Also known as: lessor interest · lessors' interest · landlord's interest
Written by attorneys — see sources below.
The economic value represented by the right to receive future rental income during the lease term together with the present value of the property upon reversion at the end of the lease.
Lamar Lewis leased commercial space to Legacy Motors for ten years. When Lewis sought to sell the building to Lighthouse Shipping, Legacy Motors withheld consent on the ground that the buyer lacked experience managing industrial tenants. The court evaluated whether the withholding was unreasonable and thereby affected the market value of Lewis's lessor's interest in the remaining lease payments and reversion.
Lance Lee owned an office building leased to Lotus Pharmaceuticals. Lee assigned his entire interest to Liberty Trust without first obtaining the tenant's consent. Lotus Pharmaceuticals claimed the assignment was invalid under the lease clause. The dispute turned on whether the assignment diminished the value of Lee's original lessor's interest by exposing the tenant to an unapproved successor.
In 1970, the Perlitches entered into a 25-year sublease with Robert Bixler for 14,400 square feet of hangar space at the San Jose Municipal Airport to conduct an airplane maintenance business. The sublease covered an original five-year term plus four five-year options to renew. The rental rate was to be increased every ten years in the same proportion as rents increased on the master lease from the City of San Jose. The premises were to be used by Bixler for the purpose of conducting an airplane maintenance business. The lease provided that written consent of the lessor was required before the lessee could assign his interest, and that failure to obtain such consent rendered the lease voidable at the option of the lessor. Subsequently, the Perlitches assigned their interest to Ernest Pestana, Inc. In 1981, Bixler agreed to sell the business, equipment, inventory, improvements, and the existing lease to Jack Kendall, Grady O'Hara, and Vicki O'Hara. The proposed assignees had a stronger financial statement and greater net worth than Bixler and were willing to be bound by the lease terms. Bixler requested consent from Ernest Pestana, Inc., but the lessor refused, claiming an absolute right to withhold consent arbitrarily and demanding increased rent and other more onerous terms as a condition of consent. The proposed assignees filed suit for declaratory and injunctive relief and damages, alleging that the refusal was unreasonable. The trial court sustained the demurrer without leave to amend. The Court of Appeal affirmed.
View caseLevi Lowe leased rooftop space on his building to a tenant. A cable company installed equipment across the roof without Lowe's permission. The installation reduced the usable area and thereby lowered the present value of Lowe's lessor's interest in future rents and the building's reversionary worth.
In 1970, Teleprompter Manhattan CATV Corp. obtained a permit from New York City to operate a cable television system in Manhattan. It entered into an agreement with the prior owner of a five-story apartment building at 303 West 105th Street to install cables on the roof in exchange for a flat fee of $50 per year. The installation included a cable slightly less than one-half inch in diameter and approximately 30 feet in length running along the roof about 18 inches above the surface. It also included directional taps measuring approximately 4 inches by 4 inches by 4 inches on the front and rear of the roof. Two large silver boxes were placed along the roof cables. Additional cable was extended another 4 to 6 feet. All components were attached by screws or nails penetrating the masonry at approximately two-foot intervals. In 1971, Jean Loretto purchased the building. At the time of purchase the cable installation was already in place as part of a larger network serving adjacent buildings, though Loretto did not discover its existence until after she took possession. Two years later Teleprompter connected a noncrossover line by dropping a cable down the front of the building to serve Loretto's own tenants. In 1973 the New York Legislature enacted section 828 of the Executive Law, effective January 1, 1973, which prohibited landlords from interfering with cable television installations on their property, barred landlords from demanding payment from tenants for permitting service, and limited any payment from a cable company to an amount the State Commission on Cable Television determined to be reasonable; the Commission later set the presumptive fee at a one-time $1 payment. In 1976 Loretto filed a class action against Teleprompter in New York Supreme Court on behalf of all owners of real property in the state on which Teleprompter had placed cable components, alleging trespass and a taking without just compensation and seeking damages and injunctive relief; the City of New York, which had granted Teleprompter an exclusive franchise for parts of Manhattan, intervened as a defendant. The Supreme Court, Special Term, granted summary judgment to Teleprompter and the city. The Appellate Division affirmed without opinion. The New York Court of Appeals upheld the statute. The Supreme Court of the United States noted probable jurisdiction.
View caseLucy Liu leased an apartment to Logan Lane. After Lane reported housing code violations, Liu attempted to sell her interest to a third party who planned to evict Lane. The threatened sale raised questions about whether the lessor's interest could be transferred in a manner that circumvented tenant protections.
In March 1965, Mrs. Yvonne Edwards rented housing property from Nathan Habib on a month-to-month basis. Shortly thereafter she complained to the Department of Licenses and Inspections of sanitary code violations which her landlord had failed to remedy. In the course of the ensuing inspection, more than 40 such violations were discovered which the Department ordered the landlord to correct. Habib then gave Mrs. Edwards a 30-day statutory notice to vacate and obtained a default judgment for possession of the premises. Mrs. Edwards promptly moved to reopen this judgment, alleging excusable neglect for the default and also alleging as a defense that the notice to quit was given in retaliation for her complaints to the housing authorities. Judge Greene, sitting on motions in the Court of General Sessions, set aside the default judgment and concluded that a retaliatory motive, if proved, would constitute a defense. At the trial itself, however, a different judge deemed evidence of retaliatory motive irrelevant and directed a verdict for the landlord. Mrs. Edwards then appealed to the District of Columbia Court of Appeals, which affirmed the judgment of the trial court. We granted appellant leave to appeal that decision to this court. The case thus presented the question of whether retaliatory eviction could be barred as a defense.
View caseThe lessor's interest consists of the discounted value of expected rental payments over the lease term plus the discounted value of the property when possession reverts to the owner at lease end.
A valid restraint requires tenant consent to any transfer of the landlord's interest, but that consent may not be withheld unreasonably unless the lease grants an absolute right to withhold.
Yes. When a third party installs equipment that occupies space on the leased property, the invasion can diminish the present value of future rents and the reversion by limiting the owner's usable area.
Supporting sources
Assignment is generally permitted unless the lease imposes a reasonable-consent requirement. Courts examine whether withholding consent is commercially reasonable before enforcing any restraint.
Supporting sources
…as Amici Curiae 21. : In this case, the Court of Appeals noted testimony preceding the enactment of § 828 that the landlord's interest in excluding cable installation "consists entirely of insisting that some negligible unoccupied space remain unoccupied." 53 N. Y. 2d, at 141, 423 N. E. 2d, at 328 (emphasis omitted). The…