Fejfar's Introduction To Residential Landlord Tenant Lease Law

Fejfar’s Introduction to Residential Landlord - Tenant - Lease Law A Tract Book By Anthony J. Fejfar © Copyright 2006 by Anthony J. Fejfar

This Tract Book is meant to be an introduction to landlord-tenant-lease law with the primary audience a lay person or a first year law student. The treatment of the subject is not meant to be exhuastive. This introduction expresses general legal principles and is not meant to provide legal advice. It the reader has a particular legal problem, the reader should consult an attorney in the appropriate jurisdiction. The historical origin of the lease is unclear. It has been speculated that the lease originated in medieval England as a method to avoid the usury prohibition against loaning money at interest.1 It is speculated that it is for this reason, that is 1

The transaction underlying the lease was in essence a loan. Let me first demonstrate how the loan works without interest. In essence the tenant is the lender and the landlord the barrower. Assume the fair market rental value of the land in question is $100. The tenant “loans” the landlord $100 in exchange for the use of the land for one year, where the land has the fair market rental value of $100. Since large land holders in England were often land “rich” but cash “poor” the foregoing transaction would be attractive. However, the lender usually wants interest, so the transaction is structured in a slightly different way. Instead of paying the full $100 fair market value yearly rent, the tenant/lender instead only pays $90 per year rent. The 1

the usury violation, that equity courts did not intervene to protect the first tenants who were usurious lenders. A lease, interestingly enough is generally considered to be personal property rather than real property. Real property involves the metaphysical principle of “seisin” which expresses the idea that a property interest has substance. A personal property interest is considered less substantial, apparently since it is a possessory interest. Since a lease is a possessory interest, the tenant has a right to possession during the term of the lease. Possession implies control, or, put another way, the right to use. The landlord retains a reversionary interest, that is, the possession of the leasehold property will return to the landlord at the end of the lease term. During the lease term the landlord has no right to enter the leased premises unless this right is reserved in the lease. For example a right to periodically inspect for damage to the leased property, or, the right to enter to perform maintenance. Because the tenant holds the possessory interest, the tenant has the right to sue an lease transaction is thus structured such that $90 annual rent is paid for land that is really worth $100 per year. This lease trasaction mirrors a loan transaction where $90 is loaned by the tenant/lender and the barrower landlord pays back $100 at an interest rate of approximately 11% per year.

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intruder for tresspass civilly. It is unclear whether the landlord has a right to sue for tresspass during the term of the lease. There are two basic types of tenancy, a lease for a term,2 and a periodic tenancy. A lease for a term is a lease for a fixed term, often a term or period of one year. A lease for term automatically terminates at the end of the term without a requirement that either the landlord or the tenant provide some type of notice.3 A periodic tenancy, on the other hand, requires timely notice by either the landlord or the tenant for a termination of the lease to take place. Typically, a month to month lease requires a one month notice of termination, while a year to year lease requires a six month notice of termination. In the case of a year to year tenancy, sometimes the requirement is reduced to a two month notice.

2 A lease for a term is also known as a tenancy for years. Both a term lease and a tenancy for years involve a lease for a fixed term. The phrase “tenacy for years” is archaic and confusing and I will not be using it in this Tract Book. 3

In Pennslvania, by statute there has been a requirement that notice must be given to terminate a tenacy for a term. Such an approach is at best confusing, at worst, wrong. Only a periodic tenancy requires notice for termination. The Pennsylvania approach is an anomoly.

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Technically, the notice required to terminate a periodic tenancy must be made so that it is effective on and for the last day of the particular lease period in question. For example, let us that the tenant has a month to month tenancy. The current date is the 15th day of June. The tenant might incorrectly assume that the lease can be terminated with one month notice as of the 14th day of July. In fact where rent is due and payable on the first of the month, the “period” of the periodic tenancy is assumed to run from the first day of the month to the last day of the month. So, if, as above the tenant decides that hae4 wishes to terminate hae tenancy as soon as possible from the 15th of June, hae will have to give notice of termination for one month corresponding with the next full lease period, which in this case is the month of July. Thus notice would be required for July 31, the last day of the full July lease period. The area to be discussed is that of assignment and sublease. Both an assignment and sublease flow from the original lease, sometimes referred to as the master lease. In the case of an assignment, the entire remainder of the lease term is contractually “assigned” by the primary tenant or “master tenant” to the second “assignee” tenant. The effect of an assignment is that there is “privity of estate” between the primary landlord and the assignee-tenant, so that covenants relating to 4

“Hae” is the neuter pronoun for a person and is used instead of “he” or “she.”

