Cyclopedia of Commerce, Accountancy, Business Administration, v. 03 (of 10)

by American School of Correspondence

LANDLORD AND TENANT

327. In General. The term, landlord and tenant, is applied to the relation existing between one who obtains the right to the possession of the real property of another, under a contract by the terms of which the title or ultimate right to possession, or at least some interest in the property, remains in the grantor. The relation existing between landlord and tenant is contractual. Like all contracts, there must be a consideration, competent parties, and legality of purpose.

The contract by which one party becomes a tenant is called a lease. The party granting a lease is called the landlord. The owner to whom the lease is given is called the tenant or lessee. A lease of property is not a sale. By a lease of real property, the lessor grants but a portion of what he possesses. By making a sale of real property, the grantor transfers his entire interest. If a tenant transfers his entire interest in the lease, it is a sale, and is usually called an assignment. If a tenant sublets a portion of his interest in the lease, he, himself, becomes a landlord, and the sublessee becomes a tenant.

328. Rights of a Tenant. The form and contents of a lease are discussed under a separate section. Parties to a lease may agree to any terms they choose, if the terms are legal. In the absence of express stipulations in a lease, many things are implied. A tenant is entitled to the possession and use of the premises leased, from the time mentioned in the lease for it to take effect. By possession is meant the right to take actual possession of the premises without being prevented by one having a right superior to that of the tenant.

A tenant is permitted to rent any premises he chooses. A landlord, on the other hand, may lease to a tenant any premises he possesses. There is no implied warranty on the part of the landlord that premises leased are in good condition, or that they are fit for any particular purpose. The tenant makes his own bargain, and, as in the case of making a purchase of goods, or in making any contract, he must take care of his own interests. The tenant may stipulate in the lease that the premises are to be in a certain condition, that they are adapted to a certain purpose. In this event, the tenant is not obliged to accept the premises if they do not comply with the terms of the lease, or he may bring an action for damages against the landlord for not complying with the terms of the lease. In the absence of any express stipulation as to the condition of the premises, or their suitableness for the purpose for which they are to be used, the law implies nothing.

A landlord is not permitted to defraud a tenant. He cannot conceal or misrepresent material facts relating to the lease. If there is a misrepresentation of a material fact by the landlord, which is relied upon by the tenant to the latter's injury, the tenant has been defrauded. He may refuse to accept the property, or he may repudiate the lease as soon as he discovers the fraud. A tenant impliedly has the right to quiet enjoyment of the premises leased. The landlord must not disturb the tenant's right to quiet possession. If the landlord, himself, or one who legally claims a right to possession of the premises disturbs the tenant's possession, the latter may sue the landlord for damages. If a mere trespasser or one who wrongfully claims the right, disturbs the possession or quiet enjoyment of the tenant, the landlord is not liable. The acts of strangers are beyond his control. The tenant may use the premises for the purposes stipulated in the lease. In the absence of express stipulation, he may use the premises for the purpose and in the manner in which the property leased is customarily used.

329. Taxes, Repairs, and Insurance. The general rule is, that in the absence of express stipulation in the lease to the contrary, all taxes are to be paid by the landlord. Even though the lease provides that the tenant is to pay all taxes, this does not include special assessments, such as assessments for city paving and sewers. Water rent is not included in the general term, taxes. The landlord is obliged to pay all taxes on the property unless the tenant expressly assumes them. In the absence of any express stipulation, the tenant must pay water-rent. There is no implied duty on the part of the tenant to insure the property leased.

A tenant is, in the absence of any express stipulation, required to keep the property in repair. He is not liable for ordinary wear and tear of the property, but must make ordinary repairs at his own expense. If the property is destroyed by fire without the fault of the tenant, the tenant is not liable for the loss. He is not obliged to rebuild the property destroyed. The lease is ended by the destruction of the property by fire, and the tenant is not obliged to pay further rent. The above is the rule fixed by statute in most states. The common law rule was that a tenant was not relieved from paying rent by the destruction of the building by fire.

