Different Ways A Renter Can Possess Property – Non Freehold Estates – Real Estate Tenant Law

A Non Freehold Estate (leasehold) is a type of estate whereby the holder of the estate has possessory rights and interest to a property, albeit will terminate at some point in favor of the FREEHOLD Estate owner(s). A leasehold provides the tenant with a present possessory interest in real property that will revert to the freehold estate owner at the end of the possession.

In other words, the person has the right to the property NOW, albeit will give it up at the end of the estate, which is often the end of the lease.
So if A (renter) wants to rent an apartment from B (landlord), the following is generally the starting point.
B has a freehold (we’ll touch on subleasing below) estate, which could be one of several types of freehold (fee simple) estates, including a life estate (when the possessor has possessory interest during their lifetime (or based on another’s life, which is called “a life estate pur autre vie” – French for “the life of another”), or fee simple estate defeasible, albeit regardless, B has a current possessory interest.

When the landlord leases the property to the renter, what the landlord is doing is transferring his right of possession to the property to the tenant. The document/instrument that typically conveys the right of the landlord to the renter is called a lease, which is normally used for the simplicity. Otherwise, what also could happen, is the parties could record the transfer and it would have a similar or same result. In fact, sometimes a party to a lease agreement, especially the renter will want to record the lease to remove/reduce the possibility that the it’s not publicly known they have an interest in the property (generally used in commercial business lease agreements).

The types of non freehold estates are as follows:

Tenancy in Years (sometimes called a Tenancy of years) – While the title states years, what throws many off is that it doesn’t have to be for years. A six month lease is a tenancy in years as much as an 18 month lease is. What is unique about a Tenancy in Years is it is a leasehold estate that lasts for a set amount of time and automatically expires at the end of the lease. It does NOT automatically renew. While the lease can be longer or shorter than “in years” it’s important to note that leases over one year need to be in writing to be enforceable. That’s a contract rule regarding the Statute of Frauds and not exactly a real property issue, albeit obviously closely related.

Periodic Tenancy – Similar to a Tenancy in Years, This is a leasehold agreement that lasts for a set amount of time, albeit automatically renews unless proper notice is given. The general rule is notice must be given before the start of the last lease period (ie if the term of the lease is one year, before the start of the new year, notice must be given to the other party. The net effect is that the minimum amount of notice will be one year, and very likely much longer, up to almost two years is possible). An exception to the notice requirement is if no notice requirements are stated in the lease agreement, and a lease is year-to-year, than a six-month notice is required. Periodic Tenancy can be created by express agreement, or by the acts of the parties (ie paying of rent each period) or by law

Tenancy at Will – Often called “month to month” is a tenancy that continues until either party terminates. Requires notice of lease termination and a reasonable time to quit the premises. Usually the amount of time is similar to a periodic tenancy in that the amount of notice time is a month (often regarded as 31 or more days regardless of the number of days in the coming month). This is the normal default for small business and residential leases (non freehold estates) when no written lease agreement is used (verbal contract).

Tenancy at Sufferance – After the tenant’s lease has expired and the tenant wrongly maintains possession of the property. This type of tenancy will last until eviction or the landlord agrees to provide a new tenancy estate to the tenant.

Subleases – A sublease is the transfer of less than the full amount of the lease term to another party. Examples include a college student renting a house with some friends and after a couple of months decides to quit school and go back home. Instead of maintaining the room, along with the monthly rental expense (which likely includes rent, heat, electric, etc….) the renter finds another to take the room and pay him rent. What’s interesting here is the student could charge less, the same, or more than they’re paying and the amount of rent doesn’t influence the rights and responsibilities of the tenant (or the sublessor). The contract between the tenant and the sublessor is only between them, and doesn’t necessarily directly involve the original landlord. In contract law, there is a legal doctrine called “privity” – which means the party have contracted with each other. The new sub lessor and original landlord are NOT in privity as they didn’t contract with each other (not directly anyway). The net impact is if the sublessor has an issue they want resolved, it’s the original tenant’s issue to take care of. The same is true for the landlord. If the landlord has an issue they want resolved regarding the sublessor, the landlord “should” contact the original tenant to get it resolved. In real world practice though, it doesn’t take much thought to see how the new sublessor and landlord might simple bypass the tenant and resolve any issue on their own.

Other important considerations with residential (and often commercial depending) leaseholds is there is an Implied Warranty of Habitability – That means the landlord is implying by law, even if they don’t state so in a lease, and often even if they attempt to disclaim it in a lease, that requires the landlord to provide and maintain the apartment/home in such a condition that is reasonably suitable for typical human needs. This includes all the basics, such as heat, running water and drains (either city sewer or private), electric service. The walls and roof must be reasonably free of leaks, and the doors/windows must reasonably keep out water, wind, etc.

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