PastPaperHero | Ownership of real property

Learning Outcomes

This article explains core landlord-tenant law principles within ownership of real property, including:

Distinguishing and comparing the main types of leasehold estates (term of years, periodic tenancy, tenancy at will, tenancy at sufferance) and recognizing how they are created, extended, and terminated under common-law and modern statutory rules.
Identifying the tenant’s primary duties—paying rent, avoiding waste, complying with use and repair covenants—and the landlord’s obligations to deliver possession, respect quiet enjoyment, and maintain habitability or suitability, with attention to MBE-style fact patterns.
Applying rules on breach, nonpayment of rent, destruction, eviction (actual, partial, and constructive), surrender, abandonment, anticipatory repudiation, and mitigation of damages to calculate outcomes and likely remedies.
Analyzing assignments and subleases using privity of contract and privity of estate to determine which parties can sue or be sued for rent, repairs, and other covenants after transfers by tenant or landlord.
Evaluating tenant remedies for landlord breach, including rent withholding, repair-and-deduct, termination, damages, and defenses such as retaliatory eviction and violation of the implied warranty of habitability.
Spotting high-yield exam traps involving holdover tenants, partial eviction, oral leases under the Statute of Frauds, destruction clauses, trade fixtures, and restrictions on transfer, and using precise terminology to structure clear, persuasive bar-exam answers.

MBE Syllabus

For the MBE, you are required to understand landlord-tenant relationships as part of ownership of real property, with a focus on the following syllabus points:

Types of leasehold estates: term of years, periodic tenancy, tenancy at will, tenancy at sufferance.
Possession and rent: landlord’s duty to deliver possession; tenant’s obligation to pay rent; effect of destruction, eviction, and habitability.
Transfers by landlord or tenant: effects of sale of the reversion, assignment, and subletting.
Termination of tenancies, including notice, surrender, abandonment, anticipatory breach, mitigation of damages, and security deposits.
Habitability and suitability: implied warranty of habitability in residential leases and implied warranty of suitability/quiet enjoyment in commercial settings.
Remedies: eviction, damages, rent withholding, repair-and-deduct, and tenant defenses such as constructive eviction and retaliatory eviction.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

Which of the following is NOT a recognized type of leasehold estate?
1. Tenancy for years
2. Periodic tenancy
3. Tenancy at will
4. Fee simple determinable
If a tenant abandons the premises before the lease term ends, what is the landlord’s duty in most jurisdictions?
1. Do nothing and collect full rent
2. Accept surrender and terminate the lease
3. Mitigate damages by attempting to relet
4. Immediately evict the tenant
Which of the following is true regarding assignment and subletting?
1. Assignment relieves the original tenant of all liability
2. Subletting creates privity of estate between landlord and subtenant
3. Assignment transfers the entire remaining lease term
4. Subletting is always prohibited unless expressly allowed

Introduction

Landlord-tenant law governs the legal relationship between the owner of real property (landlord) and a person who occupies it under a lease (tenant). On the MBE, this area blends property concepts (estates in land, future interests) with contract principles (breach, remedies, anticipatory breach, mitigation).

A leasehold gives the tenant a present possessory interest and the landlord a future interest (a reversion). The lease also contains covenants—promises by each party (for example, to pay rent, to maintain habitability)—whose breach triggers specific remedies. Historically, lease covenants were treated as independent (meaning rent was owed even if the landlord breached other promises), but modern law, especially in residential tenancies, tends to treat many covenants as mutually dependent, so serious landlord breaches can affect the tenant’s rent obligation.

Key Term: Tenancy for Years
A leasehold estate for a fixed, specified period (for example, “from January 1, 2025, to December 31, 2025”), ending automatically without notice at the expiration date.

Key Term: Periodic Tenancy
A leasehold estate that continues for successive equal periods (for example, month-to-month, year-to-year) until properly terminated by notice given in advance.

Key Term: Tenancy at Will
A leasehold estate with no fixed duration, terminable at any time by either party; modern statutes typically require advance notice.

Key Term: Tenancy at Sufferance
A temporary estate arising when a tenant remains in possession (“holds over”) after the lease ends, pending eviction or creation of a new tenancy.

Key Term: Holdover Tenant
A tenant who remains in possession after the lawful tenancy has ended; treated as a tenant at sufferance until the landlord elects to evict or to recognize a new tenancy.

Key Term: License
A revocable privilege to use land for a specific purpose (for example, a theatre ticket), which does not create a possessory estate and is not a lease; it generally cannot be assigned and does not give rise to landlord-tenant remedies.

Distinguishing a lease from a license is sometimes tested. A lease grants the tenant exclusive possession for a term in exchange for rent; a license merely permits use, often non-exclusive and revocable at will. Calling an agreement a “license” does not control if the substance is a lease: exclusive possession, defined space, and ongoing payment typically indicate a leasehold.

