A leasehold estate is a tenant’s right to occupy property that is leased for a period of time. There are different types of leasehold estates. However, we will elaborate on the estate for years in this article.
What Is An Estate For Years?
An estate for years is a type of lease agreement that grants the leaseholder or tenant the right to make use of the property for a specified period of time.
The lease for “Estate For Years” has a start and an end date. It usually lasts for many years, as the name implies. The lease also specifies the amount of rent that the person leasing (tenant) must pay the owner (landlord). The person leasing the property must vacate the property once the lease expires. It is also known as an estate for a term or a leasehold estate.
On a special note, one interesting thing about an estate for years is that a tenant can build on the property he leases. The lease can be for such a long period of time that the tenant may be able to profit from buildings he constructs on the property. This is one of the factors that makes a long-term lease appealing.
Typically, the agreement specifies the precise date on which the tenant may take possession of the property, as well as the precise date on which the property must be surrendered to the owner. With these types of leases, there is no need for the landlord or property owner to issue any type of notice to vacate the premises. This is because the end date on the contract serves as the date that the tenant must vacate the property or face additional penalties and possible legal action.
How Estate For Years Works
When a long-term lease agreement is desired, the use of an estate for years is typically used. For example, if the tenant intends to stay in the area for a job assignment for five years, this type of lease agreement would serve several functions. The longer-term would typically lock in the amount of monthly rent that the tenant would tender to the property owner for the duration of the contract. Furthermore, a lease of this type typically includes very specific provisions regarding both the landlord’s and the tenant’s rights and responsibilities. In some countries, the standard provisions make it extremely difficult for either party to terminate the lease before the expiration date unless very specific circumstances outlined in the lease agreement occur.
Estates for Years Examples
Mr. J inherited land on a major highway in Decatur, Alabama. This property is in a fantastic location, with plenty of traffic and the highest visibility in the city. His family had had over 50 bids to purchase the land and had stated that they would never sell it. They were approached in 1995 by a home improvement shop called Lowes Home Improvement to sell them the land. Mr. J’s family said “no” once more. Lowes, on the other hand, proposed a long-term lease (Estate For Years) for 50 years! This long lease gives Lowes enough time to see a return on their investment in the property while also allowing Mr. J’s family to retain ownership rights. Mr. J’s family will be able to keep the building and/or lease it back to Lowes when the lease expires in 50 years! It’s a fantastic offer for everyone.
Benefits of Estate For Years
An estate for years can also be very useful to landlords. Assuming the lease applicant possesses the financial stability and other characteristics that the landlord considers acceptable, agreeing to this longer-term arrangement indicates that the income generated by the property will be stable for an extended period of time. This would not necessarily be the case with a one- or two-year lease, as there is always the possibility that the property would be vacant between tenants. Furthermore, the provisions of the estate for years will typically require that the tenant covenant take proper care of the property while it is in his or her possession, a clause that actually benefits the landlord in keeping the property in excellent condition over time.
Estate for Years vs. Periodic Tenancy
An estate for years is a lease with a set start and end date. The renter is expected to quit the property at the end of the lease. Because the termination date is mentioned at the beginning, neither the tenant nor the landlord is required to give the notice to terminate this lease. After the initial lease period, the lease may or may not be renewed.
A periodic tenancy is a lease that has no set end date for the life of the lease. The landlord and tenant have agreed that the tenant has the right to occupy the property indefinitely. If both parties agree, they can agree that the arrangement will be terminated with notice. Any required notice will be specified in the lease itself so that each party is aware of the amount of notice required from the start of the arrangement.
Establishment of Leasehold Estates
#1. Oral Leases
Unless the term of the lease exceeds the period provided by the Statute of Frauds, leases can be created orally. In the majority of states, such a term is one year. Any oral lease that lasts longer than the authorized duration is void. Assume Simone verbally agrees with Anita to rent Anita’s flat for two years at a monthly fee of $250 in a state having a one-year Statute of fraud period. The lease is null and void, and either party may terminate it.
#2. Written Leases
The following items or provisions must be included in a lease required to be in writing under the Statute of Frauds: (1) it must identify the parties, (2) it must identify the premises, (3) it must specify the duration of the lease, (4) it must state the rent to be paid, and (5) it must be signed by the party against whom enforcement is sought (known as “the party to be charged”).
