In real estate, a lease is an agreement between a landlord and a tenant. The landlord provides property to a tenant in return for periodic payments. The landlord is the owner of the property, while the tenant is the party that gains a temporary right to use real property.
By making payments, a tenant gains the right to exclusively use the property without disturbance from the landlord. Should a landlord want to inspect the property they have to provide the tenant with an advance warning.
Rights of a Landlord
A landlord has the right to enter a tenant occupied property under certain circumstances. Under the California Civil Code, the right of entry by a landlord is permitted if:
There is an emergency
If the landlord believes the tenant is in danger
If the landlord has vacated the property for a significant amount of time. This clause can only be applied in the event the landlord believes the property is permanently vacated.
A court order has been mandated
The landlord is trying to obtain financing thereby needing the premises for a property inspection, appraisal, or others
The landlord wants to show the property to potential buyers
The landlord wants a real estate professional to provide a quote for services (i.e. contractor, repairmen, etc.)
The landlord needs to make repairs. Before repairs are made the landlord must provide advance notice to the tenant of the arrival of a contractor or repair persons.
Unless the situation is an emergency the landlord must provide advance notice to the tenant of his or her entry to the premises.
Tenant Improvements
A tenant of residential real estate must inform the landlord of any proposed renovations to the property of which the landlord must consent. Common commercial real estate practice dictates that the tenant of a unit or property must return the property in the original condition or layout that he or she once found the building.
Fixtures and the Tenant
If a tenant wants to attach any permanent fixtures that are installed, glued, or mounted onto any part of the property, the tenant must inform the landlord of potential changes and receive approval prior to installing the fixture.
Because the property will eventually be leased to another tenant, be it in residential or commercial real estate, the tenant does not have the right to remove or add fixtures without approval by the landlord. To avoid future issues pertaining to the addition or removal of fixtures, both the tenant and landlord should negotiate to clarify or make amendments to any clauses, which allow or disallow any addition or removal of fixtures. Upon closing the determination process, these negotiations must be formalized in writing.
Lease Types
Estate for years
Periodic tenancy
Estate at will
Estate at sufferance
Estate for Years
The term estate for years refers to a leasehold created and approved by both the landlord and tenant for a particular period. Although the word “for years” is in the term, the duration can be for any fixed period – years, months, weeks, or days. The length of the estate for the number of years is determined before the agreement is finalized.
Periodic Tenancy
A periodic tenancy, otherwise known as an estate from period to period, is a leasehold estate for a specified period. A periodic tenancy continues for successive periods up to the point that the tenant or landlord gives the other notification of termination of the tenancy. If the lease ends and the tenant makes an additional payment of which the landlord accepts, the lease will continue. Such an agreement can be created expressly or by implication.
Periodic tenancy usually refers to leases being on a month-to-month basis because standard real estate practice dictates that a landlord will receive necessary payment monthly. In the event no lease term has been determined or agreed upon, a month-to-month lease will be in place until either party decides to terminate the lease.
Estate at Will
Estate at will, also known as tenancy at will, is an agreement wherein a tenant will occupy a property without an official lease agreement that states the definitive rental period, payment amount, and payment date.
Under an estate at will, both the tenant and landlord can terminate the lease at any time. The agreement does not have an official contract in place; rather, a verbal agreement may be established between the landlord and tenant.
An estate at will is beneficial for landlords and tenants who do not wish to be locked down in a fixed agreement, as circumstances may change. An estate at will can be terminated unilaterally by either party. This type of lease is uncommon because most landlords prefer a designated rent period for rent rolls, expenses, and other related costs. While either party has the option to unilaterally terminate the agreement, the terminating party must do so with a 30-day advance notice.
Estate at Sufferance
An estate at sufferance, also known as tenancy at sufferance, is when an agreement between a landlord and tenant expires and the tenant still lives at the real property until the landlord demands an evacuation of the premises.
In an estate at sufferance, if the agreement expires and the tenant is still living at the property, the original terms of the agreement will still be enforced. The terms of the agreement refer to the rent amount and any other obligations on which the tenant and landlord have originally agreed. If the original terms have not been met, the landlord has the right to evict the tenant at any time without rationale.
An estate at sufferance occurs when the term of the agreement expires and the tenant still lives in the property without the owner’s consent. During an estate at sufferance, the tenant and landlord will typically not engage in any communication, either verbally or in writing, regarding the lease’s expiration.
Creating a Leasehold
Characteristics of a Valid Lease:
All parties must have legal capacity to make decisions.
Offer and acceptance.
The contract must be outlined with no contradictory clauses which may confuse or steer one party to make the wrong decision.
The contract must be in writing. Amendments should be made in written form directly on the contract. Verbal changes do not apply.
The contract must be definitive. Everything must be accurate without legal conflict and contain no ambiguous items that supply multiple meanings.
A valid lease agreement must include provisions which relate to:
Part(ies): Who is involved?
Property: Where is the property located; what is the address?
Period: When does the lease begin? When does the lease end?