Types of Leasehold Estates

There are four main types of leasehold estates tested on the MBE:

Tenancy for Years:
- Defined, fixed calendar dates or otherwise ascertainable duration (for example, “for nine months from the date of execution”).
- No notice is required to terminate; it ends automatically at the stated expiration.
- A term longer than one year usually must satisfy the Statute of Frauds (in writing, signed by the party to be charged).
Additional points:
- A lease “from March 1, 2025, to February 28, 2026” is a tenancy for years even though it is slightly less than a calendar year; what matters is that the end date is fixed.
- If the lease term is longer than one year and the Statute of Frauds is not satisfied (for example, an oral three-year lease), the lease is unenforceable as a term-of-years lease. However, if the tenant takes possession and pays rent periodically (such as monthly), most courts treat this as creating a periodic tenancy measured by the rent-payment period.
- Death of landlord or tenant does not terminate a valid tenancy for years; the lease passes to the estate or successor, subject to any contrary lease provision.
Periodic Tenancy:
- Continues from period to period (week-to-week, month-to-month, year-to-year) until properly terminated.
- Can be created:
  - By express agreement (for example, “month-to-month”).
  - By implication (rent paid monthly with no specified end date).
  - By holdover: landlord accepts rent from a holdover tenant.
Termination requires proper notice:
- At common law, notice equal to the length of the period (up to a maximum of six months) ending at the end of a period.
  - Example: A year-to-year tenancy requires at least six months’ notice; a month-to-month tenancy requires one full month’s notice.
- Many modern statutes simplify this (for example, 30 days’ written notice for a month-to-month tenancy regardless of the period).
Additional exam points:
- The notice must usually:
  - Be in writing if required by statute.
  - Specify the effective termination date.
  - Make the termination date fall on the last day of a rental period (under common law; some modern statutes relax this).
- If insufficient notice is given (for example, only two weeks’ notice for a month-to-month tenancy), the notice is typically effective to terminate at the earliest date for which proper notice would have been given.
Tenancy at Will:
- True tenancies at will are disfavored and usually arise only by express agreement (for example, “for as long as landlord and tenant desire”).
- If rent is reserved periodically, most courts construe the lease as a periodic tenancy rather than an at-will tenancy.
- Either party may terminate at any time, but modern statutes typically require advance notice (for example, 30 days).
- Terminates automatically on events such as:
  - Death of either party,
  - Waste by tenant,
  - Transfer of the property (sale, lease, or mortgage foreclosure),
  - Attempted assignment by tenant or landlord.
Exam detail:
- If a lease gives only the landlord the right to terminate (for example, “Landlord may terminate at any time”), most courts imply a reciprocal right in favor of the tenant, effectively creating a tenancy at will terminable by either party.
- If the lease has no definite duration but provides for periodic rent payments (for example, “Tenant to pay $1,000 on the first of each month, no stated end date”), courts typically treat this as a periodic tenancy rather than a tenancy at will.
Tenancy at Sufferance:
- Arises when a tenant wrongfully holds over after a valid tenancy ends.
- The landlord’s options:
  - Treat the tenant as a trespasser and bring eviction plus damages; or
  - Elect to hold the tenant to a new tenancy (usually a periodic tenancy) by accepting rent.
Additional points:
- The terms of the expired lease (including rent amount) generally carry over into the new periodic tenancy, except for provisions tied to the definite term (such as renewal options).
- Many jurisdictions allow landlords to charge a higher “holdover rent” if the tenant was given prior notice of the increase. The higher rent typically applies if the tenant remains in possession beyond the lease term and the landlord elects to create a new tenancy.
- If the holdover is due to circumstances beyond the tenant’s control (for example, severe weather preventing move-out, or a short delay in moving furniture), courts may be more lenient and refuse to treat the tenant as a willful holdover.

Creation and Termination

Tenancy for Years

Creation:
- Created by express agreement in writing if the term exceeds one year.
- The writing should identify:
  - Parties,
  - Premises,
  - Length of term,
  - Rent.
- Ambiguity in duration tends to be construed against the drafter and may convert the arrangement into a periodic tenancy.
Termination:
- Automatically at the end of the term—no notice is required.
- Earlier termination possible if the lease so provides (for example, reentry clause for failure to pay rent, destruction clause, condemnation clause).
- Breach (for example, nonpayment of rent) does not automatically terminate the lease; landlord must exercise a right of reentry, bring an eviction action, or invoke an acceleration clause if the lease provides one.
Exam detail:
- Merger: If the same person later acquires both the landlord’s and tenant’s interests in the same parcel (for example, landlord conveys fee simple to tenant), the leasehold estate and reversion merge, ending the lease.

