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Chapter 13Leasehold Estates

IN THIS CHAPTER

• Landlord–tenant law. • Defines and explains the parties in

a lease.• The essential elements of lease.• Duties, obligations, and rights of

the parties to the lease agreement.

• Leaseholds.

LANDLORD–TENANT RELATIONSHIP

• A lease is a contract between the owner of the property and the tenant.

• The owner transfers to the tenant a property interest of possession for a prescribed period of time.

• The owner is the landlord or lessor. • The tenant is the lessee.• Possession of the property will go

back to the owner at end of lease.

LEASE ELEMENTS

• Property Description• Term• Rent• Written or Oral Provisions• Recordation

Michigan Truth in Renting Act

• Regulates rental agreements for residential properties.

• Prevent landlords from using leases to violate tenants’ rights.

• Tenants cannot waive rights.• Excludes certain provisions from

being in rental agreement.

Required Notice NOTICE: MICHIGAN LAW ESTABLISHES

RIGHTS AND OBLIGATIONS FOR PARTIES TO RENTAL AGREEMENTS. THIS AGREEMENT IS REQUIRED TO COMPLY WITH THE TRUTH IN RENTING ACT. IF YOU HAVE A QUESTION ABOUT THE INTERPRETATION OR LEGALITY OF A PROVISION OF THE AGREEMENT, YOU MAY WANT TO SEEK ASSISTANCE FROM A LAWYER OR OTHER QUALIFIED PERSON.

Mutual Obligations

• The tenant’s consideration is rent. • The landlord’s consideration is possession

of the premises and the right of quiet enjoyment.

• The landlord’s obligation to give possession of the premises to the tenant is directly tied to the tenant’s payment of rent.

• If one party fails in his or her responsibility (consideration), the other party may be relieved of his or her duty.

Landlord’s Duties• The landlord is required to put the

tenant in possession. • The landlord does not have an

automatic right to inspect the leased premises.

• The landlord has the right to enter the premises in an emergency and with proper notification.

• The landlord is obligated to have the premises in habitable condition.

Tenant’s Duties• Maintain the premises with

ordinary wear and tear excepted.• The tenant is expected to use the

premises only for legal purposes and to conform to all local laws.

• Pay the agreed-upon rent in a timely fashion.

• Vacate the premises without the need for legal eviction by the landlord at end of lease.

Law of Negligence

• The failure to use care that a reasonable person would use in like circumstances.

• A person is liable for damages that result to another person if the duty is not performed in a reasonable fashion.

• The duty of care imposed upon the landlord is the care a reasonable and prudent person would exercise under like conditions.

Michigan Security Deposits Act

• Regulates how a landlord may handle security deposits received from tenants.

• These laws apply to residential leases only.• A security deposit may not exceed one and

one-half months’ rent.• Tenant must give the landlord a forwarding

address within four days after moving.• Security deposits must be placed in a

regulated financial institution or landlord must post a surety bond with the State.

Termination and Eviction Remedies

• At expiration of the lease.• The landlord and tenant can

mutually agree to cancel a lease.• Eviction.• Tenant’s claim of constructive

eviction.• Tenant abandons the premises and

the landlord reenters to accept return of possession of the premises.

TYPES OF LEASES

Gross LeaseNet LeaseGraduated LeaseEscalated LeaseIndex LeaseFixed LeaseReappraisal LeasePercentage LeaseGround LeaseOil and Gas LeasesSale and Leaseback

CHAPTER TERMINOLOGY REVIEW

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percentage leasequiet enjoymentreappraisal leaserecapture clausereversionary interestsale and leasebacksecurity depositsublease