Lease

The narrower term 'tenancy' describes a lease in which the tangible property is land (including at any vertical section such as airspace, storey of building or mine). A premium is an amount paid by the tenant for the lease to be granted or to secure the former tenant's lease, often in order to secure a low rent, in long leases termed a ground rent. For parts of buildings it is most common for users to pay also by collateral contract, or by the same contract, a service charge which is normally an express list of services in a lease to minimize disputes over service charges. A gross lease or tenancy stipulates a rent that is for the global amount due including all service charges.


A cancelable lease (UK: determinable/breakable lease) is a lease that may be terminated (formally determined) solely by the lessee or solely by the lessor without penalty. A mutually determinable lease can be determined by either. A non-cancelable lease is a lease that cannot be so terminated. Commonly, "lease" may imply a non-cancelable lease, whereas "rental agreement" may connote a cancelable lease.


Influenced by land registration, commonly tenancies initially granted for more than a year are referred to more simply as leases.^[6]


The lease will either provide specific provisions regarding the responsibilities and rights of the lessee and lessor, or there will be automatic provisions as a result of local law. In general, by paying the negotiated fee to the lessor, the lessee (also called a tenant) has possession and use (the rental) of the leased property to the exclusion of the lessor and all others except with the invitation of the tenant. The most common form of real property lease is a residential rental agreement between landlord and tenant.^[7] As the relationship between the tenant and the landlord is called a tenancy, this term generally is also used for informal and shorter leases. The right to possession by the tenant is sometimes called a leasehold interest. A lease can be for a fixed period of time (called the term of the lease). A lease may be terminated sooner than its end date by:


A lease should be contrasted with a license, which may entitle a person (called a licensee) to use property, but which is subject to termination at the will of the owner of the property (called the licensor). An example of a licensor/licensee relationship is a parking lot owner and a person who parks a vehicle in the parking lot. A license may be seen in the form of a ticket to a baseball game or a verbal permission to sleep a few days on a sofa. The difference is that if there is a term (end time), a degree of privacy suggestive of exclusive possession of a clearly defined part, practised ongoing, recurrent payments, a lack of right to terminate save for misconduct or nonpayment, these factors tend toward a lease; by contrast, a one-time entrance onto someone else's property is probably a license. The seminal difference between a lease and a license is that a lease generally provides for regular periodic payments during its term and a specific ending date. If a contract has no ending date then it may be in the form of a perpetual license and still not be a lease.


Under normal circumstances, owners of property are at liberty to do what they want with their property (for a lawful purpose), including dealing with it or handing over possession of the property to a tenant for a limited period of time. If an owner has granted possession to another (i.e., the tenant) then any interference with the quiet enjoyment of the property by the tenant in lawful possession is itself unlawful.


Similar principles apply to real property as well as to personal property, though the terminology differs. The right to sub-lease may or may not be permitted to a tenant. Where it is permitted, the lease granted directly by the owner is called a "headlease", or sometimes a "master lease". Headlease tenants and their tenants who may in turn also sublet are termed mesne /miːn/ landlords from the old French for middle. The headlease tenant has no right to grant a sublease which extends beyond the end of the headlease.^[8]


To circumvent privity of estate which is the general principle flowing from privity of contract, laws exist in several jurisdictions to bind subtenants to some of the restrictive covenants (terms) of the headlease, for instance in England and Wales those which have been held by courts to touch and concern the land.^[9]


A transfer of a remaining interest in a lease, assignment, is a type of (alienation) is often possible and an implied rights to assign exist by compulsory law or as a default position in some jurisdictions. Sharing or parting with possession can be a breach of certain leases resulting in action for forfeiture.


Enfranchisement is the obtaining of the landlord's title and is most commonly negotiated with the landlord where a tenant pays only a ground rent. Merger is where the landlord and tenant happen to be the same and can terminate a lease where there are no subtenants in certain jurisdictions.


In the United States a lessee may negotiate a right of first refusal clause into their land or property lease giving them the right to make a purchase offer on the property before the lessor can negotiate with third-party buyers. This gives tenants the ability to commit to a piece of property before any other potential buyers have the opportunity.^[10][11]

History of leases of land[edit]

Over the centuries, leases have served many purposes and the nature of legal regulation has varied according to those purposes and the social and economic conditions of the times. Leases, for example, were mainly used for agricultural purposes until the late 18th century and early 19th century when the growth of cities in industrialized countries made leases an important form of landholding in urban areas.


The modern law of landlord and tenant in common law jurisdictions retains the influence of the common law and, particularly, the laissez-faire philosophy that dominated the law of contract and property law in the 19th century. With the growth of consumerism, consumer protection legislation recognized that common law principles, which assume equal bargaining power between the contracting parties, create hardships when that assumption is inaccurate. Consequently, reformers have emphasized the need to assess residential tenancy laws in terms of protection they provide to tenants. Legislation to protect tenants is now common. Consequently, Common law has treated Lease as not similar or equivalent to a common commercial contract, especially in regard to the question of whether a Lease Agreement can be terminated by notice, in the same way and manner as a usual commercial contract.

Sublease[edit]

In real estate law, sublease (or, less formally, sublet) is the name given to an arrangement in which the lessee (e.g. tenant) in a lease assigns the lease to a third party, thereby making the old lessee the sublessor, and the new lessee the sublessee, or subtenant. This means they are not only leasing the property, but also subleasing it simultaneously.^[15] For example, if a company leases an office space directly from a landlord, the lessor, and subsequently outgrows the office, then the company can sublease the smaller office space to another company, the subtenant, and enter into a new lease for a larger office space, thereby hedging their real estate exposure.


The sublessor remains liable to the original lessor in accordance with the initial lease, including all remaining rent payments, including operating expenses and all other original lease terms. In a down-market, the original lessee may require a lower rent payment from the sublessee than what he or she may have originally paid, leaving the remaining rent owed to the lessor to be paid by the original lessee. However, if market prices have increased since the original lease was signed, the sublessor might be able to secure a higher rent price than what is owed the original lessor. However, many commercial leases stipulate that any overages in rent be shared with the landlord, the lessor.


In residential real estate, it is sometimes illegal to charge the subtenant more than the original amount in the sublessee's contract (for instance, in a rent control situation where the rental amount is controlled by law). Subletting of social housing is generally illegal, whatever the rent charged to the subtenant; in the UK it is officially described as a category of housing fraud.^[16] In New York the subletting of Mitchell-Lama cooperatives is illegal. Mitchell-Lama residents must maintain a primary residence to remain in their cooperative.^[17]


A sublease can also apply to vehicles as an alternate type of car rental. In a vehicle sublease, a lessee or vehicle owner can assign a lease to a third party and by way of contractual agreement for specific dates. Although this arrangement is not popular, it is a growing trend in the travel industry as a less expensive alternative for travelers and locals.