Periodic Tenancy

Creation:
- Express: “Landlord leases to Tenant from month to month at $1,000 per month.”
- Implied:
  - Tenant takes possession and pays rent regularly without a definite term; or
  - Invalid term-of-years lease under the Statute of Frauds, followed by possession and periodic rent payments, creates a periodic tenancy measured by the rent period.
- Holdover: Landlord accepts rent from a holdover tenant, creating a new periodic tenancy.
Termination:
- Requires valid notice given one full period in advance and effective at the end of a period, unless statute modifies the rule.
- Notice must be clear and unequivocal.
- If insufficient notice is given, it is effective for the next possible termination date.
Additional exam points:
- At common law, a year-to-year tenancy required six months’ notice to terminate; modern statutes often use shorter time frames.
- Acceptance of rent after expiration of the notice period, with knowledge of the tenant’s continued occupancy, can be treated as waiving the notice and starting a new period.

Tenancy at Will

Usually must be expressly stated; courts tend to construe ambiguous leases as periodic tenancies instead.
If only one party is given the right to terminate (for example, “Landlord may terminate at any time”), most courts imply a reciprocal right in favor of the other party.
Terminates by:
- Notice (as required by statute),
- Death of either party,
- Waste by tenant,
- Transfer of the property,
- Assignment by either party.

Tenancy at Sufferance

Created automatically by wrongful holdover.
Landlord may:
- File a summary eviction proceeding; or
- Implicitly create a periodic tenancy by accepting rent.

Additional details:

If the landlord has already started eviction proceedings, acceptance of rent might be treated merely as compensation for use and not as consent to a new tenancy, depending on jurisdiction and facts.
If the landlord timely notifies the holdover of a proposed higher rent before expiration of the original term, and the tenant holds over, many courts allow the landlord to impose the higher rent in the new periodic tenancy.

Key Term: Surrender
A mutual agreement between landlord and tenant to end the lease before the expiration of its term, terminating the estate and future rent obligations.

Key Term: Abandonment
A unilateral act by the tenant leaving the premises before lease end without intention to return and without landlord’s consent; does not by itself terminate the lease.

When a tenant simply walks away (abandonment), the landlord can either:

Accept surrender (expressly or by clear conduct inconsistent with continuation of the lease), ending the tenant’s liability for future rent; or
Treat the abandonment as a breach and relet on the tenant’s account.

Most modern jurisdictions require the landlord to make reasonable efforts to mitigate damages by trying to relet.

Key Term: Mitigation of Damages
The duty of an injured party, such as a landlord after tenant abandonment or anticipatory breach, to take reasonable steps to reduce losses, typically by attempting to relet the premises.

Key Term: Anticipatory Breach
A clear, unequivocal statement or act by one party before performance is due indicating that they will not perform lease obligations; many courts allow the other party to treat the lease as breached immediately and sue, subject to mitigation.

Anticipatory breach on a lease exam:

If the tenant clearly repudiates (for example, “I will not pay any further rent and will be out by the end of this month”), the landlord may:
- Treat the repudiation as an immediate breach and sue for damages (subject to mitigation), or
- Wait until rent becomes due and sue as each installment is missed.
Some older cases disfavor anticipatory repudiation in real estate leases, but the modern trend is to treat long-term leases as contracts for these purposes, especially in commercial settings.

Tenant’s Duties

1. Duty to Pay Rent

The tenant’s primary obligation under the lease.
Rent is typically due on the date specified in the lease (often the first of the month).
At common law, rent was owed so long as the tenant had the legal right to possess, even if the premises were destroyed. Modern law generally relieves a tenant of the duty to pay rent if:
- The premises are destroyed without the tenant’s fault (for example, accidental fire, natural disaster), and
- The destruction renders the premises uninhabitable or unusable.
Many modern statutes codify that if the leased dwelling is substantially destroyed without fault of the tenant, the tenancy terminates and rent abates going forward.
Rent can be suspended or reduced if:
- The tenant is actually or constructively evicted; or
- There is a substantial breach of the implied warranty of habitability in a residential lease.

Exam details:

If only part of the premises is rendered unusable, courts may allow partial rent abatement rather than complete suspension.
In commercial leases, destruction of the premises may not automatically terminate the lease absent a destruction clause; parties’ rights may turn on contract doctrines of impossibility and frustration of purpose.

2. Duty to Avoid Waste

Tenants must not damage or fundamentally alter the premises in a way that harms the landlord’s reversionary interest.

Key Term: Waste
The tenant’s wrongful conduct (act or omission) that damages or substantially alters the leased premises, including voluntary waste, permissive waste, or ameliorative waste.

Voluntary waste: Intentional or negligent damage (for example, tearing down a structural wall without permission, removing built-in fixtures).
Permissive waste: Failing to take reasonable care (for example, not fixing a leaking pipe, allowing substantial damage from lack of basic maintenance).
Ameliorative waste: Unauthorized alterations that increase property value (for example, converting a residential unit into upscale offices without consent).

Modern courts sometimes are more lenient with ameliorative waste if:

The change substantially increases the property’s value,
The neighborhood has changed (for example, from residential to commercial), and
Restoration would be wasteful.

But on the MBE, assume the tenant needs consent to make significant structural changes.