330. Liability for Injuries Arising from Condition of Leased Premises. In the absence of any stipulation in the lease relative to the condition of the premises leased, the tenant is presumed to make the lease on his own judgment. There is no implied duty on the part of the landlord to deliver the premises in any particular condition. This rule is subject to the limitation that a landlord is not permitted to deliver possession of premises containing latent defects of such a character as would be liable to cause injury to a tenant. If injury results from such latent defects, the landlord is liable in damages to the tenant. As a rule, however, the tenant takes the premises as they are, and if injury results to himself by reason of apparent defects in the premises, he has no right of action against the landlord. The tenant has control of the premises. If persons are injured by reason of accummulations of snow or ice on the walks, the tenant, and not the landlord, is liable therefor.

331. Rent. The compensation given by a tenant to a landlord for the use of leased premises is called rent. A tenant may become liable for rent without any express agreement to that effect. If one person, with the consent of another, occupies the premises of the latter as a tenant, he is liable to pay the reasonable value of such occupancy, as rent. This obligation is implied from the relation of landlord and tenant existing between the parties.

Ordinarily, the matter of rent is expressly agreed upon and, until the tenant is evicted, his lease surrendered, or he is released, he is obliged to pay the landlord rent. The tenant's liability to pay rent does not necessarily depend upon actual occupancy of the leased premises. He may rent the premises for the use of another, or he may, without excuse, refuse to accept possession of the premises. In either event, he is liable for rent. If the lease expressly stipulates that the premises are in a certain condition as to plumbing, etc., the tenant may refuse to accept the possession if the conditions are not fulfilled. If, on the other hand, the tenant leases premises, nothing being said about their condition, the tenant is presumed to rely upon his own judgment, and the fact that the premises are uninhabitable by reason of defective plumbing, by reason of unhealthful conditions, or for any reason, does not release him from his contract. He is liable to pay the rent agreed upon. The landlord is not permitted to defraud the tenant. He cannot mislead the tenant by false or fraudulent representations. Fraud enables a tenant to avoid a lease.

If a tenant refuses to accept possession of premises leased, or abandons the premises without excuse, he is still liable for the rent for the balance of the term. If he surrenders the lease, and the landlord consents to the surrender, the tenant is relieved from further liability. But a voluntary abandonment by the tenant, not consented to by the landlord, does not relieve the tenant from liability to pay rent. If a tenant abandons the premises leased, the landlord may permit the premises to remain vacant and compel the tenant to pay the balance of the rent when it is due under the lease. The landlord may, on the other hand, accept the premises, and cancel the remainder of the lease. Again, the landlord may take possession of the premises and relet them for the benefit of the tenant, notifying the tenant of his intention. He may collect any deficiency in the rent from the original tenant. For example, if A rents B's house for one year for $300.00 and at the expiration of six months A abandons the premises, B may relet the premises to C for A's benefit. If B relets for A's benefit, he must obtain the best terms possible. If he obtains only $100.00 rent from C for the balance of the term, he can collect $50.00 from A.

332. Distress. At common law, a landlord had the right to take possession of the personal property of a tenant who was in arrears for rent, and hold the personal property until the rent was paid. This remedy is known as distress. When a landlord makes use of this remedy he is said to distrain for rent. A landlord cannot deprive the tenant of possession, and then distrain for rent. It is not an action against the tenant personally, as an action for debt. It is a mere right of a landlord to take possession of the tenant's personal property after rent is due, and while the tenant is still in possession of the leased property as tenant. The landlord may retain possession of his property as security for the rent. At common law, a landlord could not sell the property, but could hold it as security for the rent.

At the present time, the right to distrain for rent is not recognized by many states. Where recognized, it is regulated largely by statute. The landlord is usually required to give bond, and file an affidavit with a court to the effect that the rent of a certain amount is justly due. The property is then seized by an officer of the court, and upon final termination of the case, may be sold, and the proceeds applied to the payment of the rent. This action is now treated in the nature of an attachment. (See Attachment, chapter on Courts and Legal Remedies.) The remedies of a landlord commonly recognized at the present time are actions for rent, and actions to recover possession of the premises. These remedies are discussed under a separate section.

