Sublease and Assignments:
Need to find Privity before a party can sue:
Privity of Contract
· Sue a person if you are in K with a party.
· If L and T are in K, L can sue T unless L specifically releases T from the contract (novation).
· 2 ways to get privity of K
o K.
o 3rd Party Beneficiaries – EXPRESS AGREEMENT to ASSUME all covenants of the lease (including the covenant to pay)
o Language – aggress in the instrument of assignment “assume all covenants in the lease”
o Not all jurisdictions have this.
o 3rd party assumes the benefits of the K between T and T1.
o There is an express clause that T1 promises to follow covenants of original K.
Privity of Estate
· Can only sue where property will go at the end of the lease.
· What ever T has reversion to L has privity of estate with L.
Cts need to determine whether there is a sub lease or assignment:
Ernst v. Conditt
· Issue:
o Whether the transfer of the leasehold interest in the premises from Rogers is an assignment of the lease or sublease.
§ If the contract modification was a sublease, then there was no privity between Ernst and Conditt so Ernst could not sue for breach of contract. Ernst would have to sue Rogers, (who could then sue Conditt). If it were an assignment, then privity exists and Ernst could sue Conditt directly.
· Facts: Rogers originally rented from the Ernst’s, sold his business to Conditt who extended the lease beyond Rogers original term. Rogers signed a letter stating he would be liable for the performance of the lease.
· Argument:
o The Complainants Ernst: is that the agreement between Rogers, the original lessee, and the defendant, Conditt, is an assignment of the lease; and, therefore, defendant is directly and primarily liable to complainants.
o The defendant by his answer insists the agreement between Rogers and he was a sublease and therefore Rogers is directly and primarily liable to complainants.
· Rule:
Sublease –
A “sublease” is transaction whereby tenant grants interest in lease premises less than his own, or reserves to himself reversionary interest in term
Transfers anything less than his entire interest. Lessee has retained reversion – the right to possession reverts back to him at the end of the period.
Conveys portion to T1 (T retains reversion/right of entry. T has a property interest)
Assignment –
· An “assignment of lease” conveys whole term and leaves no interest or reversionary interest in grantor or assignor.
Transfers his entire interest – right to possession for duration of term (most commonly used)
T has no reversion. T1 reversion to L.
Modern Approach –
To tell if there is an assignment or sublease – look to the party’s intent.
A less common approach is to look at the intention of the parties. Actual words used may not be indicative of party’s true intentions.
· Holding: Construction of the agreement between Rogers and Δ is an assignment of the lease.
· Reasoning: The agreement of Rogers to remain personally liable for the performance of the lease created no greater obligation other than that set forth in the original lease.
LEASES: CLAUSES PRETAINING TO SUBLET/ASSIGNMENTS
Kendall v. Ernest Ct balancing prop and K law
Lease is SILENT on whether tenant can sublet/assign.
(Prop law) generally favors free alienability of land
Why Sue:
Restraint on Alienation
Should not be stuck with land T doesn’t want
L has reversion
Lease absolutely PROHIBITS sublet/assignment.
(K Law – fair dealing) Ct would enforce that provision b/c we are respecting the agreement since these terms were bargained for.
Can the landlord WITHHOLD CONSENT (approval clause)?
Majority Rule –
Landlord can arbitrarily refuse:
L will bargain for more favorable terms
We want people to be L
Majority rule has been in effect for years – leases are written this way
Harsh consequences avoided by doctrine of waiver (lessor waived) or estoppel
Minority Rule –
Consent withheld only where the lessor has a commercially reasonable objection to the assignment.
L cannot act arbitrarily but has varied broad considerations:
Will business succeed
Financial problems (tenants, L etc)
* Clause absolutely prohibiting assignment – would be valid if freely negotiated.
Tennant who DEFAULTS
CL SELF HELP:
Landlord’s re-entry is peaceful
Even if the police are brought this would not be considered peaceful.
Nothing short of T handing over the property would be considered peaceable.
Landlord legally entitled to possession
*theoretical but not a practical solution
MODERN APPROACH:
Self help is not permitted. The landlord has no choice but to get a Ct order.
Policy Justifications:
Concerns about violence
People should not enforce their own legal rights
Summary proceedings are available.
Berg v. Wiley Tennant in Possession
Issue:
o Whether the evidence was sufficient to support the jury’s findings that the tenant did not abandon or surrender the premises.
o Whether the trial court erred in finding Wiley’s reentry forcible and wrongful as a matter of law.
Self-help
Rules:
CL- the landlord may rightfully use self-help to retake leased premises from a tenant in possession without incurring liability for wrongful eviction provided 2 conditions are met:
The landlord is legally entitled to possession
The landlord’s means of reentry are peaceable.
Tenant can recover damages if L had no right or used forcible means of entry.
Jurisdictions have problems with landlords taking the law into their own hands.
Modern Trend – Self-help is never available to dispossess a tenant who is in possession and has not abandoned or voluntarily surrendered the premises.
Potential for violent breach of peace
Holding
The only lawful means to dispossess a tenant, who is in possession under a written lease, who has neither abandoned nor voluntarily surrendered the premises and who claims possession adverse to a landlord’s claim of breach of the lease, would be by resort to judicial process
MITIGATION:
Sommer v. Kridel Tennant Abandons Possession
Holding:
A landlord seeking damages from a defaulting tenant is under a duty to mitigate damages by making reasonable efforts to relet the apartment wrongfully vacated by the tenant.
Rules
Property Law – Equate a lease with a transfer of a property interest in the owner’s estate.
The lease conveys the tenant an interest in the property which forecloses any control by the landlord
Contract Law – Duty to mitigate damages.
