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The elements of leasing reflect the focus of interests held by the two primary classes of participants in
the process - Landlord and Tenant. The focus of interests of these parties centers on the creation of the following:
- The nature of the leasehold estate, including, but not limited to
duration, tenure, base and additional rent charges, renewal and default.
- The nature of the economic attributes of the leasehold agreement,
including, but not limited to the allocation of risks, costs and benefits
between the Landlord and the Tenant.
- The regulation of behavior of Landlord and Tenant with regard to
the Property (the entire parcel and improvements within the
ownership and control of Landlord which impacts upon the leasehold
interests of Tenant) and the Premises (the specific area included in
the leasehold interest granted the Tenant).
These categories of focus include both the historical property aspects of leasehold interests, as well as the
contemporary contractual provisions, which together constitutes the entire leasehold agreement.
An enumeration of leading areas of concern within each of the modules noted above follows.
There are a number of sample leases included with the course materials. These leases are
modified versions of instruments that have been used in single tenant, multiple tenant,
strip mall and regional mall situations. In each of the categories, the language contained
in these leases to identify, convey, allocate and affect that interests, risks and relationships
of the parties should be compared and contrasted.
- An Overview of Estate Interests and Issues:
In almost every lease there is recognizable language of conveyance as the interest created by the Landlord in the
Tenant is an Estate in land. The estate in land is one, which has definite characteristics, which include
duration, exclusivity, possession, renewal and dependant promises upon which the continuation of the estate interest
is premised.
- Duration - the term of the lease. Is the term fixed in time? Is the term
a periodic tenancy? Does the term continue so long as there are
actions, which support
continuation (remaining in possession, giving
formal notice), or until such time as possession
changes or notice is given? Somewhere in the lease there ought to be language, which
delineates
the term of the leasehold interest.
- Possession - the tenant has the right of possession. Does this mean
that the Landlord must
deliver to the Tenant the right of possession, or
does it mean that the Landlord must deliver
to the Tenant actual
possession? What if the Landlord does not have the right to deliver
possession at the inception of the leasehold? What if the Landlord has
the right to deliver
possession, but someone else wrongfully deprives
the Tenant of possession either at the
inception or some later date in
the leasehold?
- Renewal - the lease may end at a date certain, but the Tenant may be
given the right to
renew the lease for an additional term, or remain in
possession. What provisions are commonly
included in leases, which
provide for the exercise of these rights? What conditions precedent
to
the exercise of these rights by the Tenant are included in these leases?
There are in the leasehold estate "Dependent" and "Independent" promises. The concept
of "Dependent" and "Independent" promises relates to the underlying estate and those
promises that are deemed made necessary to support that estate interest. In other words,
the Landlord is deemed to have conveyed the estate interest and the Tenant is deemed to have
promised to pay rent for the term of the estate interest. If the Landlord's promise to deliver
the estate interest, or if the Landlord's promise that the Tenant shall have unfettered
rights in the estate is broken, the Tenant's obligation to pay rent is held either to have
terminated, or placed in abeyance during the duration of the Landlord's default. If, on the
other hand, the Tenant does not pay the required rent, then the estate may terminate
automatically, or, terminate at the option of the Landlord. Once the estate terminates,
the Landlord may seek to recover.
An example of an independent promise might be the Landlord's promise to paint the outside of
a building, or keep the premises neat and clean, or plow the parking lot. These may clearly
be obligations of the Landlord, but they are not promises upon which the estate itself
depends at common law, unless made so by explicit contractual provisions in the lease.
A breach of these promises may give the Tenant rights against the Landlord, but in most
instances these would be collateral to the estate obligations of the parties, such as the
Tenant's obligation to pay rent.
These distinctions are critical in the creation of leasehold estates and the drafting of
leasehold instruments. They determine the nature of remedies, procedures and consequences
of a failure to perform any of the leasehold obligations by either of the parties.
Make a list of those promises, which you think were deemed dependent at common law? Make a
list of those promises, which are contractual and independent at common law? Make a list from
the leases in our materials of those contractual promises, which were made material and
dependent by agreement.
The leases included as examples in our materials include default provisions for both the
Landlord and the Tenant. Identify the default provisions in the leases. Distinguish in these
leases the default provisions that are implicitly or explicitly estate or contractual in origin.
Are there any provisions, which are impacted by Public Policy?
As distinguished from the substance of these provisions, are there procedural requirements
either required by law, or by the terms of the leasehold agreements. What do these leases
require the Landlord undertake as a condition of exercising the Landlord's rights to recover
the Landlord's estate interest? What statutory obligations, either in addition to, or as
limitations on the exercise of these rights do you find to exist with regard to these provisions?
Again, these statutory requirements will vary by jurisdiction. In New York, what are the
statutory requirements for:
- Notice
- Court Jurisdiction
- Summary Proceedings
- Determinations of Law and Fact
- Trial by Jury
- Curative Acts
- Other Remedies
Assignment: Select any one issue involving the creation, duration, and termination of
the estate interest of interest to you. Find a case on point and down load the case. Prepare
a one-paragraph summary of the major facts of the case and prepare a two-paragraph summary of
the major legal issues in the case and the holding(s) of the court. Submit the case for
posting at lease two days prior to the scheduled class to permit the others in the class to
peruse the summaries and cases prior to the class.
Find any Law Review or Trade Journal publication on the issue selected above, or any other
issue and draft a one-paragraph summary of the article.
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