Leasehold means an interest in land or property that allows the lessee to occupy and use such land or property for a specified period without availing full ownership rights. Freehold estates, on the other hand, allow the property owner to possess and occupy the property indefinitely, leasehold estates have a time limit as provided for in the lease agreement.
It is essential to know the different types of leasehold estates for a tenant and a landlord since every type has different rights, obligations, and periods provided. In this post, we shall look at the four main types of leasehold estates.
1. Estate for Years (Fixed-Term Tenancy)
The estate for years is the simplest type of leasehold estate which possesses a definite term. The term “an estate for years” does not necessarily mean that it must be fixed for years; It can be for as short as days, months, several years or any specified period. What distinguishes such type of lease agreement is that commencement and expiration dates are fixed and indicated in the lease agreement itself.
Characteristics:
- Known duration: The lease has set start and end dates and will not automatically extend on completion of the stated period.
- No early termination for breach: The canceling of the lease before its expiration is not allowed unless it is available in the lease agreement.
- General application: Most common for dwelling premises and business spaces leasing.
In the absence of a renegotiated agreement, a tenant must vacate the premises at the expiration of the lease agreement. If the tenant does not vacate the premises after the agreed-upon term without permission, he or she becomes a holdover tenant.
2. Periodic Tenancy
A periodic tenancy lease is an agreement which does not have any defined end date. At the end of this period which is mostly called a month, it is renewed, rinsed, and repeated until one of the parties gives notice to the other and decides to terminate the agreement. Concerning this type of lease, both lessees and lessors have it easy.
Characteristics:
- Presumption: In anticipation of other circumstances, the latter period is set on the lease for only a month but is automatically renewed unless the tenant serves a notice of one month.
- Termination Notice: In the event a notice to terminate the lease is required, it is usually thirty days.
- Short let applicable: This is appropriate for individuals who do not want to stay in one place for too long.
The periodic tenancy allows for more flexibility where tenants can vacate on notice without being stuck into a long lease period while landlords are able to adjust terms more regularly.
3. Estate of Will: Tenancy at Will
Tenancy at will is also defined as estate at will in which the tenant occupies the property with the owners consents but there is no lease or agreement and no definite term is provided. Such leasehold estates are terminable at will by either party, within reasonable time.
Characteristics:
Not for a specific period: The arrangement is in place indefinitely as both parties agree.
Opportunity to terminate before the due date: Within stated limits, each of the parties is entitled to terminate the agreement.
No formal agreement: More often than not, there is no lease document, thus creating ambiguity in the rights and obligations of the parties.
Conclusion:
These leases are appropriate for temporary accommodation needs but do not provide the guarantee of a lease with defined dates. The leasehold estates may be of variable flexibility, duration, and even legal rights. For both landlords and tenants, it is vital to know the various types of leases—estate for years, periodic tenancy, estate at will, and estate at sufferance—to avoid any misunderstanding and conflict when creating lease agreements.
