Also known as: leasehold interest · leasehold estate
Written by attorneys · grounded in primary & secondary sources — see below
A possessory estate in land granted by a landlord to a tenant under a lease for a fixed or determinable term in exchange for rent. The holder enjoys exclusive use and enjoyment of the premises subject to the lease terms and may enforce covenants that run with the leasehold estate.
Liberty Trust leased a warehouse to Lotus Pharmaceuticals for ten years and included an option for the tenant to purchase the building at the end of the term. When the lease expired, Lotus attempted to exercise the option. A court applied landlord-tenant rules to determine that the option remained enforceable because it was appurtenant to the leasehold estate.
Lighthouse Shipping held a leasehold interest in a commercial building subject to a mortgage held by Lexicon Media. After default, the mortgagee foreclosed and the sale produced a surplus. The court first paid Lighthouse Shipping the fair market value of its terminated leasehold before distributing any remaining funds to the equity holder.
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A leasehold interest grants exclusive possession of the premises for a term. A license is a revocable personal privilege to use land without creating an estate. An easement is a nonpossessory right to use another's land for a specific purpose.
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Yes. Modern property law treats many lease covenants as servitudes that run with the leasehold estate when they concern use of the premises and the lease shows intent to bind successors. Assignees and subtenants take subject to those obligations.
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The leasehold is terminated by foreclosure. The tenant is entitled to compensation from any foreclosure surplus equal to the fair market value of the leasehold before any balance is paid to the equity holder.
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A lease for a fixed term measured in years creates an estate for years. The writing must identify the parties, premises, duration, and rent and be signed by the party to be charged.
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