Key Term: Trade Fixtures
Items affixed to leased premises by a commercial tenant for business purposes that the tenant may usually remove before the lease ends if removal does not cause substantial damage.

On the MBE, a commercial tenant generally may remove trade fixtures before the lease ends, even if attached, so long as any damage is repaired. If the tenant fails to remove them by the end of the tenancy, they are usually deemed abandoned and become part of the realty.

3. Duty Not to Use for Illegal Purposes

Occasional illegal acts are not enough to breach the lease.
Continued, known illegal use (for example, operating an illegal gambling operation, persistent drug dealing) gives the landlord a right to terminate the lease and evict, often under statute or the lease’s forfeiture clause.
The landlord who knowingly permits ongoing illegal activity may face civil or criminal consequences; many statutes encourage landlords to act.

Exam trap:

A single illegal act (for example, one drug sale) usually does not justify forfeiture unless the lease specifically makes any violation grounds for termination and the landlord elects to enforce it.

4. Repair and Maintenance Duties

Absent agreement, the landlord bears most structural repair duties; the tenant must:
- Keep the premises reasonably clean and safe.
- Comply with housing and safety codes applicable to tenants.
- Not commit waste.
Many leases shift certain repair obligations to the tenant. These clauses are generally enforceable, especially in commercial leases, but in residential leases they cannot waive the landlord’s core obligations under the implied warranty of habitability.

Additional points:

If a tenant covenants to repair and the premises are later destroyed by fire or casualty without the tenant’s fault, many courts limit the tenant’s duty to ordinary repairs, not reconstruction, unless the lease clearly provides otherwise.
A tenant also must comply with reasonable use restrictions (for example, “residential use only,” “no pets”); violation can constitute a breach, potentially justifying termination.

Key Term: Security Deposit
Money paid by the tenant at lease inception to secure performance of lease obligations, to be returned at lease end minus lawful deductions for unpaid rent or damage beyond ordinary wear and tear.

Many jurisdictions regulate:

Maximum size of deposits (often expressed as a multiple of monthly rent),
Requirement to hold deposits in separate accounts or pay interest,
Time limits and itemization requirements for return,
Penalties, including statutory damages or attorneys’ fees, for wrongful withholding.

On the MBE, focus on the general idea: landlord may use the deposit only for authorized purposes (unpaid rent, damage beyond normal wear and tear) and must account for it at the end of the lease.

Landlord’s Duties

1. Duty to Deliver Possession

Majority (English) rule: Landlord must deliver actual possession at the lease start. If a holdover tenant is still in possession, the new tenant’s remedy is against the landlord, and rent is not owed until possession is delivered.
Minority (American) rule: Landlord need only deliver legal possession (the right to possess). The new tenant must remove any holdover tenant and is still obligated to pay rent, subject to claims against the holdover.

Exam tip:

If the fact pattern does not specify the jurisdiction, the MBE tends to assume the majority rule (landlord must deliver actual possession) unless a question is explicitly contrasting the rules.

2. Covenant of Quiet Enjoyment

Key Term: Covenant of Quiet Enjoyment
An express or implied promise that the tenant’s possession will not be disturbed by the landlord or someone with superior title, and that the landlord will not substantially interfere with the tenant’s use and enjoyment.

Breach can occur by:

Actual eviction: Landlord or holder of superior title physically excludes the tenant from all (or part) of the premises.
Constructive eviction: Landlord’s wrongful conduct substantially interferes with tenant’s use and enjoyment, causing the tenant to vacate.

Key Term: Constructive Eviction
When the landlord’s wrongful act or failure to act substantially interferes with the tenant’s use and enjoyment, and the tenant vacates within a reasonable time; the law treats it as if the landlord actually evicted the tenant.

Elements commonly tested:

Landlord (or someone for whom the landlord is responsible) causes the problem.
Substantial interference with use and enjoyment (not trivial or temporary).
Tenant gives notice and allows reasonable time to cure.
Tenant vacates the premises within a reasonable time after the landlord fails to cure.

Key Term: Partial Actual Eviction
Physical exclusion of a tenant from part of the leased premises by the landlord or someone with superior title; often excuses rent entirely if done by the landlord at common law.

Additional details:

If the landlord physically ousts the tenant from part of the premises (for example, locks the tenant out of the basement that is part of the lease), the traditional rule is that the tenant owes no rent at all until full possession is restored.
If the partial eviction is by someone with a superior title (for example, a claimant whose title is better than the landlord’s), the tenant’s rent is typically reduced pro rata.
Some jurisdictions recognize partial constructive eviction, where a defect makes part of the premises unusable; some courts allow the tenant to remain in the rest of the premises and claim a rent reduction, but constructive eviction in its classic form requires moving out.

3. Implied Warranty of Habitability (Residential)

Key Term: Implied Warranty of Habitability
In residential leases, the landlord’s non-waivable obligation to keep the premises reasonably fit, safe, and sanitary for human habitation, measured by local housing codes or community standards.

