Property II Outline –Schlossberg 2010
Part I: Leasehold Estates
1. Introduction to Leasehold Estates
Feudalism & the Creation of the Lease/Leasehold
· William the Conqueror and Battle of Hastings [war of conquest]à Creation of the Lease [1066]
o Wars were about land; William decides to reward people and sets a precedent, which remains uninterrupted until relatively recently—reward people by giving them land
· Leases not immediately admitted into the family of estates [1066àToday]
o Moneylenders used leases to evade the church’s bar on usury
· Up until 12 years ago, it was virtually unheard of to buy a property in a freehold estate
o Even today a majority of people in UK own property has a leasehold not as a freehold
§ Revenue goes to the govt. NOT the crown; in the UK there are no property taxes
· No Taxes because property is leased, NOT owned (by most)
· U.S. has a relatively high rate of home ownershipàthis is ever decreasing today
· Reason: land is cheaper than in most of Westernized companies & money is much cheaper; result: people who shouldn’t be buying homes are buying homesà poor ppl. who can’t afford to buy homes bought homes; across spectrum have ppl buying homes that have no business buying the homes that they are buying
· Post WWII boom in owner occupied single family homesàmassive investment in infrastructure created high paying jobs for classes of people who weren’t used to having disposable incomeàwhich was used to buy homes by most people, that is, they saved and put a lot of money down
· b/w 1940-1980, the proportion of homeowners doubled; as of ;96 2/3 of household owners occupied their own homes
Renters [two types: (1) Permanent & (2) “life cycle” tenants]
· (1) Life Cycle: young people, students, recently divorced persons and elderly who rent after selling their home; because of current economic situation in life, it is more economically sensible to rent, usually do because you are mobile & no family (bf’s/gf’s not family; may/not be poor)
· (2) Permanent Tenants: tend to be much poorer than homeowners
o Half of owners’ median income; x 2 as many renter households live in poverty as do owner households
· Renters spend a much higher proportion of income on housings than homeowners
but gap/diff is narrowingàforecasted later this year that price you would spend on housing for owning vs. renting will virtually be the same; 43% of families making below 10K spent at least half of their income on rent; Renters are more likely to be female-headed families (also poor); ¾ of families maintained by women under 45 are tenants compared w/1/2 of the same-age married couples
· Freehold=right of title to land [dstgshd from holding land at behest of someone else, i.e. Crown]
o Present possession; FIà up to freeholder to decide who will have this
o Concurrent estates: Way for 2 or > ppl. to simultaneously hold title to one of freehold estates i.e. FSA (individual or shared ownership)
· Nonfreehold Interests (LL-T)
o possessory interest in tenant, but no title/ownership [Owner has FI]à just has right of occupancy
Leases [4 types of leasholds]:
· Lease: a contract between 2 people; the conveyance of a property rightà occupancy
· Main Question: Is it more appropriate [policy wise] to use contract terms/laws in governance of leases OR should we use property law/covenant law to dictate terms of lease?
· They are governed by state law [differences exist at fringes in each state]
o South are landlord friendly states; NJ is tenant friendly; PA & NY are neutral: Phila is tenant friend; CALI is tenant friendly, but not as much as NJ
· (1) Term of Years (any period) [2nd most important type]
o Rsmt.: “an estate having a fixed or computable period of time”
o It can be any term; you can have a term of years that lasts for one week
§ Term is fixed when a beginning and end date are specified
§ Term can be fixed date OR a fixed event
· i.e. LL to T for 20 years to begin when improvements are commenced
§ Lease can specify a renewal term
§ Default: the term of years does NOT renew; if it gets to end and nothing happens, it converts to a automatic/period tenancy
· (2) Period Tenancy [most important of the types & Most common]
o T rents apt. at a fixed amt. of time, usually a month, and after that, it automatically renews; default is that it continues going AND the LL & T agree that either party has to give 30 days notice before terminating lease
o i.e. in CA you can’t rent a residential lease for more than one year; after a year, that term of years automatically converts to a term of tenancy—tenant friendly, so if did one year, can leave after a 30 day period once go through the first year
· (3) Tenancy-at-will
o Rsmt.: “estate created to endure only so long as both the landlord and the tenant desire”
§ Notice: mutually agreed term; BOTH the LL and T
o In trad’l Common law [C/l], this type of tenancy ended when a notice was delivered to other party
o **Today: It is NOT a product of agreement of parties, but is read into an arrangement after the fact by the court; i.e. while negotiating a lease, the T takes possession but the talks failà T is a T-a-W
§ i.e. T takes possession under oral lease in a state that requires all leases to be in writingà T is a T-a-W
o Forget the Rsmt. Definition , use today’s; T-a-W is when Crt. deems there to be one after examining the fact, which can happen if there is no lease, and then they decide what the terms of the lease will be when they find a T-a-W to exist
· (4) Tenancy-at-Sufferance [least common of the four]
o Holdover tenant, that is, someone that used to have occupancy rights, but lost the legal right to remain after the tenancy
o C/L: the landlord possessed self-help rights [do as they wanted]
o **Today: do not allow self-help; LL has a statutory right to reasonable rental value, so must go through lawful proceedings
· Case: Vasquez [APPLICATION: Is farm worker a Tenant?]