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land found in the original lease can be directly enforced by the primary landlord against the assignee-tenant, with the primary tenant being involved. In the case of a “sublease” some time at the end of the lease is retained as a “reversion” by the primary tenant. For example, the original lease between the primary landlord and the primary tenant runs from July 1, 2005, to June 30, 2006. The primary tenant goes into possession on July 1, 2005. On August 1, 2005 the primary tenant decides to “sublease.” The primary tenant then “subleases” the leased premises to the subtenant for the period running from August 1, 2005, until June 1, 2006. Since the month of June 2006 is retained as a reversion by the primary tenant, the legal effect of the second “lease” is a sublease not an assignment. In the case of a sublease there is no privity of estate between the primary landlord and the sublessee. Only covenants found in the sublease can be enforced directly against the sublessee, and only by the sublessor. There also exists what I describe as a “sidelease.” A sidelease is a lease between the primary tenant, and a secondary tenant who moves in as a “roommate,” while the primary tenant still stays in possession of hae room, with the entire leased premises, except for the bedrooms, considered common areas. The law of sideleases is undeveloped. If both the primary tenant and the secondary tenant sign the lease with the primary landlord, then, essentially, both tenants become 5

“primary” co-tenants, as tenants in common. On the other hand, if the second tenant does not sign the primary lease, and the second lease is for a full term, then there would be a sidelease “partial assigment” of the leased premises. If the primary tenant retains a reversion, then there would be a sidelease sublease. It is a mistake to refer to a sidelease, as such, as a sublease. The last topic to be treated in this Tract Book, is the duty to repair. I use the artificial contructs of the “ancient common law,” the “traditional common law,” and the “modern common law.” Under the ancient common law, which is no longer in force. The landlord had an implied covenant of quiet enjoyment not to actively interfere with the tenant’s possession, while the tenant had a implied covenant to pay rent. The tenant also had an implied covenant not to commit permissive waste, that is, the tenant had a duty to make minor “tenantable” repairs which were intended to keep the leased premises from deteriorating. These covenents operated “independently” of each other. The result of independent covenants was that the only remedy for either side of the lease (the landlord or the tenant) was to bring a lawsuit in court for damages. Failure to perform by one side did not excuse counterperformance by the other side. The traditional common law favors the landlord. Under the traditional common law, which applies to residential tenancies in a minority of jurisdictions, 6

the tenant can be evicted for failing to make tenantable repairs, and for failing to pay rent. The tenant can only withhold rent, on the other hand, if the landlord wrongfully ousts or evicts the tenants, that is, if the landlord breaches the implied covenant of quiet enjoyment. However, there is one qualification to the eviction rule, and that is the doctrine of “constructive eviction.” Under the doctrine of constructive eviction if the landlord fails to comply with a substantial lease covenenant, such as a duty to keep the leased premises in repair, the tenant has the right to give the landlord reasonable notice of the problem and a reasonable time to fix the problem. If the landlord fails to fix the problem, then the tenant has duty to give the landlord notice that the tenant is vacating the premises (moving out) and then so. The tenant was also required to immediately stop paying rent. Constructive eviction can be a trap for the unwary. The most important thing is to make sure that a substantial lease covenant has been breached or violated. If the tenant follows the requirements of constructive eviction, giving notice, moving out and not paying rent, and the landlord’s failure turns out not to be substantial, then the tenant would be in breach and could very well liable for double rent (the old lease and the new replacement lease). Finally, there is the modern common law. Under the modern common law, which applies to residential tenancies in a majority of jurisdictions, the landlord has 7

a duty to repair under the implied warranty of habitability. There is mutuality of obligation between the landord’s duty to repair on the one hand and the tenant’s duty to pay rent, on the other. The landlord has a duty to keep the leased premises in repair and habitable. The tenant has a number of remedies if the landlord fails to repair. The tenant can: 1. Sue for reduced use and enjoyment of the leased premises. 2. Repair the problem or have it repaired at tenant expense and then deduct from the rent. 3. Stop paying rent in proportion to the seriousness of the defect. 4. If the problem is substantial, stop paying rent and move out. It should be noted that a tenancy is considered residential if the leased premises are essentially used for sleeping and eating. The fact that an apartment building is a commercial use in some sense for the landlord is irrelevant.

Bibliography Bruce and Ely, Modern Property Law Cunningham, Property 8

Powell, Real Property

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