Key points:

Applies only to residential leases.
Cannot be disclaimed or waived by the tenant.
Typical breaches: lack of heat in winter, lack of running water, serious plumbing or electrical defects, severe infestations, collapsing ceilings, dangerous structural defects.
Minor code violations (for example, peeling paint, cracked tiles) usually do not constitute a breach unless they collectively render the premises uninhabitable.

Procedural steps (often implied on exams):

Tenant gives landlord notice of the defect.
Tenant allows a reasonable time for repair.
If landlord fails to fix, tenant may exercise remedies.

Tenant’s remedies (depending on jurisdiction):

Move out and terminate the lease.
Make repairs and deduct the cost from rent (often limited to reasonable amounts).
Reduce or withhold rent (often placing withheld rent in escrow).
Sue for damages, such as:
- Difference between the fair rental value as promised and as is;
- Consequential damages (for example, property damage, personal injury) if causally connected.

Distinguish from quiet enjoyment:

Habitability focuses on physical conditions necessary for residential living; quiet enjoyment is broader and protects against substantial interference from any landlord conduct.

4. Implied Warranty of Suitability (Commercial)

Key Term: Implied Warranty of Suitability
In many jurisdictions, an implied promise in commercial leases that the premises are fit for their intended commercial use at the outset and will be maintained in that condition.

Features:

Typically applies to latent defects in essential facilities for the intended commercial use (for example, structural integrity, basic utilities).
The warranty is less universally adopted than the residential habitability doctrine; some states rely instead on express clauses and common law caveat lessee.
Remedies parallel those for habitability in jurisdictions that recognize the warranty: rent abatement, damages, sometimes termination for serious breaches.

On the MBE, if you see a commercial tenant unable to operate its intended business because of a serious structural defect known to the landlord or within the landlord’s control, consider a breach of the covenant of quiet enjoyment or suitability, depending on the jurisdiction described.

5. Tort Liability of Landlord

Traditional rule: “Caveat lessee” (let the tenant beware), with narrow exceptions where landlord is liable for:

Latent defects known to landlord and not disclosed.
Defects in common areas under landlord’s control (for example, hallways, elevators, stairwells).
Negligent repairs undertaken by landlord (landlord makes the condition worse or gives false sense of security).
Public use exceptions (for example, premises leased for admission of the public and landlord knows or should know of a defect; tenant will not fix; there is a short time between the lease and the public use).
Short-term leases of furnished dwellings (landlord liable for defects existing at the beginning of the lease because tenant reasonably relies on landlord’s inspection).

Modern trend: Landlords owe a general duty of reasonable care under ordinary negligence principles. Many courts treat landlords similarly to other property owners, especially in multi-unit residential and commercial contexts.

Contract clauses:

Exculpatory clauses that purport to relieve the landlord of all liability for negligence are often unenforceable in residential leases and are strictly construed in commercial leases.
Landlords generally cannot disclaim liability for intentional or reckless conduct.

Key Term: Retaliatory Eviction
A landlord’s attempt to terminate a tenancy, raise rent, or otherwise penalize a tenant because the tenant exercised legal rights (such as reporting housing code violations); such conduct is generally prohibited.

Key Term: Self-Help Eviction
A landlord’s use of force, lockouts, or other nonjudicial means to remove a tenant; generally unlawful in modern law, with eviction required to occur through court process.

Many states:

Bar landlords from increasing rent, decreasing services, or bringing eviction actions in retaliation for a tenant’s good-faith complaint for a specified period (for example, six months after the complaint).
Treat self-help eviction as wrongful, exposing landlords to damages and sometimes punitive damages.

Remedies for Breach

1. Tenant Breach (Primarily Nonpayment of Rent or Abandonment)

If tenant fails to pay rent or abandons the premises:

Landlord may:
- Evict the tenant through judicial process (summary proceedings) and recover unpaid rent and possibly future rent (subject to mitigation).
- Treat abandonment as an offer of surrender and accept it, ending the lease (and tenant’s liability for future rent).
- Relet the premises for tenant’s account and sue for the difference between the agreed rent and the rent obtained, plus incidental damages.

Most jurisdictions impose a duty to mitigate, requiring the landlord to make reasonable efforts to relet the premises. Reasonable efforts:

Advertising the property,
Showing it to prospective tenants,
Not unreasonably rejecting suitable replacement tenants.

Landlord does not have to:

Accept a substantially worse tenant (for example, poor credit, unsuitable use),
Accept significantly reduced rent if comparable tenants at similar rent are reasonably available.

Exam detail:

If the landlord leaves the premises vacant to accumulate damages, many courts will limit recovery because of failure to mitigate.
A commercial landlord may sometimes agree in the lease that the tenant waives mitigation; some courts enforce such clauses, but this is jurisdiction-specific and less likely to be tested on the MBE than the general duty-to-mitigate rule.