· Facts: D is a non-prof corp; farmers hired workers from PR through Corp; workers were to pay for transportation from PR to work in NJ; workers reimbursed if contract was fulfilled; reimbursed if worker was physically unfit, not reimbursed if worker was fired; if fired hearing & appellate process was ok; Corp provided the barracks; P got there, worked and he was fired, given hearing on same day, told to pack up and leave, seeks readmis, denied, he found home, but others evicted in middle of night & thrown in street
· Issue: whether or not a farm worker is a T; if YESà then decide how to handle the situation; if not a tenant then NJ tenant act doesn’t apply; if they are a tenant, then go through dictates of the NJ tenant act, they can be protected by anti-eviction act [Sub-issue: whether m-worker entitled to notice]
· Outcome of 1st issue: the migrant workers are NOT Ts because characteristics of tenancy were too different from those of a migrant workers
· Outcome of sub-issue: yes entitled to notice; they turned to public policy [PP] for the reasoning
o In NJ: contracts can be trumped by PP even though PP was never enunciated before
o Area of law they looked to: LL-T law [policy underlying LL-T law was used]
§ This is ironic because they deemed him NOT a T
o Specifically in LL-T Law: unequal bargaining power [less for migrant workers than Corp]
o Court Parallels-àTo contract of adhesion; Consumers accepting a standardized form of contract
§ Issue w/contract is that it is UNCONSCIONABLE because there is NO alternative
§ Failure to address worker’s need for alternative housing and its disregard for worker welfare following evictment [If he gets booted, he gets booted on the street]
· Remedies: case-by-case basis because all cases are different; Self-help was rejected
2. Conflicts about Rent & LL Right to Receive Rent
Rent: Main Qà what LL has right to do [3 options/examples]
· Example I: Holdover-T stays on AND refuses to pay rent [holdover T
Case: Sommer Case [APPLICATION: Duty to Mitigate]
· Facts: D leased apartment from P, Sommer; term of 25 mos; one week after signing agreement, paid security deposit and 1st mos rent, wrote letter asking for release; however LL sues, chose not to rent out apartment even though he could—turns down other Ts, re-rents a year later, prior to re-renting, he sues
· Issue: Does LL have a DtM?
· PP Behind Majority Rule: 2 different views that one has of leases: (1) either as a contract OR as (2) a transfer of property rightsà that a LL cedes an interest in his property and thus does NOT need to concern himself w/T’s abandonment [this was the majority rule at this time]
· Majority rule [then] did NOT apply contract law àno DtM; views lease as a conveyance of property rights
· Policy behind the minority Rule [DtM]: leases are contractsà interpret them according to cannons of contract law; because lease clauses increasingly resemble contract relationships
· Which rule does the Court go w? LL MUSTà DtM [was the minority rule AND now the majority rule]
· Case: Perosio Case [APPLICATION: Duty to Mitigate]
· Facts: Perosio rents from Riverview; Fulfills only ½ of his lease, moves out; LL sues for lost rent
· Issue: does LL have a DtM damages?
· PP Behind Majority Rule: 2 different views that one has of leases: (1) either as a contract OR as (2) a transfer of property rights; that a LL cedes an interest in his property and thus does NOT need to concern himself w/T’s abandonment [this was the majority rule at this time]
· Majority rule [then] did NOT apply contract law àno DtM; views lease as a conveyance of property rights
· Policy behind the minority Rule [DtM damages]: leases are contractsà interpret them according to cannons of contract law; because lease clauses increasingly resemble contract relationships
· Most leasee’s think they are entering into contract anyway, so modern day majority rule makes senseàDtM
· Which rule does the Court go w? LL MUSTà DtM [was the minority rule AND now the majority rule]
· Rationale for adopting the minority rule [DtM (back then); now DtM is majority]?
o Real Property is Uniqueàit is non-fungible & U because no two sets of property can exist in exact same place ever; There is no loss of opportunity for the LL because real estate is unique
· Does this rationale apply for multi-dwelling units [that is, the uniqueness]? YES
· What must a LL do in those circumstances? LL must attempt to re-let that specific unit
o The duty to steer because unless you own a multi-unit dwelling where ONLY vacant apartment is this specific one, if there is another one, there is no incentive to rent this one out because you are getting paid on it, so Court says have to steer to this one
· Who carries the BOP for mitigation? The LL because in a better position to prove it
o NJs is the most heightened: LLs expense, BOP and steering [most extreme DtM]
· Results of Sommer Case and Perosio Case [Supreme Courtàthe outcome of case]
o S: the T won because LL waited so long & could’ve re-rented earlier [T didn’t have to pay anything]
o P: Sup. Court-T wins (Rvsd) & Remand for NT to determine if LL mitigated his duty
