Lease


A lease is a contractual arrangement calling for the user to pay the owner for the use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial or business equipment are also leased. In essence, a lease agreement is a contract between two parties: the lessor and the lessee. The lessor is the legal owner of the asset, while the lessee obtains the right to use the asset in return for regular rental payments. The lessee also agrees to abide by various conditions regarding their use of the property or equipment. For example, a person leasing a car may agree to the condition that the car will only be used for personal use.
The term rental agreement can refer to two kinds of leases:
A lease is a legal contract, and thus enforceable by all parties under the contract law of the applicable jurisdiction.
In the United States, since it also represents a conveyance of possessory rights to real estate, it is a hybrid sort of contract that involves qualities of a deed.
Some kinds of leases may have specific clauses required by statute depending upon the property being leased, the jurisdiction in which the agreement was signed, and the residence of the parties.
Common elements of a lease agreement include:
  • Names of the parties of the agreement.
  • The starting date and duration of the agreement.
  • Identifies the specific object being leased.
  • Provides conditions for renewal or non-renewal.
  • Has a specific consideration for granting the use of this object.
  • Has provisions for a security deposit and terms for its return.
  • May have a specific list of conditions which are therein described as Default Conditions and specific Remedies.
  • May have other specific conditions placed upon the parties such as:
  • * Need to provide insurance for loss.
  • * Restrictive use.
  • * Which party is responsible for maintenance.
  • Termination clause
All kinds of personal property or real property may be leased. As a result of the lease, the owner grants the use of the stated property to the lessee.

Leases of land

The narrower term 'tenancy' describes a lease in which the tangible property is land. A premium is an amount paid by the tenant for the lease to be granted or to secure the former tenant's lease, often in order to secure a low rent, in long leases termed a ground rent. For parts of buildings it is most common for users to pay also by collateral contract, or by the same contract, a service charge which is normally an express list of services in a lease to minimize disputes over service charges. A gross lease or tenancy stipulates a rent that is for the global amount due including all service charges.
A cancelable lease is a lease that may be terminated solely by the lessee or solely by the lessor without penalty. A mutually determinable lease can be determined by either. A non-cancelable lease is a lease that cannot be so terminated. Commonly, "lease" may imply a non-cancelable lease, whereas "rental agreement" may connote a cancelable lease.
Influenced by land registration, commonly tenancies initially granted for more than a year are referred to more simply as leases.
The lease will either provide specific provisions regarding the responsibilities and rights of the lessee and lessor, or there will be automatic provisions as a result of local law. In general, by paying the negotiated fee to the lessor, the lessee has possession and use of the leased property to the exclusion of the lessor and all others except with the invitation of the tenant. The most common form of real property lease is a residential rental agreement between landlord and tenant. As the relationship between the tenant and the landlord is called a tenancy, this term generally is also used for informal and shorter leases. The right to possession by the tenant is sometimes called a leasehold interest. A lease can be for a fixed period of time.
A lease may be terminated sooner than its end date by:
  • Break/cancellation
  • A negotiated deed of surrender or yielding-up.
  • Forfeiture
  • By operation of statute
A lease should be contrasted with a license, which may entitle a person to use property, but which is subject to termination at the will of the owner of the property. An example of a licensor/licensee relationship is a parking lot owner and a person who parks a vehicle in the parking lot. A license may be seen in the form of a ticket to a baseball game or a verbal permission to sleep a few days on a sofa. The difference is that if there is a term, a degree of privacy suggestive of exclusive possession of a clearly defined part, practised ongoing, recurrent payments, a lack of right to terminate save for misconduct or nonpayment, these factors tend toward a lease; by contrast, a one-time entrance onto someone else's property is probably a license. The seminal difference between a lease and a license is that a lease generally provides for regular periodic payments during its term and a specific ending date. If a contract has no ending date then it may be in the form of a perpetual license and still not be a lease.
Under normal circumstances, owners of property are at liberty to do what they want with their property, including dealing with it or handing over possession of the property to a tenant for a limited period of time. If an owner has granted possession to another then any interference with the quiet enjoyment of the property by the tenant in lawful possession is itself unlawful.
Similar principles apply to real property as well as to personal property, though the terminology differs. The right to sub-lease may or may not be permitted to a tenant. Where it is permitted, the lease granted directly by the owner is called a "headlease", or sometimes a "master lease". Headlease tenants and their tenants who may in turn also sublet are termed mesne landlords from the old French for middle. The headlease tenant has no right to grant a sublease which extends beyond the end of the headlease.
To circumvent privity of estate which is the general principle flowing from privity of contract, laws exist in several jurisdictions to bind subtenants to some of the restrictive covenants of the headlease, for instance in England and Wales those which have been held by courts to touch and concern the land.
A transfer of a remaining interest in a lease, assignment, is a type of is often possible and an implied rights to assign exist by compulsory law or as a default position in some jurisdictions. Sharing or parting with possession can be a breach of certain leases resulting in action for forfeiture.
Enfranchisement is the obtaining of the landlord's title and is most commonly negotiated with the landlord where a tenant pays only a ground rent. Merger is where the landlord and tenant happen to be the same and can terminate a lease where there are no subtenants in certain jurisdictions.
In the United States a lessee may negotiate a right of first refusal clause into their land or property lease giving them the right to make a purchase offer on the property before the lessor can negotiate with third-party buyers. This gives tenants the ability to commit to a piece of property before any other potential buyers have the opportunity.

History of leases of land

Over the centuries, leases have served many purposes and the nature of legal regulation has varied according to those purposes and the social and economic conditions of the times. Leases, for example, were mainly used for agricultural purposes until the late 18th century and early 19th century when the growth of cities in industrialized countries made leases an important form of landholding in urban areas.
The modern law of landlord and tenant in common law jurisdictions retains the influence of the common law and, particularly, the laissez-faire philosophy that dominated the law of contract and property law in the 19th century. With the growth of consumerism, consumer protection legislation recognized that common law principles, which assume equal bargaining power between the contracting parties, create hardships when that assumption is inaccurate. Consequently, reformers have emphasized the need to assess residential tenancy laws in terms of protection they provide to tenants. Legislation to protect tenants is now common.
Consequently, Common law has treated Lease as not similar or equivalent to a common commercial contract, especially in regard to the question of whether a Lease Agreement can be terminated by notice, in the same way and manner as a usual commercial contract.

Types of tenancies

Fixed-term tenancy or tenancy for years

A fixed-term tenancy or tenancy for years lasts for some fixed period of time. It has a definite beginning date and a definite ending date. Despite the name "tenancy for years", such a tenancy can last for any period of time—even a tenancy for one week may be called a tenancy for years. At common law the duration did not need to be certain, but could be conditioned upon the happening of some event,. In many jurisdictions that possibility has been partially or totally abolished.
A fixed term tenancy comes to an end automatically when the fixed term runs out or, in the case of a tenancy that ends on the happening of an event, when the event occurs. If a holdover tenant remains on the property after the termination of the lease, s/he may become a tenant at sufferance because the lessor/landlord has suffered the tenant to remain as a tenant instead of evicting him or her. Such a tenancy is generally "at will," meaning the tenant or the landlord may terminate it at any time, upon the providing of proper statutory notice.