2. Landlord Breach (Quiet Enjoyment, Habitability)

If landlord breaches the covenant of quiet enjoyment (including constructive eviction) or the implied warranty of habitability:

Tenant may:
- Terminate the lease and move out (constructive eviction or severe habitability breach).
- Withhold or reduce rent in proportion to the defect (especially under habitability).
- Repair and deduct in jurisdictions recognizing that remedy.
- Sue for damages (for example, difference between fair rental value as warranted and value as is, plus consequential damages).

Key distinction:

A tenant claiming constructive eviction must vacate (or the claim fails).
A tenant relying on habitability may remain in possession and use the condition as a defense to a rent claim or as a basis for damages or rent abatement.

Exam Tip: Distinguish constructive eviction (requires moving out) from breach of habitability (often allows staying and withholding rent). This distinction is frequently tested.

3. Acceleration of Rent and Future Damages

Some leases contain acceleration clauses providing that upon tenant default, all future rent becomes immediately due. Enforceability depends on:

State law on liquidated damages and penalties,
Reasonableness of the total amount compared with probable actual damages.

Even without an acceleration clause, landlords may recover future damages (discounted to present value) for the remainder of the lease term, minus amounts actually received or reasonably obtainable through reletting, consistent with mitigation.

4. Interaction with Security Deposits

When the lease ends:

Landlord may apply the security deposit to:
- Unpaid rent,
- Damage beyond ordinary wear and tear,
- Other lawful charges under the lease.

Landlord must then:

Return any remaining balance within the statutory time,
Provide an itemized statement of deductions if required by statute.

Wrongful failure to return a security deposit can result in:

Actual damages,
Statutory penalties (often multiples of the deposit),
Attorneys’ fees in some jurisdictions.

Worked Example 1.1

A tenant signs a one-year written lease for an apartment, paying monthly rent. After six months, the tenant moves out and stops paying rent. The landlord advertises the apartment but cannot find a new tenant for three months. Who is liable for the unpaid rent?

Answer:
The tenant is liable for rent for the three months the unit was vacant, minus any rent the landlord actually received from a replacement tenant. The landlord must make reasonable efforts to mitigate damages by attempting to relet, but is not a guarantor of success.

Worked Example 1.2

A tenant transfers the entire remaining eight months of a lease to a new tenant, who pays rent directly to the landlord. After two months, the new tenant stops paying rent. Who can the landlord sue?

Answer:
The landlord can sue the assignee (new tenant) for rent as long as the assignee remains in possession because they are in privity of estate. The landlord can also sue the original tenant, who remains in privity of contract, unless the landlord expressly released the original tenant (a novation).

Worked Example 1.3

A landlord fails to repair a broken heating system in a residential apartment despite repeated written notices. In winter, the apartment becomes so cold that it is unsafe to live there. The tenant moves out and stops paying rent. The landlord sues for rent for the remaining six months of the term. What is the likely result?

Answer:
The tenant can assert constructive eviction and breach of the implied warranty of habitability. The landlord’s failure to provide heat substantially interfered with use and enjoyment, and the tenant vacated within a reasonable time. The lease is treated as terminated, and the tenant is not liable for future rent.

Worked Example 1.4

A tenant’s one-year lease ends on June 30, but the tenant stays in possession and sends the landlord a check for July rent, which the landlord cashes without comment. What estate does the tenant now have?

Answer:
The tenant is a holdover tenant initially, creating a tenancy at sufferance. By accepting rent, the landlord has elected to create a new periodic tenancy (most likely month-to-month) on the same terms as the prior lease, except for terms tied to the definite term (such as renewal options).

Worked Example 1.5

A tenant in a residential lease stops paying rent after the landlord doubles the rent in apparent retaliation for the tenant’s recent complaint to the housing authority. The landlord brings an eviction action for nonpayment. What is the tenant’s best defense?

Answer:
Retaliatory eviction. A landlord may not terminate, refuse to renew, or substantially raise rent because the tenant exercised legal rights such as reporting code violations. The court will likely bar the eviction and the retaliatory rent increase.

Worked Example 1.6

A tenant rents a commercial space for a restaurant. The lease is silent about repairs. Shortly after opening, a hidden structural defect in the ceiling (known to the landlord but not disclosed) causes part of the ceiling to collapse, forcing the restaurant to close. The landlord refuses to repair. The tenant stops paying rent but stays in possession, hoping the landlord will fix the defect. The landlord sues for unpaid rent. What result?

Answer:
The landlord has breached the covenant of quiet enjoyment and, in many jurisdictions, the implied warranty of suitability for commercial use. However, because the tenant has not vacated, the tenant cannot claim constructive eviction. In most jurisdictions recognizing suitability, the tenant may claim a rent abatement and damages while remaining, but cannot completely stop paying rent unless the lease or statute so permits. If the exam focuses on traditional constructive eviction, the tenant must leave to terminate the rent obligation.