Landlord must treat apartment like vacant stock.
Must use reasonable diligence in attempting to re-let the premises.
If T surrenders property and L accepts, T is not liable for rent therefore there is no duty to mitigate.
Mitigation is about L taking steps to re-let the apt. Must take a look at what measures the L takes.
CL ↔ there is no duty to mitigate
Under Property Law: a lease is a transfer of an interest in property. “To T for a defined period” The property is the T responsibility for the term of the lease.
L is not the wrong doer – should not have to seek out new T continually.
Encourages abandonment which leads to vandalism
FAVOR MITIGATION:
Avoids vandalism and abandonment
Under K law there is a duty to mitigate. (A lease is a K)
Problem of Mitigation:
Implicitly accept surrender – by trying to mitigate L accepts T surrender and T is off the hook for paying rent.
A savy L could sent a letter rejecting the surrender.
If L can’t mitigate the rent is T responsibility.
Lost Volume Seller ↔ No Duty to mitigate Ct are unsympathetic no apt is identical.
BURDEN OF PROOF FOR MITIGATION:
L has to prove she made reasonable efforts to mitigate.
Surrender –
Terminates the lease – if the landlord accepts the T offer.
If accepted it extinguishes the lessee’s liability for future rent – but not for accrued rent of for past breaches of other covenants.
Implied offer to surrender:
Intent Test – once considers whether the landlord’s actions are inconsistent with or repugnant to continuation of the original lease
TENANTS RIGHTS & REMEDIES
Old CL ↔ Once a L leased property L had not further responsibilities. T took “as is.”
Exception – L makes property habitable before the T moves in.
Reste v. Cooper
The flooding situation is equivalent to the landlord evicting her. The lease had an express covenant of quiet enjoyment; the landlord had not allowed her to quietly enjoy her property.
The defective driveway which caused the flooding was a latent defect unknown to the T when she inspected the premises.
T signed a 2nd lease relying on the promise that the L would remedy the flooding conditions. T did not accept the premises in its defective condition.
A constructive eviction claim must be serious. Where there is a covenant either express or implied:
Any act or omission of the landlord which renders the premises substantially unsuitable for the purpose for which they are leased or which seriously interferes with the beneficial enjoyment of the premises is in breach the covenant of quiet enjoyment and constitutes a constructive eviction.
NEED NOT BE PERMANENT – recurrence follows regularly and is suffici
fore they acted intentionally.
Once we know they acted intentionally then we ask Was It Reasonable?
· Restatement Reasonable test: Weight/balance: fact intensive
o Gravity of the harm
§ Extent and character of the harm
§ Social value of what the Π is doing t the surrounding area
§ Burden of the Π in avoiding the harm
· AGAINST
o Utility of the Δ conduct
§ Social value of the Δ conduct
§ Suitability of the Δ activities in the surrounding area
§ Practicality/Burden of Δ in preventing the harm
Weight of harm depends on the person balancing
Both inquires are fact intensive
BALANCING THE EQUITIES – REMEDIES TEST to determine if an injunction should be granted
Estancias Dallas Corp. v. Schultz
Π wants an injunction to abate the Δ from using the a/c
Ct uses balancing of equities – remedies test:
Balancing the Equities –
Balance the injury to the Δ and the public by granting the injunction against the injury that would be suffered by the Π if the claim is denied.
Different from the restatement test b/c we are looking at the public’s interest as well.
Efficiency Objective – to avoid the greater harm or social cost.
An injunction is a legal right that can be sold.
Nuisance Claims can be resolved in 3 ways:
INJUCTION: Δ has to abate the activity in question by granting the Π injunctive relief Morgan & Estancias Cases
DAMAGES: Let the activity continue if the Δ pays damages Boomer Case
INJUCTION & DAMAGES: Abate activity if the Π pays damages. Spur Case
Boomer v. Atlantic Cement Co.
The Ct did not grant an injunction b/c there was nothing the cement co could do to fix the problem. There is social benefit to the offending conduct.
Boomer’s and the neighbor’s damages were relatively small compared to the value of Cement co operations to the economy.
Should be noted that if the ct did grant an injunction the cement co could by the Π off. But there is a problem with this
Reason why ct granted permanent damages:
Hold outs – more Π the harder to negotiate. In the Shultz case there was one Π but in this case there are numerous Π.
There could be Π that negotiate early and those that may be hold outs. The transaction costs are high.
Every time you add another Π the ct is less likely to grant injunction b/c parties cannot negotiate.
The problem in this case is too large for the ct to solve the legislature should handle issues of this nature.
DISSENT:
Permanent damages does not allow the cement business to internalize damages
The need to take into account those that were impacted by the Δ behavior but have not come forward.
The permanent damages were a license for the co to continue a wrong.
Consider harm to 3rd parties not joined in the law suit.
The legislature would have problems in this case as well. There is a minoritarian bias in favor of the cement co.
2 party situations like Estancias will likely bargain efficiently, whereas multi-party like Boomer will have difficulties
Spur Industries, Inc. v. Del E. Webb Development Co.
The Statute makes what Spur’s cattle farm a Public Nuisance. Del Webb is seen as coming to the nuisance.
Coming to the Nuisance
If you show up 2nd it is unfair to grant an injunction. The Δ was there first in time.
Residential land owner may not have relief if he knowingly came into a neighborhood reserved for industrial/agricultural endeavors and have been damaged thereby
If Web were the only party damaged the Ct would have barred relief asked by Webb.
Ct grants the injunction against Spur, but makes Del Webb, the Π, pay the Δ for damages to move the cattle farm.
Π is more at fault and the Ct is sympathetic to the residents of sun city. The people who bought from Del Webb were innocent parties.
