; * the tenant attempts to assign his tenancy; * the landlord transfers his interest in the property; * the landlord leases the property to another person; * the tenant or the landlord dies.


Tenancy at sufferance

A tenancy at sufferance (sometimes called a holdover tenancy) is created when a tenant wrongfully holds over past the end of the duration period of the tenancy (for example, a tenant who stays past the expiration of his or her lease). In this case, the landlord can hold over the tenant to a new tenancy, and collect rent for the period the tenant has held over. A tenancy at sufferance may exist when a tenant remains in possession of property even after the end of the lease, until the landlord acts to eject the tenant. The occupant may legally be a trespasser at this point, and the possession of this type may not be a true estate in land, even if authorities recognize the condition to hold the tenant liable for rent. The landlord may be able to
evict Eviction is the removal of a tenant from rental property by the landlord. In some jurisdictions it may also involve the removal of persons from premises that were foreclosed by a mortgagee (often, the prior owners who defaulted on a mortgag ...
such a tenant at any time without notice. Action to evict will terminate a tenancy at sufferance, because the tenant no longer enjoys possession. Some jurisdictions impose an irrevocable election whereby the landlord treats the holdover as either a trespasser, or as a tenant at sufferance. A trespasser is not in possession; but a tenant at sufferance continues to enjoy possession of the real property. The landlord may also be able to impose a new lease on the holdover tenant. For a residential tenancy, such new tenancy lasts month to month. For a commercial tenancy of more than a year, the new tenancy is year to year; otherwise, the tenancy lasts for the same length of time as the duration under the original lease. In either case, the landlord can charge a higher rent, if the landlord, before the expiration of the original lease, has notified the tenant of the increase. Simply leaving property behind on the premises does not constitute possession and thus, a tenancy at sufferance cannot be established. E.g., ''Nathan Lane Assocs. v. Merchants Wholesale'', 698 N.W.2d 136 (Iowa 2005); ''Brown v. Music, Inc.'', 359 P.2d 295 (Alaska 1961).


Continuation tenancy

In some jurisdictions, the tenant has a legal right to remain in occupation of the premises after the end of a lease unless the landlord complies with a formal process to dispossess the tenant of the property. For example, in
England and Wales England and Wales () is one of the three legal jurisdictions of the United Kingdom. It covers the constituent countries England and Wales and was formed by the Laws in Wales Acts 1535 and 1542. The substantive law of the jurisdiction is En ...
, a business tenant has a right to continue occupying their demise after the end of their lease under the provisions of sections 24–28 of the
Landlord and Tenant Act 1954 The Landlord and Tenant Act 1954 (2 & 3 Eliz 2 c 56) is an act of the United Kingdom Parliament extending to England and Wales. Part II of the act is a statutory code governing business tenancies. Part I of the act, which deals with the protecti ...
(unless these provisions were formally excluded by agreement before the lease was completed). At the end of their lease they need do nothing but continue payment of rent at the previous level and uphold all other relevant covenants such as to keep the building in good repair. They cannot be evicted unless the landlord serves a formal notice to end the tenancy and successfully opposes the grant of the new lease to which the tenant has an automatic right. Even this can only be done under prescribed circumstances, for example the landlord's desire to occupy the premises himself or to demolish and redevelop the building.


Duties of participants


Duties of landlord

The first duty of the
landlord A landlord is the owner of a house, apartment, condominium, land, or real estate which is rented or leased to an individual or business, who is called a tenant (also a ''lessee'' or ''renter''). When a juristic person is in this position, t ...
is to put the tenant in physical possession of the land at the outset of the lease (the
English English usually refers to: * English language * English people English may also refer to: Peoples, culture, and language * ''English'', an adjective for something of, from, or related to England ** English national ...
and
majority rule Majority rule is a principle that means the decision-making power belongs to the group that has the most members. In politics, majority rule requires the deciding vote to have majority, that is, more than half the votes. It is the binary deci ...
, as opposed to the American rule which only requires the tenant be given ''legal'' possession, or the ''right'' to possess); the second is to provide the premises in a ''habitable condition''—there is an implied warranty of habitability. If landlord violates either, the tenant can terminate the lease and move out, or stay on the premises, while continuing to pay rent, and sue the landlord for damages (or withhold rent and use breach of implied warranty of habitability as a defense when the landlord attempts to collect rent). The lease also includes an implied covenant of quiet enjoymentlandlord will not interfere with tenant's quiet enjoyment. This can be breached in three ways. # Total eviction of the tenant through direct physical invasion by landlord. # Partial evictionwhen the landlord keeps the tenant off ''part'' of the leased property (even locking a single room). Tenant can stay on the remaining property without paying any rent. # Partial eviction by someone ''other'' than landlordwhere this occurs, rent is apportioned. If landlord claims to lease tenant an area of 1,000 square metres but 400 square metres of the area belongs to another person, tenant only has to pay 60% of the rent.


