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Leasehold Estate

DEFINITION

The temporary ownership right of a tenant to use and occupy real property.

EXPLANATION

A leasehold estate is the temporary right of a lessee granted by the lessor in which the lessee can claim property as personal property.

A leasehold is an agreement of land tenure which gives the lessee the right to use the real property for a specified amount of time. Under a lease, the lessee has the right to occupy the real property until the agreement ends. The terms which guide the responsibilities of the landlord and tenant are established in the lease.

The main component of a leasehold interest is the right of exclusive possession and use of the property by the lessee, for a fixed period of time, as determined by the lease agreement. By agreeing to lease the property to a tenant, the lessor parts with his or her right to exclusive possession and only holds basic title during the duration of the lease.

Leasehold Estates

Types of Leasehold Estates

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. 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. A tenant that stays in the property after the lease’s expiration is an estate at sufferance. Can b

Creating a Leasehold

Characteristics of a Valid Lease:

All parties must have legal capacity to make decisions.

An offer must be made and accepted by another party.

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.

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