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Essentials of Business Law, 9th edition
INSTRUCTOR’S MANUAL
Chapter 26 Landlord–Tenant Relations
LESSON OVERVIEW
While Chapter 24 dealt with the introduction of leasehold estates, Chapter 26 elucidates the
landlord–tenant relationship and the major points of law that affect and govern leasehold estates. This
chapter also discusses the four types of tenant interest in real property, and through the use of
examples, depicts their relevance in the real life situations. Additionally, the chapter intends to describe
the rights and duties of landlord and tenant, issues pertaining to the termination of lease, and the
question of tort liability. Finally, students’ understanding of the topic is evaluated through
objective-type questions, discussion questions, and case scenarios. Students are encouraged to conduct
their own research through the use of the Internet and other sources.
CHAPTER OUTLINE
A. THE LANDLORD–TENANT RELATIONSHIP (p. 430)
1. The Difference between a Lease and a License (p. 430)
2. Essential Elements of the Landlord–Tenant Relationship (p. 430)
3. The Lease Is the Basis of the Relationship (pp. 430-431)
B. TYPES OF TENANT INTERESTS IN REAL PROPERTY (pp. 431-432)
1. Periodic Tenancy (p. 431)
2. Tenancy for Years (p. 431)
3. Tenancy at Will (p. 432)
4. Tenancy at Sufferance (p. 432)
C. RIGHTS AND DUTIES OF THE PARTIES (pp. 432-436)
1. Landlord’s Warranty of Habitability (pp. 432-433)
2. Landlord’s Right to Rent, to Regain Possession, and to Evict (p. 433)
3. Landlord’s Right to Keep Fixtures and Permanent Improvements (p. 434)
4. Landlord’s Duty to Mitigate Damages (p. 434)
5. Tenant’s Right of Quiet Enjoyment (pp. 434-435)
6. Tenant’s Right to Acquire and Retain Possession (p. 435)
7. Tenant’s Right to Assign or Sublease (pp. 435-436)
D. TERMINATION OF LEASES (p. 436)
1. Lease Expiration (p. 437)
2. Tenant’s Abandonment (p. 437)
3. Termination by Forfeiture (Breach) (p. 437)
E. TORT LIABILITY (p. 437)
F. CHAPTER SUMMARY (p. 438)
G. CHAPTER ASSESSMENT (pp. 438-444)
1. Matching Key Terms (pp. 438-439)
2. True/False Quiz (pp. 439-440)
3. Discussion Questions (pp. 440-441)
4. Thinking Critically About the Law (p. 441)
5. Case Questions (p. 442)
6. Case Analysis (pp. 443-444)
7. Legal Research (p. 444)
KEY TERMS
Key terms are listed at the beginning of the chapter, posted in the student textbook margins, and placed
in bold in the copy. They are listed here for your quick reference.
§ landlord (p. 430)
§ tenant (p. 430)
§ lease (p. 430)
§ lessor (p. 430)
§ lessee (p. 430)
§ covenant (p. 430)
§ condition (p. 430)
§ fair housing act (p. 431)
§ periodic tenancy (p. 431)
§ tenancy for years (p. 431)
§ tenancy at will (p. 432)
§ tenancy at sufferance (p. 432)
§ warranty of habitability (p. 433)
§ mitigate (p. 434)
§ quiet enjoyment (p. 434)
§ eviction (p. 435)
§ assignment of lease (p. 435)
§ sublease (p. 435)
LEARNING OUTCOMES
The chapter Learning Outcomes will help you and the students discover the concepts and information
that should be understood upon completion of the chapter. You may want to access the PowerPoint
(PPT) slides for Chapter 26 when you begin the study of the chapter and discuss each Learning
Outcomes. Each Learning Outcome will be covered separately in the Instructor Notes, but they are
shown here in total as an overview of the sections being presented in Chapter 26. The corresponding
text page numbers and PPT slides are listed next to each outcome. These slides should be used to
reinforce the main points of the lecture.
After completing this chapter, the students will be able to:
1. Discuss the landlord–tenant relationship. (p. 430-431, PPT slides 2-7)
2. Describe the four types of tenant interests in real property. (pp. 431-432, PPT slides 8-10)
3. Discuss the rights and duties of landlords and tenants. (pp. 432-436, PPT slides 11-17)
4. Explain several reasons for termination of leases. (p. 436-437, PPT slides 18-19)
5. Explain how liability is determined and whether the landlord or tenant is likely to be found liable.
(p. 437, PPT slides 20-21)
LECTURE OUTLINE
A. THE LANDLORD–TENANT RELATIONSHIP
The landlord is the owner of real property who gives up his or her right of possession, and the tenant
is the person who agrees to pay for the use of real property. The relationship between the two involves
a tenant’s possession, use, and control of real property in exchange for payment of rent. The document
in which the terms of the agreement are spelled out is the lease. The landlord is referred to as the lessor,
and the tenant is referred to as the lessee.
