A leasehold property is a piece of real property (including either land or buildings) owned by one party, the lessor, who then legally grants another party, the lessee, the right to use the property for a period of time. The lessor does not give the lessee any actual ownership rights in the property, only possessive rights. There are several different types of leaseholds, each with its own rules.
Creating a Leasehold
Parties may create a leasehold either in writing, or by any type of oral agreement in which the lessor gives the lessee either explicit or implicit permission to use the property. Leases lasting longer than a year, however, must generally be written. The essential characteristic that distinguishes leaseholds from other types of property interests is the fact that even if the parties don't know when the leasehold will terminate, they have tacitly agreed that it will terminate, that it will not continue indefinitely.
Types of Property
A leasehold is an estate in land. In most states, law has defined "land" to include the land itself, the buildings upon it and any natural resources present in the land (although leases to mine or otherwise extract resources generally have their own bodies of law.) Leasehold property may also include "fixtures," personal property that is attached to the land in such a permanent way that the law considers the property part of the land.
Term of Years
The term of years, or tenancy of years, is a type of leasehold that lasts for a specific period of time decided between the lessor and lessee. The parties generally fix the termination date at the beginning of the leasehold. Parties can terminate a term of years early if the lessee surrenders the property, and the lessor accepts his surrender.
Tenancy at Will
A tenancy at will is a leasehold intended by the parties to continue until either party wishes to end it. State law typically requires the lessor or lessee to give varying amounts of notice in a tenancy at will. The law may also terminate a tenancy at will upon the occurrence of certain events.
A periodic tenancy is a type of leasehold with a fixed start date but no certain end date. Periodic tenancies differ from tenancies at will in that the periodic tenancy renews itself repeatedly for fixed periods until one party gives notice. Month-to-month rentals typically fall under this heading; once a new month has started, the leasehold will continue through the end of that month. The successive renewal period may be any amount of time up to a year.
Tenancy at Sufferance
Tenancy at sufferance is a type of leasehold created when a lessee stays in possession of the property even though his legal leasehold has expired. At this point, the lessor can evict the lessee at any time with no notice required. Should the lessor allow the tenancy to continue, the lessee will owe the lessor rent for the period until he vacates.