University of South Carolina School of Law
Property II, Spring 2010
Prof. Josh Eagle
Chapter 7: Leasing Real Property
Traditional view of Leaseholds: seen as nonfreehold estates. Landlord transferred the exclusive right to possession of the premises to the tenant, and retained a future interest (usually reversion). Thus, it was governed by property law.
Today: Leaseholds are usually governed by a hybrid of contract and property law.
Immutable Rules – supersede any contrary provision in the lease.
Default Rules – fill in the gaps that the parties did not address in the lease.
A. Creating the Tenancy
1. Selecting the Tenant
Fair Housing Act (federal) – most important statute regulating landlord’s right to exclude.
· Can’t refuse to rent because of against race, color, religion, sex, familial status, or national origin.
· Cannot publish anything with respect to sale or rental of a dwelling that indicates a preference, limitation, or discrimination based on race, color, religion, sex, handicap, familial status, or national origin.
· Can’t refuse to permit, at the expense of the handicapped person, reasonable modification of existing premises occupied or to be occupied by such a person if such modification may be necessary for that person to have full enjoy
Neithamer v. Brenneman Property Services, Inc.
US DC (1999)
Fact: Gay HIV positive man is refused rental. Sues for discrimination.
Issue: Whether there was enough evidence to hold that
Rule: To establish a prima facie case of discrimination:
(1) Plaintiff is a member of a protected class and Defendants knew or suspected that he was.
(2) Plaintiff applied for and was qualified to rent the property in Question
(3) Defendants rejected his application
(4) Evidence to show that he was rejected under circumstances which give rise to an interference of unlawful discrimination
Three-step Approach to establish discriminatory intend under the Fair Housing Act:
(1) P establishes a prima facie case of discrimination
a. P is a member of a protected class and D knew or suspected that he was
b. P applied for and was qualified dto rent the property in question.
c. D rejected his application.
d. Evidence to show that he was rejected under circumstances which give rise to an interference of unlawful discrimination.
(2) The burden then shifts to the D to prove a legitimate, nondiscriminatory reason for his conduct
(3) If the D meets that burden, then the P must show that the reason is a mere pretext.
Handicap – also includes persons who do snot suffer from an impairment, but who are perceived as having such an impairment.
Civil Rights Act of 1866 – provides additional protection against racial discrimination
2. Selecting the Estate
CL freehold estates:
· Term of Years Tenancy
· Periodic Tenancy
· Tenancy at Will
· Tenancy at Sufferance
a. Term of Years Tenancy
Term of years tenancy –
· Fixed duration agreed upon expires and the landlord main advance.
· Once term ends, tenant’s possessory right automatically expires and the landlord may retake possession.
· Commonly used in commercial transactions.
b. Periodic Tenancy
· Automatically renewed for successive periods unless the landlord or tenant terminates the tenancy by giving advance notice.
· Month-to-Month periodic tenancies are frequently used in residential leases.
c. Tenancy at Will
· No fixed ending point.
· Continues only so long as both the landlord and the tenant desire.
· Today, most states require advance notice to end this tenancy, usually e to the period of time between rent pay
d. At Sufferance
· Created when a person when a person who rightfully took possession of land continues in possession after that right ends.
· Arises from tenants improper conduct, not from an agreement
· Holdover Tenant
· CL gave landlord two options in this situation: (1) treat T as a trespasser and evict him or (2) renew T’s tenancy for another term
· Today: Most abolish or limit the second option listed above.
Term of Years or Periodic Tenancy
· When does tenancy end?
Dorms – Is a license not a lease.
License – a personal privilege to sue the land of another for some specific purpose
Lease – transfers the exclusive right of possession o the tenant.
3. Negotiating the Lease
Statute of Frauds – A lease of real property for a term of more than one year cannot be enforced unless it is in writing.
Standard forms – preprinted standard lease form, without any meaningful opportunity to negotiate.
Rent Control – A typical rent control ordinance establishes a “base rent” for each unit.
4. Delivering Possession
Keydata Corp v. U.S.
English Rule –
· Tenant may terminate the lease and sue the landlord for damages.
· She may also affirm the lease, pay no rent until the premises are vact, and collect damages from the landlord.
American Rule –
· Incoming tenant may sue the holdover tenant to recover possession and damages.
· She has no claim against the landlord.
B. Condition of the Premise
1. The Challenge of Substandard Housing
In Re Clark
US Bankruptcy Court of Penn. (1989)
2. Constructive Eviction
3. The Implied Warranty of Habitability
Implied Warranty of Habitability – are meant to protect the tenant as the party in the less advantageous bargaining possession. It is based theory that the residential landlord warrants that the leased premises aer habitable at the outset of the lease term and will remain so during the course of the tenancy.
Wade v. Jobe
C. Transferring the Tenant’s Interest
Assignment – tenant transfers entire right of possession in a rental property
Sublease – tenant transfers partial right of possession for a lease. This includes if tenant includes entire pr
protecting tenants from arbitraty or ill motivated evictions.
· Would not advance purpose of statute – mere expiration fo a lease DOES NOT constitute a legitimate business or economic reason. A Landlord would have used Period Tenancy if being able to evict tenants for any reason was an economic/business interest of hers.
· If mere expiration of a lease constituted good cause, then tenants could be evicted arbitrarily from their homes through no fault of their own.
Two ways to Evict:
· Use Self-Help – L could retake possession through self-help, which is physically entering the premises and causing T to leave, as long as L used only a reasonable amount of force.
o Policy reason for allowing self-help – virtually no cost. Everyone who is a tenant would pay more for ejecting those tenants that don’t leave.
· Sue Tenant: L could sue T to secure a judgment ordering T’s eviction and the judgment could be enforced by a law enforcement officer.
Berg v. Wiley
SELLING REAL PROPERTY
Purchase Contract – area of buying/selling where a contract is involved.
Closing – contract is fully performed at the closing; buyer pays the purchase price, lenger advances the loan funds and the seller transfers title.
Title Protection – buyer protects her title through title covenants, a title opinion based on a search of public land records, and/or a title insurance policy.
Attorney’s involvement in varies per jurisdiction. In SC, an attorney is still required in all steps of purchase of K. Will be disbarred if your paralegal does it; buying a home is the single largest and most important transaction that occurs in most people’s lives. Thus, we want everything to be done correctly and carefully for purposes of judicial efficiency.
A.THE PURCHASE CONTRACT
Typically a standard, preprinted form supplied by a real estate broker with blanks to fill in regarding price, method of payment, time for performance, closing date, contingencies, etc.
Once the contract is signed, parties prepare for closing…
(1) The seller’s title is examined – a title search is done. AP is an example of something that will not show up in a title search.
(2) The condition of the property is evaluated – book is wrong, this should really be done before you sign the contract. There is usually an inspector provision.