Payment: For how much is the tenant responsible?
Parties
The lease should specify all parties of the lease. Both the name of the landlord and tenant should appear on the lease. The lease should also include any parties who also may occupy the property.
Nature of a Lease
While a lease can be oral or written, it is always advised to have the terms of the lease in writing. Legally speaking, leases for a duration of less than a year can be executed verbally. Unwritten leases for over one year are considered unenforceable. Even if the landlord and tenant have a good working relationship, individuals dynamically change their opinions and decisions and, as they do, discrepancies may arise, which can only be addressed if the lease is in writing.
The two characteristics of a lease include:
Conveyance by the landlord to the tenant.
Contract between the landlord and tenant that governs the responsibilities and duties of the landlord and tenant. This includes payment, maintenance, and safety.
There are no specific words or documents that must be used to execute a lease agreement; however, the following components are required for a valid lease.
Components of a Lease
Agreement between landlord and tenant
Mutual obligations
Legal capacity of parties
Lawful object. Even if the lease is lawful in nature, certain portions of the lease may be deemed unlawful. An example of this is a specific provision that waives a tenant’s or landlord’s right to something, including security deposits, or waiving one’s right to a course of action, such as lawsuit against the other party.
Property
The property shall be described in the lease agreement. This includes the property address, the physical characteristics of the property, and any details that involve property damage (i.e. cracked flooring, busted water pipe, etc.). To avoid legal disputes, both the tenant and landlord should include the characteristics of the property.
Period of Time
All related dates should be provided. These dates range from the beginning day of the lease, that is, the first day the tenant will occupy the property, until the lease’s end date. If there is no end date on the lease, the last payment made by the tenant will be the end date. Leases are generally monthly; however, some landlords may accept leases on a weekly basis in order to avoid being bound to the provisions engendered in a long-term lease. This may apply in instances where the landlord wants to repair or renovate the property in the near future.
Property located in a city legally cannot have lease terms that exceed 99 years. This provision was created because, historically speaking, tenants have occupied real property for many years without the landlord being able to change the terms of the agreement to reflect inflation, increased cost of living, increased property taxes, and any changes that the landlord may have wanted to do to the property.
The 99-year maximum lease length applies to real property that is being used for the gas and oil exploration or other mineral and raw material excavations. Real property used for the purpose of agricultural can be leased for a maximum of 51 years. In the event the original landlord dies or is unable to make competent decisions because of old age, illness, or other medically documented reasons, the probate court will make decisions regarding the lease length on behalf of the deceased or incompetent party. Also, if a minor or other person who does not have legal decision capabilities is the owner of the property, the probate court can take over and make decisions on behalf of the parties.
The tenant must be provided a copy of the lease agreement within 15 days of agreeing to the lease. Also, the tenant may request a copy of the lease and is entitled to receive the request within 15 business days. This may be done by the tenant to verify that all provisions and responsibilities are being met. In the unlikely event that the lease is verbal, a basic lease agreement must be drafted by the landlord confirming the basic provisions of the agreement. At the very least, the basic lease agreement must include provisions which concern parties, property, period, and payment.
**Directions** Place a residential lease or month to month lease agreement of association of realtors
Payment
A rental payment in the form of a dollar amount is the standard form of payment for a lease. After the lease is executed, the terms of the agreement will be in effect. This will include payments to be made based on the terms of the agreement. Depending on the agreement, rent may be paid in advance of occupying the property or any other agreed upon date.
The lease shall include the name, address, and other contact information (office number, cell phone number) of the person or company to whom the payments will be made. The landlord has the right not to include his or her name in the payment section of the agreement, assuming the lease includes instructions as to how and where to make payments. This may entail instructions on where to send the check, bank account number for where the money should be deposited, or electronic funds transfer.
Security Deposit
A security deposit is a payment made by a tenant in advance of occupying the property. The security deposit covers the cost of processing the lease agreement, cleaning the property and any costs related to default for damages inflicted by the tenant.
Security deposits are collected by the landlord for the landlord to have tangible insurance in the event a tenant defaults on rental payments, inflicts damage on the property, or if the actions of the tenant require the need for cleaning, which may also entail renovation efforts. The security deposit will be retained by the landlord until the period in which the tenant vacates the property.
If damages are inflicted by the tenant, the tenant can fix said damages before the lease agreement expires. Should the tenant not fix, repair, or clean the items altered by his or her actions, the landlord would have the legal right to keep the security deposit up to the amount in damages. Furthermore, the landlord has the right to refuse a tenant’s proposal to repair an item that the tenant damaged. This is because the landlord retains the right to obtain repairs from his or her place of personal preference and the option of refusal also serves as a precautionary measure to prevent tenants from using subpar contractors or materials.
Under the Costa-Hawkins Rental Housing Act (Costa-Hawkins) the landlord has the right to increase rental rates following the departure of old tenants. Prior to this act, it was difficult for many landlords to increase rental rates in specific geographical markets.