Landlord's tort liability

Under the common law, the landlord had no duties to the tenant to protect the tenant or the tenant's
licensees A licensee can mean the holder of a license or, in U.S. tort law, a licensee is a person who is on the property of another, despite the fact that the property is not open to the general public, because the owner of the property has allowed the lic ...
and invitees, except in the following situations: # Failure to disclose latent defects of which the landlord knows or has reason to know. Note that the landlord has no duty to repair, just to disclose. # For a short-term lease (3 months or less) of a furnished dwelling, the tenants are treated as invitees, and the landlord is liable for defects even if the landlord neither knows nor should know of them. # Common areas under landlord's control (e.g. hallways in an
apartment building An apartment (American English), or flat (British English, Indian English, South African English), is a self-contained housing unit (a type of residential real estate) that occupies part of a building, generally on a single story. There are ma ...
), if the landlord failed to use reasonable care in maintaining them. # Injury resulting from landlord's negligent repairseven if the landlord used all due care. # Public use, if the following three factors exist: ## Landlord knows or should know that the tenant makes public use of the land (e.g. the land is rented for use as a restaurant or a store); ## Landlord knows or should know that there is a defect; and ## Landlord knows or should know that the tenant will not fix the defect.


Duties of tenant

Under the common law, the tenant has a number of duties to the landlord: # to pay rent when it is due, # to avoid
waste Waste (or wastes) are unwanted or unusable materials. Waste is any substance discarded after primary use, or is worthless, defective and of no use. A by-product, by contrast is a joint product of relatively minor economic value. A waste pr ...
of the property. #to inform the landlord of any development that may affect the subject property. A tenant is liable to third party invitees for negligent failure to correct a dangerous condition on the premiseeven if the landlord was contractually liable.


Effects of condemnation

If land under lease to a tenant is condemned under the government's power of
eminent domain Eminent domain (United States, Philippines), land acquisition (India, Malaysia, Singapore), compulsory purchase/acquisition (Australia, New Zealand, Ireland, United Kingdom), resumption (Hong Kong, Uganda), resumption/compulsory acquisition (Austr ...
, the tenant may be able to earn either a reduction in rent or a portion of the condemnation award (the price paid by the government) to the owner, depending on the amount of land taken, and the value of the leasehold property. With a ''partial taking'' of the land, the tenant may claim apportioned rent for property taken. For example, suppose a tenant leases land for six months for ¤1,000 per month, and that two months into the lease, and the government condemns 25% of the land. The tenant will then be entitled to take a portion of the condemnation award equal to 25% of the rent due for the remaining four months of the lease—¤1,000, derived from ¤250 per month for four months. A ''full taking'', however, extinguishes the lease, and excuses all rent from that point. The tenant will not be entitled to any portion of the condemnation award, unless the value of the lease was greater than the rent paid, in which case the tenant can recover the difference. Suppose in the above example that the market value of the land being leased was actually ¤1,200 a month, but the ¤1,000 per month rate represented a break given to the tenant by the landlord. Because the tenant is losing the ability to continue renting the land at this bargain rate (and probably must move to more expensive land), the tenant will be entitled to the difference between the lease rate and the market value – ¤200 per month for a total of ¤800.


See also

*
Case v. Minot ''Case v. Minot'', 158 Mass. 577 (1893), was a case decided by the Supreme Court of Massachusetts that was one of the first cases to hold that inaction by a landlord could establish a constructive eviction Constructive eviction is a term used in ...
*
Housing cooperative A housing cooperative, or housing co-op, is a legal entity, usually a cooperative or a corporation, which owns real estate, consisting of one or more residential buildings; it is one type of housing tenure. Housing cooperatives are a distin ...
*
Landlord and Tenant Act Landlord and Tenant Act (with variations) is a stock short title used for legislation about rights and responsibilities of landlords and tenants of leasehold estate in Hong Kong, the United Kingdom and the United States. List Hong Kong *The Land ...
*
Landlord harassment Landlord harassment is the willing creation, by a landlord or their agents, of conditions that are uncomfortable for one or more tenants in order to induce willing abandonment of a rental contract. This is illegal in many jurisdictions, either un ...
* Leasehold valuation tribunal * Life estate * Rental agreement *
Tenant farmer A tenant farmer is a person (farmer or farmworker) who resides on land owned by a landlord. Tenant farming is an agricultural production system in which landowners contribute their land and often a measure of operating capital and management, ...
* Tenement *
Tenement (law) {{Wiktionary, tenement A tenement (from the Latin tenere ''to hold''), in law, is anything that is held, rather than owned. This usage is a holdover from feudalism, which still forms the basis of property law in many common law jurisdictions, in ...


References


External links


Lease advice
the UK government's leasehold advisory service for England {{Authority control Landlord–tenant law Leasing Real property law Scots law legal terminology Renting Land tenure