The provisions do not have to be perfectly stated. They will be sufficient to justify the lease under the Statute of Frauds as long as they meet the five requirements. For example, the parties do not have to be mentioned in the lease. Assume that the prospective tenant pays the landlord a month’s rent in advance and that the landlord provides the tenant with a receipt that lists the property and the terms of the lease but does not include the tenant’s name. Following that, the landlord refuses to allow the tenant to move in. Who would win in court? The tenant could be identified as the tenant to whom the lease terms were intended to apply. This is because she had the receipt in her possession,
Similarly, the lease does not have to describe every feature of the premises to be enjoyed. Thus, even if the lease is silent on these points, a tenant who rents an apartment in a building will be entitled to use the common stairwell, the roof, and so on. And, as long as a specific amount can be determined, the rent can be stated in terms other than absolute dollar terms. It could, for example, be expressed as a percentage of the tenant’s dollar business volume or as a cost-of-living index.
Commonly Used Lease Clauses
#1. Joint and Several Liability
This phrase is commonly found in residential leases. It allows the landlord to treat several tenants as individually and collectively obligated to uphold the lease’s requirements. In other words, the collective is accountable, but each person is as well. If there are six roommates who share the rent and are on the lease, the landlord simply needs to serve one or more to meet the lease’s notice requirements.
There should be a clause that specifies what happens if either party to the lease fails on the conditions. It should also specify when a party is deemed to be in default. It’s fine to simply mention that a default occurs when one party violates the conditions of the lease. However, it’s better to list the specific methods in which an automatic default occurs to be explicit. It would be a “not limited to” clause. This means that any additional clauses not specified would also result in default if they were breached.
Subleasing is prohibited under some leases. Landlords frequently claim that it is difficult to enforce, thus they allow it. If the space is subleased, you might charge a fee or raise the rent. In this condition, it is best practice to require a full application procedure, including credit and background checks, for sublease tenants.
#4. Late Fees
Late fees might be applied to encourage on-time rent payments. However, check state regulations to see if special grace periods or other rules regarding late rent penalties are required. Make it clear when and how much a late fee will be charged. If this isn’t stated clearly in the lease, it will be difficult to justify charging a late fee in court.
This is a critical provision. Sometimes, due to changes in the law, a component of a lease can be declared invalid. This clause indicates unequivocally that if one component of a lease is found unconstitutional, the remaining portions of the contract will remain legally binding.
#6. Lease Renewal
In the agreement, there are several options for dealing with the lease renewal. Automatic and non-automatic are the most prevalent. When the renewal date passes, the renter is automatically obligated for another lease period if automatic renewal is used. This places the onus on the tenant to notify the landlord and terminate the lease in advance.
Non-automatic lease renewals, which are more prevalent, normally need a certain length of notice if the tenant does not intend to renew. If the notice is not received by that date, the landlord faces a monetary penalty because he doesn’t have as much time to find a new renter to shorten the vacancy term. In any case, it is recommended practice for the landlord to put up internal alerts so that tenants are aware of any significant due dates.
#7. Property Use
Take caution not to break any anti-discrimination rules while you’re here. In general, the one thing to keep in mind is to keep the number of unit tenants to a minimum. You can leave the number blank until you know how many people will live there, so if three people move in with your approval, the lease will limit the residents to three. This prevents undesirable boyfriends/girlfriends or family members from moving in.
These are standard lease provisions. However, you should always get a lease agreement that is correctly drafted for your state, as laws differ and you want to stay on the right side of the law.
If circumstances necessitate the termination of an estate for years prior to the expiration date, the two parties will normally try to settle the problem amicably. If this is not practicable, one or both parties may seek assistance from the court system to address the situation. Depending on the nature of the events leading up to the early termination of the contract, the courts may either assist the parties in reaching an agreement, or they may rule in favor of one party, authorizing the early termination of the lease, and ordering one or both parties to pay termination expenses and court costs.
Estate for Years FAQs
What type of estate lasts for an indefinite period of time?
Freehold estates are estates with an indefinite duration that can last a lifetime or forever.
What is the free estate?
The free estate includes assets owned by the individual under a tenancy in common but not assets owned by the individual under a joint tenancy, which pass to the other joint tenant by survivorship.