Worked Example 1.7

A tenant orally agrees to rent a house for three years at $2,000 per month. The tenant pays rent monthly and moves in. After one year, the landlord seeks to evict, arguing the lease is void under the Statute of Frauds. The tenant defends, claiming a three-year tenancy for years. What estate does the tenant have?

Answer:
The oral three-year lease violates the Statute of Frauds and is unenforceable as a term-of-years lease. However, because the tenant took possession and pays rent monthly, most courts treat this as creating a month-to-month periodic tenancy. The landlord may terminate by giving proper notice for a periodic tenancy but cannot simply evict without notice.

Worked Example 1.8

A tenant installs heavy ovens and venting as part of a bakery business in leased space. At the end of the lease, the tenant removes the ovens and venting, leaving minor holes in walls and ceilings, which the tenant promptly repairs. The landlord sues, claiming the ovens and venting were fixtures that became part of the realty. Who prevails?

Answer:
The tenant. The ovens and venting are classic trade fixtures installed by a commercial tenant for business purposes. The tenant may remove trade fixtures before the lease ends so long as removal does not cause substantial damage and any minor damage is repaired. The landlord’s claim that these fixtures automatically became part of the realty fails.

Worked Example 1.9

A landlord leases an apartment to a tenant “for residential use only.” The tenant begins using one room as a small hair salon for paying customers. The landlord discovers this and seeks to terminate the lease immediately. The tenant argues that the use is harmless and actually increases the property’s value. What result?

Answer:
The tenant is breaching the lease’s use restriction by operating a commercial business in premises limited to residential use. Even if the use arguably increases value, it is an unauthorized change in use and can be treated as a breach, possibly as ameliorative waste. The landlord may terminate the lease if the lease or governing law allows termination for such a breach and follows required procedures.

Worked Example 1.10

A tenant abandons leased office space with six months left on the lease, telling the landlord in writing that she will not return or pay further rent. The landlord makes no effort to relet the space for the remaining six months and then sues the tenant for all six months of rent. How much may the landlord recover?

Answer:
In most jurisdictions, the landlord has a duty to mitigate by making reasonable efforts to relet. By doing nothing, the landlord cannot recover all six months of rent; recovery will be reduced by the amount the landlord could reasonably have obtained by reletting. On an MBE question that assumes the modern rule, the landlord’s failure to mitigate limits damages.

Assignment and Subletting

Key Term: Assignment
The transfer by a tenant of the entire remaining lease term and all possessory rights to a new tenant, who comes into privity of estate with the landlord and becomes primarily liable for lease obligations that run with the land.

Key Term: Sublease
The transfer by a tenant of less than the entire remaining lease term or retention of a reversionary interest, with the original tenant remaining in privity of estate and contract with the landlord; the subtenant pays rent to the tenant, not directly to the landlord.

Key Term: Privity of Estate
A property-law relationship between parties who hold successive interests in the same land, such as landlord and current tenant or landlord and assignee, supporting enforcement of covenants that run with the land (like rent).

Key Term: Privity of Contract
A contract-law relationship between parties to the lease agreement itself, usually the original landlord and original tenant, who remain liable to each other on lease covenants unless released.

1. Assignments by Tenant

If a tenant transfers the entire remaining term, it is an assignment (even if the parties call it a “sublease”).
Assignee and landlord are in privity of estate:
- Each is liable to the other for covenants that run with the land (for example, rent, repair) while the assignee holds possession.
Original tenant remains in privity of contract with the landlord and is liable on the lease unless a novation occurs (landlord expressly releases the original tenant and substitutes the assignee).

Multiple assignments:

T1 (original tenant) assigns to T2; T2 later assigns to T3.
Landlord is in privity of estate with whoever is currently in possession (T3).
Landlord remains in privity of contract with T1, and possibly with T2 or T3 if they expressly assumed lease obligations in a way that makes landlord a third-party beneficiary.

Exam strategy:

To determine who is liable for rent:
- Identify who is in possession (for privity of estate).
- Identify who signed the lease or assumed it (for privity of contract).

2. Subleases by Tenant

If the tenant keeps any part of the remaining term (even a day) or reserves the right of reentry, the transfer is a sublease.
Subtenant and landlord are not in privity of estate or contract.
- Landlord cannot sue subtenant directly for rent under the original lease.
- Landlord must enforce rights against the tenant, who in turn may sue the subtenant.
Subtenant owes duties to the tenant under the sublease; the tenant remains fully liable to the landlord.

Effect of termination:

If the prime lease is terminated (for example, for tenant’s breach), the sublease usually falls with it; the subtenant has no independent right to remain against the landlord unless the landlord agrees otherwise.