1. The Difference between a Lease and a License
Both leases and licenses give nonowners certain rights in real property. A lease transfers
to a lessee the right of possession; a license does not. A license merely gives a person the
right to use real property for a specific purpose and can be canceled at the will of the
landowner.
2. Essential Elements of the Landlord–Tenant Relationship
The essentials of the landlord–tenant relationship are
• The tenant can occupy a landlord’s property only with the consent of the landlord.
• The tenant’s rights in the property are inferior to those of the landlord.
• The property must revert (be returned) to the landlord at the termination of the lease.
• The parties must agree that the tenant has a right of immediate possession.
3. The Lease Is the Basis of the Relationship
The landlord–tenant relationship can be created by an express or an implied contract.
While oral contracts of lease are valid under common law, most state statutes require
written leases in instances where the term of the lease is greater than one to three years.
a) Covenants
A covenant is an agreement or promise in a lease to do a particular thing such as
when a tenant promises to use the property for certain purposes or a landlord
promises to make certain repairs and to assure the tenant’s quiet enjoyment.
b) Conditions
A condition, or restriction, included in a lease limits the use of the property. The
landlord may cancel the lease if a tenant fails to respect the conditions specified.
c) The Law Relating to Leases
The Fair Housing Act prohibits discrimination in housing on the basis of race,
color, sex, familial status, national origin, religion, or handicap. Additionally,
under common law, the parties to a lease were relatively free to include whatever
terms were acceptable to and agreed upon by the parties. Increasingly, however,
leases are subject to many more legal restrictions than they were in the past.
B. TYPES OF TENANT INTERESTS IN REAL PROPERTY
The type of possession interest a tenant has in real property can vary considerably depending on the
agreements between the parties and the provisions of the lease. The following types of possession
interests are most common.
1. Periodic Tenancy
A periodic tenancy is a possession interest in which the lease continues for successive
periods for the same length of time—weekly, monthly, annually, and so forth.
2. Tenancy for Years
The most common type of possession interest is a tenancy for years. This type of lease
is for a specific period of time—weeks, months, years, and so on. A tenancy of this type
automatically terminates on the stated expiration date.
3. Tenancy at Will
A tenancy at will is a possession interest in which no specific time of lease is agreed
upon. The lease continues indefinitely, until one of the parties notifies the other of a
desire to terminate the lease.
4. Tenancy at Sufferance
A tenancy at sufferance exists only in one limited situation—when a tenant wrongfully
extends his or her tenancy beyond the term agreed upon. Tenancy at sufferance is really
not a true tenancy at all, since the status of the tenant in this situation is rather uncertain.
C. RIGHTS AND DUTIES OF THE PARTIES
While the rights and duties of the parties are usually stated in the lease, these rights may be expanded
or modified by relevant laws and regulations.
1. Landlord’s Warranty of Habitability
In the case of the landlord–tenant relationship, the law assumes another kind of promise
—an implied warranty of habitability.
2. Landlord’s Right to Rent, to Regain Possession, and to Evict
The landlord has the right to collect the agreed-upon rent as provided in the lease. Also,
the landlord has the right to regain possession of the property in good condition at the
end of the lease. In addition, the landlord has the right, subject to limitations by state
statutes and local ordinances, to evict a tenant for nonpayment of rent, illegal use of the
premises, or other material violations of the terms of the lease.
3. Landlord’s Right to Keep Fixtures and Permanent Improvements
A tenant may wish to make improvements by attaching fixtures to the land or to the
premises. Two issues raised by such actions are:
Does the tenant have the right to make attachments?
Does the tenant have the right to remove the fixtures he or she attached at the end of the
lease?
The law gives the tenant the right to make reasonable modifications to the leased
property in order to make it suitable for use under the circumstances.
4. Landlord’s Duty to Mitigate Damages
In most states, a landlord has a duty to make reasonable efforts to reduce, or mitigate,
his or her losses resulting from a tenant’s abandonment. A landlord must make a
reasonable effort, for example, to find a new tenant to occupy the abandoned premises.
If the landlord fails to make such reasonable effort, the tenant would be relieved of his
or her obligation under the lease to pay the rent for the remaining time of the lease.
5. Tenant’s Right of Quiet Enjoyment
Most written leases provide covenants (promises) of quiet enjoyment of the premises,
and in many states, this is an implied right. The right to quiet enjoyment includes the use
of the leased premises without unreasonable interference from the landlord or third
parties.
6. Tenant’s Right to Acquire and Retain Possession
When agreeing to lease property, the landlord promises that the tenant will have
possession of the premises on the agreed-upon date. If the landlord interferes with the
tenant’s right of possession by evicting him or her without a court order of eviction, the
tenant has the right to terminate the lease. An eviction is a legal action that denies the
tenant the use of the premises. An actual eviction occurs when the tenant is denied the
physical use of the premises, whether or not such an eviction was approved by a court. A
constructive eviction results when the tenant’s use or enjoyment of the property has been
substantially lessened as a result of certain actions, conditions, or behavior on the part of
the landlord or other tenants. A constructive eviction can result from excessive noise.
