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Leasehold Interest in Real Property

9. What is a “leasehold estate” in real property?

A leasehold estate, commonly called a lease, is the property right granted to a tenant by a landlord. The lessor has limited rights similar to that of an owner, but for a limited term. The renter cannot materially change the property without the landlord’s consent. Any material changes to the property (such as installation of fixtures) become the property of the landlord upon termination of the lease.

•    Note: The provisions of the Uniform Commercial Code, Article 2A govern leases of personal property.

•    Discussion: Should a lease be considered a form of ownership interest in property? At what point do you think the right of use turns into rights of ownership?

•    Practice Question: Gayle has a house that she generally rents to tenants. Juliet comes into town and asks Gayle if she can stay with her for a few days. Gayle agrees to allow Juliet to stay in her rental house. After a couple of days, Juliet offers to clean up the house as a thank you for letting her stay in the house. Gayle agrees without any talk of compensation or rent. Juliet proceeds to paint the walls, install curtains, and replace some of the faucets. What is the relationship between Gayle and Juliet? Did Juliet have the right to undertake the aforementioned changes to Gayle’s house?

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