7.1 The Lease Contract

The Lease Contract

A lease is both an instrument of conveyance and a contract. It conveys a leasehold estate (less-than-freehold) to the tenant, granting the right to use and occupy the property, but not legal title. The four main types of leasehold estate are:

• Estate for years: Specific lease term
• Estate from period-to-period: Term automatically renews
• Estate at will: No specified lease term
• Estate at sufferance: Tenancy without consent

A valid lease conveys exclusive right to use and occupy the property for a limited time in exchange for rent, with return of the property at term end. Leasehold estates are always temporary. The landlord (lessor) conveys the leasehold; the tenant (lessee) receives it.

Leasehold Rights and Obligations

• Tenant: Exclusive possession, use, quiet enjoyment, and profits from use. Obligations: pay rent, maintain property, comply with rules.
• Landlord: Receive rent, re-possess after lease, monitor tenant obligations. Obligations: provide building services, maintain condition.
• Lease obligations survive death of either party (with exceptions).
• Sale or mortgage of leased property does not terminate lease obligations.

Contract Requirements

• Legally able parties
• Property description
• Exclusive possession for tenant
• Legal and permitted use
• Consideration (rent or other)
• Offer and acceptance
• Landlord’s signature (tenant’s signature is prudent)
• Leases over one year must be in writing (Statute of Frauds)

Lease Clauses

• Rent and security deposit
• Lease term
• Repairs and maintenance (who is responsible for what)
• Subletting and assignment (with landlord approval)
• Rules and regulations
• Improvements and alterations (permissions and ownership)
• Options (renewal, purchase, expansion)
• Damage and destruction provisions