Execution and Acceptance
A written lease is deemed executed when a lease is signed, delivered, and accepted by the other party. A lease that is signed by the landlord and received by the tenant is considered enforceable even if the tenant does not sign. If the tenant does not sign the lease agreement and begins living in the unit, it is assumed by law that the tenant accepts the lease; therefore, even if the tenant does not sign, his or her actions deem the agreement executed and enforceable.
Rights of a Tenant
The covenant of quiet enjoyment ensures the lessee the right to exercise use of the property without interference from the landlord. The landlord can interfere with the tenant’s use of the property in instances of eviction or other reprehensible acts, such as damage or failure to make rental payments.
Constructive Eviction is a real estate legal term which refers to a scenario where a landlord fails to meet the minimum standards and obligations of his or her duty towards the property and the tenant. The following is a list of hypothetical situations wherein constructive eviction may apply:
Landlord interference of tenant’s legitimate use of the property
Failure to provide basic services (i.e. water, heat)
Failure to correct deficiencies and make necessary repairs after written notice by tenant. This includes only items which are deemed necessary (i.e. toilet, wiring, plumbing, etc.).
Landlord altering tenant’s property without advance warning
Unfairly threatening to remove tenant. Potential reasons for unfair tenant removal threats may include children, guests, and other unwarranted reasons of removal of the tenant.
Attempt by landlord to vacate tenant with the intent of leasing property to another tenant.
A tenant subject to the above conditions may terminate the lease indefinitely without legal recourse from landlord.
Transferring a Lease
In the event a tenant no longer wants to occupy the property, he or she has the option of subleasing the property to another tenant. Under a sublease, the existing terms of the original lease will be passed to the new tenant, who will then continue the lease for the duration of the lease. In many instances the landlord may require the tenant to conduct a background check on the subject party.
A sandwich lease is a lease wherein the original tenant leases the remaining terms of a lease to a new tenant. Certain landlords may prohibit the use of a sublease or sandwich lease. Under a sandwich lease, the original lessee acts as both the lessee and lessor as he or she handles collecting and paying rental payments. There are no specific reasons why the original lessee of a property may want to sublease a property; however, it is generally because he or she can no longer abide by the original terms of the agreement or may need a smaller or larger building to lease for the purpose of living or for their business.
An alternative to the common sublease is the transferring of property to another tenant under a provision called a lease assignment. A lease assignment involves transferring the lease to another party. With the approval of the landlord, the original tenant can be removed from the lease and will then no longer hold any liability relating to the original lease of the property.
Lease Renewal
The terms of a lease agreement will include provisions relating to the renewal of the lease. The tenant and landlord have the option of renewing the lease by continuing the original lease agreement or drafting a new agreement. Rather than making amendments to the original lease agreement, it is advisable to have a new agreement drafted specifically if there have been any changes to the agreement with regards to price, usage, or any alterations to the property.
A holdover tenancy is the party that stays in the property following the lease’s end date. It can be inferred that the landlord’s acceptance of a tenant’s payment following the end of the lease is formal acceptance of the tenant’s right to continue occupying the property.
Lease Extension
A lease extension is issued when the parties to a lease agree to continue the lease according to original lease agreement. A lease extension can occur if the landlord allows the tenant to remain in the property. If the original lease agreement terminates and the landlord allows the tenant to remain by accepting payments, the party’s actions presume the continuation of the lease.
In the event the lease agreement terminates and the landlord accepts payments after its termination, the tenant will remain on a month to month contract for no longer than a maximum of one year. If the agreement contains a clause or provision indicating that the lease terminates, the lease extension must be in writing in order for it to be valid.
Valid lease extensions must be specific and cannot contain broad clauses such as “generally unenforceable”. If something is unenforceable the contract must explicitly state that which is unenforceable.
Landlord Responsibilities and Obligations
A landlord handles upholding all applicable housing and building standards as directed by city coding regulations. Although most, if not all, lease agreements will not include any provisions which relate to city coding, landlords are still expected to abide by all city, state, and federal habitability standards. The provision which all landlords are expected to follow is the warranty of habitability. This warranty indicates that landlords must keep the property in habitable condition even if the lease does not specifically state so. This includes the landlord’s responsibility to make repairs to maintain minimum habitation standards.
Landlord Duty for Residential Real Estate (Found in Civil Code Section 1941.1)
Waterproofing and weather protection including exterior walls, unbroken windows and doors
Plumbing and gas maintenance
Water supply of hot and cold running water
Heating facilities
Electrical lighting
Building is properly maintained and sanitary and free of garbage, filth, debris mold, mildew, rodents, etc.
Adequate garbage disposal including bins, trash cans, and dumpsters
Floors, stairways, and railing in good condition
Locked mail area
Repairs
As mentioned above, the landlord is responsible to repair or renovate any problems in the property which make the property uninhabitable. If the landlord does not fix the problem on time, the tenant can claim the covenant to repair, which, if proven, would force the landlord to repair the damages.
