The Non-Freehold Estates

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Terms:


Term of Years:
A tenancy that is to last for a specified period of time.

Periodic Tenancy
A tenancy that continues as a matter of course for successive periods until one party terminates the tenancy with sufficient notice.

Tenancy at Will
A tenancy that may be terminated by either party at any time and that continues only with the consent of both parties.

Tenancy at Sufferance
A tenancy arising when a person who has been in lawful possession of property wrongfully remains on the property after his or her lease has expired.

Statute of Frauds:
A transfer of an interest in real estate for more than one year must be in writing to be valid.


Although the rules pertaining to the non-freehold estates (also known as “leaseholds”) will be dealt with in more detail in the chapter on landlord-tenant law, for purposes of comparison with the freehold estates, it is worthwhile to discuss the types of non-freehold estates, their natures and their languages of creation.

As a rule, the non-freehold estates are considered a lesser degree of ownership than are the freehold estates. In fact, when one person holds a non-freehold estate in property, the original owner is still considered the current owner of the property.

This is unlike a situation in which one person holds a freehold estate and another person holds a future interest in the land (such as a remainder or possibility of reverter). In that case, the person holding the freehold estate is considered to be the current owner of the property. A holder of a non-freehold estate, on the other hand, is considered, at best, a co-owner with the person who holds the future interest. The holder of the non-freehold estate is usually referred to as the tenant and the holder of the future interest is referred to as the landlord.

This does not mean, however, that holders of a freehold estate always hold the property for longer than holders of a non-freeholder estate. On the contrary, a freehold estate can be ended within minutes of the creation (ie. if the recipient of a life estate dies right after the transfer), while a non-freehold estate can last any period of time short of perpetuity.

We will now discuss the three types of non-freehold estates.

The Term of Years

A term of years is any interest that is set to last for a predetermined period of time. A term of years need not even last for a full year. On the other side of the coin, there is no limit to how long a term of years can last. The only requirement is that the term of the interest be a definite one and that it be spelled out at the time that the interest is created. For example:

Greg gives his house “to Marsha for 15 years.” Marsha has a term of years.

Greg gives his house “to Marsha for 5 minutes.” Marsha has a term of years.

Greg gives his house “to Marsha for 1,000,000,000 years.” Marsha has a term of years.

As with the life estate, when a person conveys a term of years, the grantor retains a “reversion” interest. At the time that the term expires, possession of the property automatically goes back to the grantor.

As with the freehold estates, a term of years can be determinable or limited by a condition subsequent. Also as with the other estates, the future interest following the term of years can be granted to a third party. The third party’s interest is called the “remainder” interest. For example:

  1. Roper conveys an apartment “to Jack for 2 years, so long as the rent is paid on time." In this case, Jack has a term of years that is subject to a condition. In essence, he has a determinable term of years. If Jack fails to pay the rent on time, even once, the apartment will automatically revert to Roper.
  2. Roper conveys an apartment “to Jack for 2 years, but if the rent is not paid on time, then Roper will have a right of re-entry." Jack has a term of years that is subject to a condition subsequent. If Jack fails to pay the rent on time, Roper has the option to re-enter the apartment. If he fails to do so, then Jack’s possession of the apartment will continue until the end of the two year term.
  3. Roper conveys an apartment “to Jack for 2 years, so long as the rent is paid on time, and then to Janet.” Jack has a term of years that is determinable and Janet has a remainder interest. If Jack fails to pay the rent on time, the apartment will automatically go to Janet.

The Periodic Tenancy

As its name implies, a “periodic tenancy” continues from "period" to "period." The term of the period is established at the outset of the arrangement. If no period is specifically identified at the outset of the tenancy, then the period of the tenancy will be presumed to be the same as the scheduled rent payment intervals. (If the payment schedule is not definite or set, the tenancy will usually be presumed to be a month to month tenancy.) For example:

  1. Roper conveys an apartment “to Jack, for an indefinite period of time, for periods of 7 days.” Jack has a periodic tenancy and each “period” is 7 days. This tenancy would be a “week to week periodic tenancy.”
  2. Roper conveys an apartment “to Jack, for an indefinite period of time” and they make an arrangement that the rent money must be paid by Jack to Roper on the first day of each month. The period will be presumed to be one month and the tenancy would then be a “month to month periodic tenancy.”
  3. Roper conveys an apartment “to Jack, from year to year.” Jack obviously has a periodic tenancy, the periods for which are one year.