7. Tenant’s Right to Assign or Sublease
Often, a tenant will transfer his or her interest in the property to a third person. An
assignment of lease is a transfer of the tenant’s interest in the entire premises for the
entire length of the term of the lease. A sublease is a transfer of the tenant’s interest for a
part of the premises or for a part of the term of the lease.
D. TERMINATION OF LEASES
A lease may be terminated for several reasons.
1. Lease Expiration
The most common reason for termination is the expiration of the lease, no matter
whether the tenancy is periodic, for years, or at will. When the lease is terminated for
this reason, the landlord is required to return to the tenant any security deposit the tenant
had paid, unless there are damages to the premises that are above and beyond normal
wear and tear.
2. Tenant’s Abandonment
If the tenant has abandoned the premises, he or she is not relieved of the obligation to
pay the agreed-upon rent. If, however, the landlord has violated his or her express or
implied duty to provide the tenant with quiet enjoyment, the tenant may abandon the
premises under the doctrine of constructive eviction, and this action will terminate the
lease.
3. Termination by Forfeiture (Breach)
Most leases contain a provision that gives the landlord the right to terminate the lease if
the tenant fails to pay rent or violates any other material lease provision. However, the
tenant’s breach must be material, that is, involve an important matter. It is unlikely that a
court would allow a termination if the tenant is only a few days late with the rent
payment.
E. TORT LIABILITY
When a person is injured on leased premises, the question of liability arises. Generally, the person in
control of the area in which the injury took place is held to be responsible. The landlord remains in
control of common areas, such as hallways, stairways, and laundry rooms. The tenant is responsible for
injuries occurring on his or her own leased premises. For this reason, apartment dwellers’ insurance
policies are sold to protect the tenant policyholder against liability losses resulting from injuries that
occur on the tenant’s premises, but not losses that result from injuries that occur in common areas or in
the physical structure itself.
INSTRUCTOR NOTES
A resulting answer or explanation is provided below for each Learning Outcome in Chapter 26. Every
outcome is also mapped to corresponding text page numbers, PPT slides, and relevant chapter
assessment exercises and activities for ease of reference and use.
LO1. Discuss the landlord–tenant relationship.
The landlord is the owner of real property who gives up his or her right of possession, and the tenant is
the person who agrees to pay for the use of real property. The relationship between the two involves a
tenant’s possession, use, and control of real property in exchange for payment of rent. A lease transfers
to a lessee the right of possession. A license does not transfer possession, but only gives the licensee the
right to use real property and can be canceled at will by the landowner. Covenants are promises by
either the landlord or the tenant to do certain things. Conditions are restrictions on the use of the
property.
Text Pages: 430-431
PowerPoint: Slides 2-7
Discussion Questions: 26-27
Case Questions: 39
Case Analysis: 40
LO2. Describe the four types of tenant interests in real property.
The four kinds of tenant interests in real property are the following: (a) periodic tenancy (a
possession interest in which the lease continues for the same length of time), (b) tenancy for years (a
lease for a specific period of time), (c) tenancy at will (a possession interest in which no specific time
of the lease is agreed upon), and (d) tenancy at sufferance (when a tenant wrongfully extends his or her
tenancy beyond the term agreed upon).
Text Pages: 431-432
PowerPoint: Slides 8-10
Case Questions: 37
LO3. Discuss the rights and duties of landlords and tenants.
The law imposes on the landlord the warranty of habitability and the duty to mitigate damages if a lease
is breached. In return, the landlord has the right to rent, regain possession, evict, and keep fixtures and
permanent improvements to the property. Tenants have the right to property that is reasonably fit and
safe for occupancy; to the quiet enjoyment of the premises; and to acquire, possess, assign, or sublease
the premises subject to the terms of the lease.
Text Pages: 432-436
PowerPoint: Slides 11-17
Discussion Questions: 28-29
Thinking Critically About the Law: 32-34, 36
Case Questions: 38
Case Analysis: 42
LO4. Explain several reasons for termination of leases.
The most common reason that a lease is terminated is by expiration. Leases also can be terminated by
abandonment or by breach of the terms of the lease.
Text Pages: 436-437
PowerPoint: Slides 18-19
Discussion Questions: 30
LO5. Explain how liability is determined and whether the landlord or tenant is likely to be found
liable.
Liability is generally determined by who has control of the premises at the time and place of injury. The
tenant is responsible for injuries occurring in his or her own leased premises. The landlord is
responsible for injuries that occur in common areas.
Text Pages: 437
PowerPoint: Slides 20-21
Discussion Questions: 31
Thinking Critically About the Law: 35
Case Analysis: 41
