What Is 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.

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.

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.

Frequently Asked Questions (FAQs)