333. Leases. Lease is the term applied to the agreement by which one person becomes a tenant, and another a landlord. Leases are usually in the form of formal written instruments in which the rights and duties of the parties are quite fully set forth. No particular form of language is required to make a valid lease. If the agreement shows an intention on the part of the parties to create the relation of landlord and tenant, it is sufficient to constitute a lease. Parties may make oral leases covering short periods of time. Most of the states provide by statute that leases beyond certain periods must be in writing to be enforceable. This period varies in the different states. Some require leases in excess of three years to be in writing; others fix the limit at one year. Some of the statutes which do not specially require leases to be in writing, make them void as against purchasers or incumbrances if not recorded. Such statutes in effect require the lease to be in writing. A lease does not require a seal. By statute, most states require leases to be witnessed, usually by two witnesses, and acknowledged before a notary public. Witnessing is called attesting, or attestation. By acknowledgment is meant an admission of the signature by the parties to a lease before a notary public. The notary writes his certificate upon the lease, stating that the parties acknowledged the signature in his presence. The notary signs and seals the certificate of acknowledgment. The states generally require by statute that leases beyond a certain time, usually one or more years, be recorded with the public recorder of the county where the property leased is located, to be effectual as against subsequent purchasers or incumbrances.

Certain requisites are recognized in formal lease. The names and description of the parties, the terms of the lease, the description of the property, the signing, delivery, and acceptance of the lease, and the witnessing and acknowledging are regarded as essential features.

Covenants are express or implied terms of a lease. If parties expressly agree to do certain things enumerated and set forth in the lease, the covenant is said to be express. The law implies certain obligations on the part of the parties to a lease. There is an implied covenant on the part of the tenant to pay rent, and to make all ordinary repairs subject to the reasonable wear and tear of the premises. The landlord impliedly consents to give the tenant quiet enjoyment, and to pay taxes and assessments.

334. Transfer of Leases. A landlord may transfer his interest in a lease. A tenant may, unless the lease stipulates otherwise, transfer his interest in a lease. A transfer of an interest or right in which a third person, not a party to the transfer, has an interest is usually called an assignment. For example, A owes B $100.00, B may assign his claim to C. By notifying A of the assignment, A is obliged to pay C, instead of B. Any defense that A has against B is available against C. As a rule, partial interests cannot be assigned so as to be binding upon the obligor, without the latter's consent. If A owes B $100.00 B cannot assign $10.00 of this claim to ten different parties. This would compel A to pay ten different persons, while the original obligation bound him to pay but one. A may have a counter claim amounting to $50.00. To obtain the benefit of this counter claim, he would have to set it up in five different suits, whereas if the claim were sued by the original owner, or by one owner he would have to make a defense in but one suit.

An assignment may be made orally, if not in conflict with the provisions of the Statute of Frauds. It may be made by written contract. No particular language is required to make a valid assignment. Any words expressing the intention of one party to make an assignment, accepted by the one to whom the assignment is to be made, is sufficient. A landlord may assign a lease. Upon receipt of notice of the assignment from the landlord or the assignee, the tenant must pay to the assignee the rent subsequently coming due. If an assignment is made by a landlord, and no notice is given the tenant, the latter discharges his liability under the lease by paying the original landlord. Originally at common law, a landlord could not assign his rights without the consent of the tenant. The tenant could not be compelled to recognize a new landlord. Recognition of a new landlord was called attornment. A tenant may assign his interest in a lease if the lease does not expressly provide otherwise. This does not relieve the tenant from liability under the lease, even though the landlord consents to the assignment, and accepts rent from the assignee. The original tenant is a surety for the rent. After an assignment of a lease by the tenant, the landlord, if he does not expressly release the original tenant, may collect the rent from either party.

