What is an Estate for Years?

Estate for years is a type of lease agreement that specifies an exact beginning and ending date for the tenant to occupy the property.

Key Takeaways

  • Estate for years is a type of lease agreement that spells out a specific beginning and ending date for the lease.
  • An estate for years agreement should include clauses on liability, default, subleasing, late payments, severability, lease renewal, and use of the property.
  • Unlike periodic tenancy, no notice is needed for terminating an estate for years agreement because it automatically expires on a set date, which is when the tenant should vacate the property.

How Does Estate for Years Work?

In real estate, a property being leased is called a leasehold estate. One type of leasehold estate is the “estate for years,” which means the tenant will lease the property for a specified length of time. It is sometimes also called tenancy for years or estate for term.

In this type of lease, there is a defined beginning date and ending date for a specific term. This means that no notice to vacate is required, as the ending date of the lease is when the tenant should vacate the property.

The lease cannot be terminated before expiration unless both parties agree. The rights and obligations of the owner or landlord and the tenant are spelled out in the lease.

Components of Estate for Years

In an estate for years lease agreement, there are typically several different types of clauses that you should include. Here are the basics.

Joint and Several Liability

Used a lot in residential leases, this clause allows the landlord to treat multiple tenants as each being individually and jointly liable to uphold the terms of the lease. In other words, the group is responsible, but so is each individual. For example, if there are six roommates sharing the rent and named on the lease, the landlord needs only to serve one or more to meet lease terms for notice.

Default

There needs to be a clause setting out what happens if either party to the lease defaults on the terms. It should also state when a party is considered in default. It’s OK just to state that a default occurs when one party violates the terms of the lease, but it’s better practice to list the ways in which an automatic default occurs to make it very clear. It would be a “not limited to” clause, meaning any other terms not listed would still trigger default, if violated.

Subleasing

Some leases forbid subleasing. Landlords often say that it’s difficult or impossible to enforce, so they allow it. You can charge a fee or increase rent if the property is subleased. It’s good practice in this clause to require a complete application process, including credit and background checks for sublease tenants.

Late Fees

To encourage on-time rent payments, you can charge late fees. Check state laws, however, to determine if specific grace periods are required or whether there are other rules related to late rent penalties.

Note

Be clear as to when a late fee kicks in and the amount. If this isn’t clear in the lease, it will be tough to defend the late fees in court.

Severability

This is an important clause. At times, sometimes because laws change, a portion of a lease can be declared illegal. This clause clearly states that if one portion of a lease is declared illegal, all other portions of the lease will still be legally enforceable.

Lease Renewal

There are various ways to handle lease renewal or extension in the agreement. The most common are automatic or non-automatic. If automatic renewal is used, the tenant will be automatically liable for another lease period when the renewal date passes. This puts the onus on the tenant to inform the landlord in advance and terminate the lease.

The more common non-automatic lease renewal will usually require a specific amount of notice if the tenant is not going to renew. If notice isn’t received by that date, there is some sort of monetary penalty, as the landlord doesn’t have as much time to find a new tenant to reduce the vacancy period. Either way, it is a best practice for the landlord to set up internal alerts so that the tenants can be reminded before any important due dates.

Use of the Property

Be careful not to violate laws related to discrimination here. Generally, the one thing to be sure to do is to limit the number of unit occupants. You can leave the number open until you know how many, so if three people move in with your approval, the lease would then limit the occupants to three. This keeps unwanted friends or family members from moving in.

Note

Those are common lease clauses, but you always want to get a lease agreement properly constructed for your state, as laws vary and you want to stay on the right side.

Frequently Asked Questions (FAQs)

What’s the difference between estate for years and periodic tenancy?

Estate for years (or estate for term) is an agreement for a set period of time. Periodic tenancy (or period-to-period) follows from one period of time to the next. An example of periodic tenancy would be a month-to-month lease, where the tenant rents a unit from one month to the next. Unlike periodic tenancy, estate for years has a set date when the lease agreement expires.

How do you terminate an estate for years lease?

With an estate for years, the end date or termination of the lease is spelled out in the agreement. The tenant doesn’t need to give notice, because the date their lease is up is included in the lease agreement already.

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