We have L and T, and T assigns to T1. There is also an assumption agreement between T and T1. Then T1 just assigns to T2. Then T2 assigns to T3. Who is liable to the landlord? I think that T1 is liable through privity of contract because of the assumption agreement (the landlord is the third-party beneficiary of that agreement). The tenant is liable through privity of contract. What about T3 who currently has possession? Would there be privity of estate between T3 and the landlord? Yes! There’s a whole list of assignments. What about T2 who assigned to T3? Is there any privity of contract or privity of estate? There is no privity of contract because there is no assumption agreement. There is also no privity of estate once T2 has assigned his interest to T3. Of course, T2 could be liable to T3. T1 will be liable for the rent that came due while he had privity of estate. T2 will be liable for the rent that came due while he had privity of estate, and the same with T3. But T1’s liability won’t end with his privity of estate.
Just what is a covenant? I don’t know because I missed it.
An assignment is as simple as saying: “I hereby assign my lease to you.” The lessee signs, and that’s the end of it. The assignee doesn’t have to do anything. In addition, the sublessee could say: “I accept the assignment and promise to do X, Y, and Z.”
T is always liable because T promised to pay the rent to L. Unless L lets him out of the contract, T is liable.
Yet another problem
L leases to T, T subleases to T1, then T1 assigns the sublease to T2. The rent doesn’t get paid, and L sues T and wins. What rights does T have against T1 and T2? Is there an agreement in the sublease whereby T1 promises to pay T? L has no rights against either T1 or T2. That’s what it means to say that it’s a sublease. All that T1 assigned to T2 is the sublease. So privity of estate and contract, at least on the lease, is only between L and T. Under what other basis could T1 be liable if there’s no promise to pay rent in the sublease? There may not be privity of contract between T and T1, but there is privity of estate between them. T has a reversion (by definition, because we’ve called this a sublease). T1 owns interest in the same property. This is a different privity of estate because it’s a different estate. Even if there is no contract, T1 has the obligation to pay the rent based on privity of estate. If T1 assigns to T2, is T2 liable to the original tenant? Yes! The privity of estate has moved from T1 to T2 when the assignment happens. But both T1 and T2 are only liable for the rent while they were in privity of estate unless there’s a contract somewhere.
Don’t forget, if the lessor retains a reversion, then it’s a sublease. If it were an assignment, the lessor would assign the entire term of the lease to the lessee.
Julian v. Christopher
What if the lease prohibits assignment or subletting without the landlord’s consent? On what basis can the landlord base his refusal? The reason must be reasonable! This case acknowledges that the common law rule is that the landlord can refuse to consent and be as arbitrary as he pleases about it. However, the rule of this case, which is probably the trend, is that if the lease is silent, the landlord must be reasonable. What’s the justification of the rule? Well, people should be reasonable. You have a right, especially once you look at a lease as a contract, to expect that the party you’re contracting with will act reasonably and in good faith.
Why do we allow the landlord to be involved with the decision to transfer the leasehold estate at all? We don’t like restraints on alienation generally. The landlord retains an interest in the property, and has an interest in making sure the property is taken care of properly. We give the landlord power that we would not give in other sales. We give the landlord the power to approve.
So the landlord must be reasonable. What does reasonable mean? What if the landlord will not consent unless he is paid more money? Is that reasonable? What if the assignee is charging more rent than what was originally agreed to between the landlord and tenant? Should the landlord get that? The case holds no. The landlord wanted an extra $150 or so, and the case holds that this isn’t reasonable.
The landlord doesn’t have to consent to assignment that will harm the interest of other tenants. The landlord doesn’t have to consent to waste. The landlord doesn’t have to consent to assignment to a tenant with bad credit.
If the contract says: “No assignment without the landlord’s consent”, can the tenant sublease? Sure, because these agreements are construed strictly against the landlord because of the policy of free alienation. If you don’t want assignments or subleases, you must say both.
But if the clause is “freely negotiated”, then the landlord is free to unreasonably withhold consent. Who has the bargaining power, though? Don’t tenants get leases on a take-it-or-leave-it basis? How far will this court really take this opinion? Will they decide that these are contracts of adhesion against public policy? Most people don’t try to negotiate their leases.
There are five types: (1) license, (2) easement, (3) profit, (4) real covenant, and (5) equitable servitude.
The license is a revocable permission. Its key is that it is revocable. There is a big debate in the literature: what if a license becomes irrevocable? Does it become an easement, or is it simply an irrevocable license? Braunstein thinks they’re just synonymous.
An easement is the right to use the land of another for a limited purpose. It is not an estate in land, because it will never become possessory. The most common easement is a “right of way”, like if two neighbors share a common driveway. Power companies also get easements to run their power lines across property. There can be other types of easements as well.
A profit is like an easement, but in addition to having the limited right to use somebody’s property, you have the right to take something. Profits are not very important in modern law. Sometimes they’ll crop up in natural resources law, but other than that it’s usually the same as an easement. The right to take or sever something from the land plus the right to go on the land is called a profit.
Real covenants and equitable servitudes will be treated as synonymous, at least for starters. Real covenants are covenants that run with the land. Successors to the land are bound or benefited by the covenant. Future owners of the land will be bound to perform the covenant even though they didn’t enter into a contract to do it if the right circumstances are met. The original example of this is rent that “runs with” the lease. Courts were originally very suspicious to real covenants because they clouded up the title to land and affected the alienability of land. Today, these are seen as actually promoting the free alienability of land.
Tomorrow, we’ll go through some more introductory stuff.