335. Leases for Years. A lease for years is a lease for a definite and ascertained period of time. If A rents B's farm for five years commencing June 1, 1910, the lease is for years. If A leases B's house for a year, a month, or a week, to commence on a certain date, the time of the lease is definite and ascertained and constitutes a lease for years. If A rents B's house for a year commencing June 23, 1910, at $25.00 per month, the rent to be monthly in advance, the lease is one for years. The fact that the rent is to be paid in installments does not render the lease one from month to month.

A lease is regarded as personal property and, while it is an interest in real property, it is usually called a chattel real, and is treated as personal property. When the owner of a lease dies, the lease is personal property in the hands of the executor or administrator of the owner, and does not descend to the heirs of the owner as real property. In some states, long time leases, such as leases for ninety-nine years, are by statute made real property.

The practical distinction between leases for years and leases from month to month, is that in the former, the lease ends when the time covered by it expires. In a lease from month to month, a new lease is created by implication, if a tenant is permitted to hold over. This question is discussed more at length under the section, Tenancies from Year to Year.

336. Subletting. Some states by statute refuse to permit a tenant to sublet any portion of his lease, without the consent of the landlord. A landlord may stipulate in his lease that a tenant shall not sublet any portion of the premises. In the absence of statutory provisions, or stipulations in the lease, a tenant may sublet the leased premises. A transfer by a tenant of an interest in the leased premises may be an assignment, or it may be a sublease. An assignment is a transfer by a tenant of his entire interest in the premises. If A rents B's farm for five years, and sells his lease for five years to C, the transfer is an assignment. A transfer of only a portion of a tenant's interest is a sublease. If A rents B's farm for five years, and leases the farm for three years to C, the transfer is an assignment. If A leases the farm to C for five years, the transaction is a sublease. An assignment is a transfer of the tenant's entire interest in the leased premises. A sublease is a transfer of a part of a tenant's interest in the leased premises.

A tenant may mortgage his interest in the leased premises. A creditor of a tenant may levy upon the lease in satisfaction of a judgment, the same as upon any article of personal property.

The purpose of the statute and stipulations in a lease, forbidding a tenant to sublet the leased premises, is for the protection of the original lessor. A subtenant is not permitted to avoid a lease on the ground of such a statutory provision, or by reason of such a stipulation in a lease. For example, if A rents B's farm for five years, and the lease contains a stipulation that A cannot sublet, if A sublets the farm for three years to C, C cannot avoid the obligation to A by reason of the stipulation in the lease. The stipulation is a privilege in favor of B. It may be exercised by B if he chooses to avail himself of the privilege. He may waive the privilege, or refuse or neglect to exercise his right. Neither C nor anyone else can avail himself of this privilege.

It is sometimes quite difficult to tell just what constitutes a subletting in violation of a statutory provision or a provision in the lease. Mere privileges granted to others do not constitute sublettings. Permission granted a neighbor to use a barn for a short period, or taking roomers by the week, has been held not to constitute a subletting.

If a tenant in violation of his lease sublets a part of the premises, the original lessor may eject the sublessee, and sue the tenant for damage for breach of contract.

If a tenant exercise his right of subletting a part of the premises, he is not thereby relieved from his responsibility to pay rent under the lease. Even though the tenant agrees to accept rent from the sublessee, and apply the same on the obligation of the original lessee, this does not relieve the original tenant from his obligation to pay rent. For example, if A rents B's house and lot for three years for $25.00 per month, payable monthly in advance, and B agrees to accept the rent from C, and does accept payments from C, this does not relieve A from liability to pay B the rent. A is a surety, and his obligation to pay the rent to B is the same as the obligation of C. If B expressly agrees to relieve A and to accept C in place of A, he can no longer hold A.