3. Restrictions on Transfer

If the lease is silent, tenants may assign or sublease freely.
A clause prohibiting “assignment” but not “subletting” is usually construed narrowly: it bars only assignment, not sublease (and vice versa).
A clause requiring landlord’s consent is enforceable.
- Traditional rule: Landlord may withhold consent for any reason or no reason, unless the lease says consent will not be unreasonably withheld.
- Modern trend (especially for commercial leases): Consent may not be unreasonably withheld, even if the lease is silent, focusing on commercially reasonable grounds (for example, financial stability, proposed use inconsistent with building).

Waiver:

If a lease prohibits transfers without consent, but the landlord knowingly accepts rent from an unauthorized assignee or subtenant, the landlord may be deemed to have waived the restriction for that transfer.
The restriction normally remains in place for future transfers unless clearly waived more broadly.

Exam Warning

If a lease prohibits assignment or subletting, but the landlord knowingly accepts rent from an unauthorized assignee or subtenant, the landlord may be deemed to have waived the restriction for that transfer. The restriction normally remains in place for future transfers unless expressly waived.

Transfers by Landlord

A landlord can also transfer their interest (the reversion):

Sale of the property usually:
- Does not terminate existing leases.
- Binds the new owner (“successor landlord”) to covenants that run with the land (for example, duty to maintain common areas, accept rent).
- Leaves the original landlord liable in privity of contract for covenants in the original lease, unless released.

Tenant’s obligations:

Tenants remain bound by the lease and must pay rent to the new landlord once given proper notice of the transfer.
If a tenant mistakenly pays rent to the old landlord after notice of sale, the tenant may still be liable to the new landlord; on exams, look for whether the tenant had notice.

Security deposits:

Upon sale, many statutes require the original landlord to transfer the security deposit (minus lawful deductions) to the new landlord and notify the tenant.
The new landlord typically becomes responsible for returning the deposit at the end of the lease.

Revision Tip

Always distinguish between assignment (entire remaining term) and sublease (less than the entire term) on the MBE. Use privity of estate and privity of contract to determine who may sue whom for rent or other covenants.

Key Point Checklist

This article has covered the following key knowledge points:

Leasehold estates include tenancy for years, periodic tenancy, tenancy at will, and tenancy at sufferance; holdover tenants create a tenancy at sufferance until the landlord elects to evict or recognize a new tenancy.
Creation and termination rules differ for each lease type; proper notice and timing are critical for periodic tenancies and at-will tenancies, and the Statute of Frauds shapes term-of-years leases of more than one year.
The distinction between a lease (exclusive possession for a term) and a license (revocable use privilege) can affect available remedies and transferability.
Tenants must pay rent, avoid waste (voluntary, permissive, ameliorative), comply with lease repair and use obligations, and not use premises for continuous illegal purposes.
Tenants may generally remove trade fixtures before the lease ends if they repair resulting damage; failure to remove by the end of the term usually results in abandonment of the fixtures to the landlord.
Landlords must deliver possession (actual possession under the majority rule), respect the covenant of quiet enjoyment, and in residential leases maintain habitability; many jurisdictions also impose an implied warranty of suitability in commercial leases.
Constructive eviction requires substantial interference caused by the landlord, notice, an opportunity to cure, and the tenant’s vacating within a reasonable time; partial actual eviction by the landlord can excuse rent entirely at common law.
Breach of the implied warranty of habitability allows a residential tenant to move out, withhold or reduce rent, repair and deduct, or seek damages, and the warranty cannot be waived.
Landlords typically may not use self-help eviction and may not retaliate against tenants for lawful complaints about housing conditions or code violations.
On tenant breach (nonpayment, abandonment, anticipatory breach), the landlord must make reasonable efforts to mitigate damages by attempting to relet, and may choose among eviction, acceptance of surrender, or reletting for the tenant’s account.
Surrender ends the lease by mutual agreement; abandonment does not, but may be treated as a breach triggering the landlord’s duty to mitigate.
Assignment transfers the entire remaining lease term and creates privity of estate between landlord and assignee; the original tenant remains in privity of contract absent novation and can still be liable on lease covenants.
Subleasing transfers less than the entire remaining term; landlord has no privity of estate or contract with the subtenant and must enforce covenants against the original tenant.
Sale or transfer of the reversion does not terminate existing leases; the new landlord is bound by covenants that run with the land and typically assumes responsibility for returning security deposits.
Restrictions on assignment and subletting may be waived by landlord conduct, such as knowingly accepting rent from an unauthorized transferee; many modern courts require commercial landlords to act reasonably in withholding consent.

Key Terms and Concepts

Tenancy for Years
Periodic Tenancy
Tenancy at Will
Tenancy at Sufferance
Holdover Tenant
License
Waste
Trade Fixtures
Implied Warranty of Habitability
Implied Warranty of Suitability
Covenant of Quiet Enjoyment
Constructive Eviction
Partial Actual Eviction
Surrender
Abandonment
Mitigation of Damages
Security Deposit
Retaliatory Eviction
Self-Help Eviction
Assignment
Sublease
Privity of Estate
Privity of Contract
Anticipatory Breach

Ownership of real property - Landlord-tenant law