978-0078023194 Chapter 26 Lecture Notes

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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