337. Tenancies at Will and at Sufferance. A lease may be entered into, the terms of which may be terminated at the will of either party. It is for an indefinite period. Such a lease creates a tenancy at will. (See Estates at Will, chapter on Real Property.) Tenancies at will are uncommon. The usual tenancies are tenancies for years and tenancies from year to year. If A permits B to take possession of, and to occupy his house under an agreement that either he or B may terminate the lease at the desire of either party, the tenancy is one at will. B may agree to pay rent at the rate of $10.00 per week, $40.00 per month or $500.00 a year, or at any rate, without affecting the estate at will. If the estate is for an indefinite period, but is terminable at the wish of either party, no matter what the arrangement for paying the rent, it is an estate at will, as distinguished from an estate for years, and an estate from year to year.

It is sometimes held that a person who holds over with the consent of the landlord after the termination of a lease for a definite period, called an estate for years, is a tenant at will. For example, if A rents B's house for one year, and at the expiration of the year, A with B's consent retains possession, A is a tenant at will. The tenancy may be terminated at the desire of either party, and upon notice by either party. In most jurisdictions, however, this constitutes A a tenant from year to year. (See following section.)

A tenancy at sufferance is created by a tenant unlawfully retaining possession of the premises after the termination of his lease, without the consent of the landlord. If A rents B's house for one year, and at the expiration of the year A, without B's consent retains possession of the house, he is a tenant at sufferance. He is a trespasser, and may be ejected by B. Tenancies at will and at sufferance are estates in land. They are also discussed under the chapter on Real Property.

338. Tenancies from Year to Year. A tenancy may be created for a definite period of time to continue for similar periods unless terminated by notice of either party. Such a tenancy is called a tenancy for years. The tenancy may involve any definite period with the understanding that it is to continue for similar periods if not terminated by notice of the landlord or tenant. While the estate is called an estate from year to year, or a tenancy from year to year, it may be for a week, a month, a year, or a series of years, or for any definite period. If A rents B's house for one year, the rent to be paid at the rate of $30.00 per month, payable monthly in advance, the lease to continue for yearly periods unless either A or B notifies the other to the contrary, the tenancy is from year to year. If, at the expiration of the year, A retains possession of the premises, having received no notice from B to leave, A has a lease for another year under the same terms, and so on, for succeeding years. The period may be a week, or a month, as well as a year. Sometimes leases are spoken of as leases from month to month, or from week to week, in case the lease is to continue for a month, or a week. The same principle is involved as in leases from year to year. If the tenant holds over after the expiration of the week or month, he has a lease for a similar period at the same terms.

A tenancy for years may be created by express or by implied contract. It is sometimes difficult to tell whether a tenancy is for years, from year to year, or at will. If a lease specifies that it is to cover a definite period only, it is a lease for years, and terminates at the expiration of that period. If the lease stipulates that it is to cover a definite period, and continue for similar periods unless either party terminates it by notice to the other, it is a lease from year to year. If the lease stipulates that it can be terminated at the will of either party, it is a lease at will. When the lease is oral, or created by implication, the intention of the parties must determine the nature of the lease.

Some difficulty arises in determining whether a lease is one at will, or from year to year when a tenant for years is permitted to hold over with the consent of his landlord. For example, if A rents B's farm for one year, and is permitted by B to remain in possession after the expiration of the year, in theory, A is a mere tenant at will, and can be ejected at the will of B. This is the law in a few jurisdictions. Most jurisdictions, however, hold that A, when permitted to hold over by B's consent, becomes a tenant from year to year.

339. Termination of Leases. A lease for years is terminated by expiration of the period covered by the lease. The lease may contain covenants, breach of which may by stipulation constitute a ground of forfeiture. For example, a lease may contain a stipulation that the landlord may declare a forfeiture in case the tenant fails to pay the rent when it is due. If the tenant commits a breach of this or any other covenant made by special stipulation, a ground of forfeiture, the landlord may by notice declare the lease forfeited. This renders the balance of the lease void. Leases for years, definite periods of time, require no notice to terminate. Leases at will, and from year to year require notice on the part of the party seeking their termination to be given to the other party. For example, suppose A rents B's house for one year, to continue for similar periods if agreeable to both parties. To terminate the lease at the end of the year, B must notify A to quit the premises at the expiration of the year. If A, on the other hand, desires to terminate the lease at the expiration of a year, he must notify B previous to the expiration of the year, of his intention to terminate the lease at the expiration of the year. If A holds over without notice to B, or without B's consent, A has a lease for another year at the same terms as before.

