What to Know about Lease Extensions
When preparing a residential lease agreement, most landlords will choose a fixed-term tenancy. Essentially all the residential leases attorneys draft have fixed-terms. However, landlords often get into a situation where the tenant needs two to three extra months before their next residence is ready. Often, landlords are cautious to extend for such a short period … especially if it disrupts the summer leasing schedule. Instead, landlords may decide to choose unique language in extending the lease. Landlords should be cautious, though, about extending residential leases using anything other than a fixed-term tenancy. So that the landlord can get a better understanding of the major types of tenancies, I will describe them below.
There are four types of tenancies, which are generally described as follows:
Fixed-Term Tenancy – A fixed term tenancy is a tenancy for a specific period of time. Essentially all residential leases attorneys draft are fixed terms. An example of a fixed-term lease is as follows: “Janey hereby leases to Joey the premises at 123 Main Street from November 1, 2015 to October 31, 2016.”
Periodic Tenancy – A periodic tenancy is a tenancy that covers a certain period of time. Generally, the lease automatically renews for the same period unless notice of termination is provided by either the landlord or the tenant. An example of a periodic tenancy is as follows: “Janey hereby leases to Joey the premises at 123 Main Street on a month-to-month basis for $1,000 per month.” Here, either Janey or Joey would need to provide a month’s notice to terminate the lease prior to the start of the next month.
Tenancy at Will – A tenancy at will is established when the residential lease fails to establish a specific term or a period term. So long as rent is paid and accepted, the tenancy will continue. However, either party may terminate the lease at will. An example of a tenancy at will is as follows: “Joey may rent the premises at 123 Main Street by paying to me $1,000 for the month.”
Tenancy at Sufferance – A tenancy at sufferance is a tenancy that is created when the tenant should not be there. It is essentially trespassing, but there are a few differences. An example of a tenancy at sufferance is a tenant refusing to leave the premises after the expiration of a lease. Another example is a person refusing to leave their home after a foreclosure. In both instances, the tenant once held a right to possess the premises, but then lost the right.
One may be asking why this information is important to extensions. The importance is how the landlord chooses to extend the lease.
(i) If the extension states that the lease will be extended until January 31, 2016, then the lease remains a fixed term lease, and the notice provisions stay the same as in the lease.
(ii) If the extension states that the lease will be extended month to month, then the lease will automatically renew and the landlord must provide notice of termination prior to the start of a month.
(iii) However, what happens if a landlord provides an extension until the tenant can find a new place to live? Such language is ripe for debate. However, Texas courts have ruled that similar uncertain language created a tenancy at will, which is terminable by either party at any time. Nitschke v. Doggett, 489 S.W.2d 335, Tex.Civ.App.—Austin (1973). If the lease extension truly created a tenancy at will, then either the tenant or landlord may immediately terminate the tenancy upon written notice. This creates a problem for landlords and tenants and a ripe source of litigation. Additionally, justice courts often arrive at solutions they deem more equitable while downplaying defined areas of the law. To avoid the debate as to whether similar language creates a tenancy at will or a fixed-term tenancy, landlords should use clear and decisive language in leases and their extensions. The lease extension should not be left open for an indefinite period of time.
(iv) If there is no extension, then the tenancy becomes one at sufferance.
In short, landlords should use definite language in defining the terms of a lease and the extensions thereto. An indefinite term could lead to indefinite litigation, and that truly is costly.
Robert Newton is an attorney based in Frisco, Texas, that practices real estate law, estate planning, and business law. This post is meant for informational purposes only and does not constitute legal advice.