A periodic tenancy can also be created by implication (without the existence of the periodic tenancy being expressed by either party), in the following situations:

        1. (As alluded to before) the tenant's term has no designated period of time and the rent is reserved by the landlord on a periodic basis. Then the periods are equal to the time periods over which the rent is due.

        2. When the tenant is holding over after the end of a term of years. So long as the landlord does not evict the tenant after the term of years has run out, the parties will be presumed to be continuing the lease under a periodic tenancy. For example:

Roper conveys an apartment “to Jack for two years.” After the two years are up, Jack continues to live in the apartment and Roper does not throw him out. The parties will continue under a periodic tenancy, the period of which will be equal to the period of rent payment intervals.

        3. When the parties make an oral lease for a term of years that is invalid due to the Statute of Frauds. Instead, the parties will be presumed to be maintaining the lease under a periodic tenancy.

Roper orally conveys an apartment “to Jack for two years.” As you may recall from contracts, under the Statute of Frauds, a transfer of an interest in real estate for more than one year must be in writing to be valid. Although the term of years violates the Statute of Frauds and is therefore void, the lease will exist under a periodic tenancy, the period of which will be equal to the period of rent payment intervals. See Sutherland v. Drolet, 154 Wis. 619 (1913).

The reason that the periods are important is because of the notice requirement for terminating the lease. For all of the estates that we discussed so far, there is no notice requirement for the termination of the estate. The estate simply ends when its term runs out or when the condition that terminates the estate occurs. For example:

Andrew has a life estate in Blackacre. Andrew dies. The life estate terminates automatically. There is no requirement that the holder of the future interest give notice to Andrew’s estate or heirs. He or she may simply enter and take over Blackacre.

However, there is an advanced notice requirement for terminating a periodic tenancy. In other words, the landlord must give the tenant notice a certain period of time in advance before terminating a periodic tenancy. This requirement has two elements:

  1. The tenancy can only be terminated at the end of a period (usually, the end of the period is when the rent is due); and
  2. The notice period of time must be at least one full period. For example:

Howard owns an apartment in which Fonzie has a week-to-week periodic tenancy. The payment is due on every Monday night. On Thursday, March 10, Fonzie has a particularly wild party and Howard wants to evict Fonzie as soon as possible.

The earliest that Howard can evict Fonzie would be Monday, March 21, even if he gave Fonzie notice on March 11. This is because:

  1. The tenancy must be ended at the end of a period, which, in this case, is a Monday; and
  2. At least one full period (a week in this case) must pass between notice and termination.

Thus, Monday, March 14, is too early.

The exception to this rule is the year-to-year (or longer) periodic tenancy. Since the period is so long, it would make little sense to follow the same notice requirement. Instead, 6 months of notice is sufficient before terminating the tenancy. Although, as with the shorter periodic tenancies, the tenancy can only be terminated at the conclusion of a period.

The Tenancy at Will

The tenancy-at-will is very similar to a periodic tenancy. The only difference is that the tenancy at will has no set periods.

As we discussed before, in general, if you have a landlord-tenant relationship without it having been specified what type of tenancy was created, a periodic tenancy will be inferred. Therefore, for a tenancy-at-will to exist, it will usually have to be created expressly. This is because courts are reluctant to find the existence of a tenancy-at-will because of its harsh rule when it comes to termination of the relationship, which we will discuss later in this section.

A tenancy at will is created by using language that states that the estate will last only so long as both parties agree. For example:

Omar conveys a parcel of property "to Andrew as long as we both are willing." Andrew is the tenant in a tenancy at will. Omar is the landlord.

The rule regarding termination of the tenancy-at-will is, as the name indicates, that either party may terminate the tenancy for any reason at any time. The traditional rule was that a tenancy-at-will could be terminated by either party without notice at any time. However, modern statutes and courts have added a requirement that the landlord give the tenant “reasonable” notice before evicting a tenant-at-will. Some jurisdictions define the amount of time that constitutes “reasonable” notice.

The Tenancy at Sufferance

Related to the tenancy-at-will is the “tenancy at sufferance.” This occurs when a tenant has overstayed his term in a term of years and the landlord has the legal right to evict the tenant. If the tenant overstays his or her term, the landlord may evict the tenant or “hold over” the tenant and the new relationship will be an implied periodic tenancy. Before the landlord makes this decision, the relationship that exists in the meantime is called a “tenancy at sufferance.” We will discuss the options of a landlord in more depth in the chapter on landlord-tenant law.



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