To terminate a lease from year to year or at will, the party seeking the termination of the lease must notify the other party of his intention to terminate the lease. The states generally provide by statute the time and manner of giving such notice. In general, the notice must be in writing and must be served on the interested parties or their agents a reasonable time before the expiration of the period of the lease.

A lease may be terminated by a subsequent agreement between the parties. This is commonly known as a surrender. A surrender is a release of possession of the premises by the tenant, and an acceptance by the landlord. A mere abandonment of possession by a tenant without the express or implied acceptance or assent of the landlord is not a surrender. Such an abandonment might constitute a breach of contract on the part of the tenant, but it requires the assent of the landlord to terminate the lease. If A rents a farm for three years at $500.00 a year, and at the expiration of two years agrees to pay B $100.00 to cancel the lease, and B accepts, the transaction constitutes a surrender, and terminates the lease. If A merely abandons the premises without the consent of B, the lease still exists. B can collect the rent for the remaining period covered by the lease. If A abandons the premises, and notifies B that he will not carry out the lease, B may refuse to accept the breach, permit the premises to remain vacant, and collect the rent from B. B may accept A's breach of the contract, and terminate the lease, or he may take possession of the premises, and relet them for A's benefit, notifying A that he takes possession for A's benefit, and not for his own. In this event, B must use reasonable diligence in obtaining the highest rent possible, and if he is obliged to rent for a less amount than A was to pay, B can collect the difference from A.

340. Liability of Parties to a Lease for Breach. If the landlord fails to fulfill the conditions of the lease, he is liable in damages to the tenant. The damages are the difference between the rent paid under the lease, and the market value of the premises furnished. For example, if A rents his house and lot to B for one year at $25.00 per month, and agrees to redecorate the house, but fails to do so, A may recover from B the difference between $300.00, the rent paid under the lease, and the market rental of the house undecorated. If a tenant abandons the lease, the landlord may recover from the the deficiency between the rental named in the lease, and the rental he is able to obtain for the balance of the time covered by the lease.

For example, if A rents B's farm for three years at $500.00 a year, and at the expiration of two years, A abandons the lease, if B is able to obtain but $300.00 for the remaining year covered by the lease, he can recover $200.00 and expenses from A.

A suit for damages is not the only remedy the landlord has against a tenant for the latter's abandonment of the premises. The landlord may refuse to accept the breach on the part of the tenant, let the premises remain vacant, and collect the rent under the lease.

The landlord may enter the premises for the purpose of preventing loss or destruction of the premises without accepting the breach. The landlord may accept and cancel the remaining portion of the lease, or he may again lease the premises for the benefit of the tenant, and collect the deficiency in the rent from the tenant. This question is also discussed in the previous section.

341. Actions for Recovery of Rent and Possession of Leased Premises. A landlord may sue and recover judgment by bringing an ordinary action for debt when rent or any installment is due. If A rents B's house for one year at the rate of $25.00 per month, payable at the end of each month, and fails to pay any installment, B may sue him. The judgment may be satisfied out of any property A may have. If married, A, by statute in most jurisdictions, is entitled to a certain amount of exempt property.

If the landlord has failed to perform all of the terms and conditions of the lease, A may bring a counteraction against B when sued by B for rent. For example, if B has failed to repair the house according to the terms of the lease, A may counterclaim for damages when sued by B for the rent.

When the period of the lease expires, the landlord is entitled to possession of the premises. At common law, he was entitled to use the force necessary to recover possession. He is not permitted to commit a breach of the public peace in obtaining possession. Most of the states provide statutory methods for obtaining possession. A complaint is filed with a court and an officer of the court ejects the tenant by order of court. Non-payment of rent does not entitle the landlord to terminate the lease, unless the lease expressly so provides. When the lease is forfeited according to its provisions, the landlord is entitled to take possession.