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Property Outline Spring 2007 - Property Outline Spring 2007...

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Property Outline Spring 2007 Landlord/Tenant 1) Sublease -is a partial transfer of less than the full remaining term of the lease. Thus, the subletting tenant (the original tenant [sublessor]) retains some interest in the term. a. A sublease is an independent transaction creating a wholly new and distinct landlord-tenant relationship between the sublessor and sublessee. b. The sublessee is not bound by the covenant to pay rent in the original lease – the original tenant remains bound by it – or by any other covenant in the original lease. 2) Assignment -is a transfer of the whole unexpired term of the lease. MAJORITY RULE : if the original tenant retains an interest in the premises, the transfer from the tenant to the 3 rd party is a sublease, but if the original tenant transfers the property for the entire remaining period of the lease, the transfer is an assignment. Privity of Contract - is a relationship existing between both parties to a contract. 1) exists between a landlord and a tenant (even after the transfer) Privity of Estate - is a relationship existing between both parties because they have a mutual, immediate, and simultaneous interest in the leased premise 1) exists between a landlord and a tenant 2) exists between a landlord and an assignee Both of the privities can be the basis for liability for rent Landlord v. Original Tenant: Landlord wins either way if assignment or sublease Landlord v. New Tenant #1: Landlord wins if assignment, but loses if sublease *Ordinarily ex-assignees not liable anymore, only original tenant and most recent assignee (if there are multiple assignment) Warning: intermediate assignee can contract out of the above rule, by agreeing to pay rent no matter what (usual language: assignee “assume all the covenants in the lease”) Approval Clause - generally leaseholds are freely transferable, absent a provision in the lease to the contrary; the tenant has the right to alienate his or her interest of estate. If the lease is silent on the issue, it is construed by the courts as permitting a transfer without the landlords consent a. The right to sublet of assign maybe restricted by an express provision in the lease i. These clauses are generally valid;
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1. MAJORITY RULE —landlord can refuse consent arbitrarily! (Universal in residential leases) also majority rule in commercial context with some dissent Reasons Why : 1) It’s the landlords property 2) A contract is a contract 3) Its his property and therefore should be able to benefit from increased property value 2. MINORITY RULE —landlord cannot refuse unreasonably a. The landlord may not arbitrarily refuse to approve a proposed subleasee or assignee and must have a commercially reasonable basis for refusal Reason Why : 1) It promote free alienability 2) Implied contract of good faith and fair dealing in every contract Tenants Duties to Landlord (Remedies) Primary Duties: 1) Pay Rent a. If Tenant does not pay rent, landlord can i. Go to court (summary proceedings ii. Self-Help : throwing out the tenant on your own (e.g. lockout) 1.
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