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Chapter 15.docx

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Department
Law and Business
Course Code
LAW 603
Professor
Gil Lan

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Chapter 15 – Real Property: Interests and Leases Interests in Land are rights that a person can enforce with respect to a particular piece of land. They are always accompanied by two sets of rights and obligations. 1. The buyer of the land and the seller has a contract. They are the only two people affected by the agreement. 2. Once the rights are transferred the stadium belongs to the buyer. If the seller continues to use it the buyer can get a court order to evict him/her. You can exercise these rights against anyone else who interferes with your property rights. Property rights are good against the whole world, not just the person from whom they are acquired. The most significant interests in land are called estates; which is an exclusive right to possess a property for a period of time. Three type of Estates: Life Estate, Fee Simple, and Shared Ownership Fee Simple - The largest package of rights that a person can hold in land. - It does not amount to absolute ownership but comes very close. - You are entitled to possess it for an indefinite duration and are entitled to give it away upon your death. - You can use and abuse the land as you please. You can maintain it or you gut it out. Three Limitations of a Fee Simple 1. You must avoid committing torts such as occupiers’ liability, nuisance, and Rylands v Fletcher. 2. Your use of the land is subject to various forms of regulation. (Zoning and Planning). 3. Your property may be expropriated; when the government takes property for a public purpose. (Widen a highway or construct a bridge). You are entitled to compensation but cannot insist upon keeping the land. Life Estate - Right to exclusive possession during life of someone - Relevant life is usually life of interest holders - Interest automatically terminates upon death and is dealt with in one of these two ways: o Reversion to party with fee simple o Remainder to person selected by party with fee simple - Life estate holder is entitled to profits but cannot commit an act of waste; occurs when a property is changed in a way that significantly affects its value. (Digging pits, cutting trees). - If an act of waste is committed then individual is liable to the person who holds the reversion or remainder. - Applies only to acts not to omissions. (Can’t demolish building, but not required to maintain) Leasehold Estate (Lease or tenancy) - Rights to exclusive possession for a specific period of time. - It is a property interest created by contract so all usual contractual requirements must be satisfied. (Intention to create legal relations, offer and acceptance, and consideration). - The basic rule is that a lease MUST be evidenced in writing unless it is for three years or less. - There must be a mutual agreement between the two parties, in this case: Landlord and tenant. o Landlord person with interest in land who agrees to allow someone else to take possession. o Tenant is the person who receives the right to possess the property. - The duration of the lease must be definite. There are several possibilities: o Fixed-term tenancy exists when it is possible at the outset to determine when the tenancy will end. May create a new lease at the end of the old one; even if they don’t a periodic tenancy may arise if the tenant remains in possession and the landlord continues to accept rent and regular intervals. o Periodic tenancy is also for a fixed period, but it is automatically renewed at the end of each term unless one of the parties provides notice to quit. The length of the term usually mirror the rent paying intervals as well as the notice period. (a monthly lease means 1 clear months’ notice). Usually longer notice period required for residential leases; yearly tenancy normally requires six months’ notice. o Tenancy at will exists if there is no set term and either party can terminate the lease at any time. o Tenancy at sufferance occurs when a tenant continues to possess the premises at the end of a lease without the landlord’s permission. The tenant who does not vacate within a reasonable time after being asked commits the tort of trespass, and the landlord can take steps to have the tenant forcibly removed. There is no obligation to pay “rent”, but the person in possession is required to pay compensation for the use and occupation of the property. Assignments and Subleases Assignment occurs when you (assignor) transfer your contractual rights to a third party (assignee). The third party steps into your shoes and becomes the tenant. This situation is subject to four limitations: 1. Your lease may either prohibit an assignment or require your landlord’s consent. 2. It would not necessarily include all terms in the lease. Assignee is bound only by the real covenants; which are promises that are directly related to the land (pay rent or repair). 3. The assignor is not necessarily protected from liability. If the assignee did not fulfill the lease the landlord could normally demand relief from the assignor. **Ensure the assignment requires the assignee to honour the lease and to compensate for any money that you may have to pay the landlord. 4. An assignment must cover the entire term of a lease. If it falls short, by even a day, it may be a sublease. Sublease occurs when a tenant grants a lease to a third party. - Tenant would continue to be the tenant under the original lease, but would also be a landlord under the sublease. - The sublease might apply to the whole property or just a section of it. - It may contain the same terms as the original lease, but it need not do so. Commercial Leases – occurs when premises are rented for a business purpose. **pg. 364** - Parties are generally free to set their own terms, nevertheless, certain covenants, or promises, are standard. The Standard Covenants are: o The tenant’s obligation to pay rent.  May be express or implied.  Calculation of rent can be based on size of premises or profits earned. (Gross or Net) • Gross lease requires tenant to pay a single sum which is intended to cover both rent and costs. • Net lease requires the tenant to separately pay rent and a proportion of costs. This way if costs rise then the extra burden is shared proportionately by the landlord and tenant.  Rent reviews  Independent obligation • Tenant cannot refuse to pay rent if the landlord fails to keep the property in good repair. The tenant must pay and sue for breach of contract. • Landlord is required to look after structure and common areas that are available to various tenants; the tenant is obligated to maintain the premises themselves. • The lease will also severely restrict the tenant’s ability to undertake in renovations. Any permanent renovations are likely to be considered fixtures, which presumably become the property of the landlord. • Landlord’s most important obligation requires quiet possession; prohibits landlord from interfering with the tenant’s enjoyment of the premises. This covenant can be broken in a number of ways: see p. 366* • Unless otherwise agreed the landlord is required to pay the taxes associated with the property. BOTH SHOULD OBTAIN INSURANCE. Remedies for Commercial Leases - Can include compensatory damages, injunctions, and discharge. - Two special remedies available to landlords: o Ev
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