Also known as:lessees interest · lessee interest · tenant's interest
Written by attorneys — see sources below.
An interest in leased property held by the tenant under a lease agreement. It encompasses the right to possession and use for the lease term. The interest is typically valued as the property's market value minus the lessor's interest and is subject to assignment or sale.
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How its tested
Common Examples
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Landlord Withholds Consent to Assignment
Lillian Locke leased a retail space from Linden Bank under a lease requiring the bank's consent for any assignment of her interest. When Lillian sought to assign the lease to Lattice Systems, the bank refused without stating a reason tied to the assignee's fitness. Lillian sued, arguing the refusal was unreasonable under the applicable restraint rule. The court evaluated whether the bank's consent was withheld arbitrarily, determining that the lessee's interest could be assigned if the landlord lacked a commercially reasonable basis for objection.
Commercial Lease Assignment Dispute
Lucas Lee held a commercial lease from Lexicon Media and attempted to assign his lessee's interest to Lunar Dynamics. Lexicon Media withheld consent citing only a general policy against transfers. Lucas sued to compel the assignment. The court assessed whether the landlord's refusal was reasonable given the proposed assignee's financial stability and business compatibility, allowing the transfer when no legitimate objection was shown.
Kendall v. Ernest Pestana, Inc.40 Cal. 3d 488, 709 P.2d 837
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.
Landon Long and Latoya Lane held joint interests in leased premises. Landon sought to assign his lessee's interest to a third party over Latoya's objection. Police later entered based on Latoya's consent alone. The dispute centered on whether one co-tenant's objection could block the assignment of the lessee's interest or authorize entry affecting the shared possession rights.
Georgia v. Randolph547 U.S. 103 (2006)
In late May 2001, respondent Scott Randolph and his wife Janet separated when Janet left their marital residence in Americus, Georgia, and went to stay with her parents in Canada, taking their son and some belongings. In July 2001, Janet returned to the Americus house with the child.
On the morning of July 6, 2001, Janet complained to the police that after a domestic dispute her husband had taken their son away, and when officers reached the house she told them that her husband was a cocaine user whose habit had caused financial troubles. Shortly after the police arrived, Scott Randolph returned and explained that he had removed the child to a neighbor's house out of concern that his wife might take the boy out of the country again; he denied cocaine use, and countered that it was in fact his wife who abused drugs and alcohol.
One of the officers asked Scott Randolph for permission to search the house, which he unequivocally refused. The sergeant then turned to Janet Randolph for consent to search, which she readily gave. She led the officer upstairs to a bedroom that she identified as Scott's, where the sergeant noticed a section of a drinking straw with a powdery residue he suspected was cocaine.
Sergeant Murray left to get an evidence bag and called the district attorney's office, which instructed him to stop the search and apply for a warrant. When he returned, Janet Randolph withdrew her consent. The police took the straw to the police station along with the Randolphs. After obtaining a search warrant, they returned and seized further evidence of drug use, leading to Scott Randolph's indictment for possession of cocaine.
He moved to suppress the evidence as the product of a warrantless search unauthorized by his wife's consent over his express refusal. The trial court denied the motion. The Georgia Court of Appeals reversed, and the Georgia Supreme Court affirmed. The United States Supreme Court granted certiorari.
Lorenzo Lugo leased a building and held the lessee's interest when a cable company installed equipment on the roof without consent. The installation occupied a small portion of the space. Lorenzo claimed the permanent physical occupation diminished the value and usability of his lessee's interest. The court examined whether the installation constituted a compensable interference with the leasehold rights.
Loretto v. Teleprompter Manhattan CATV Corp.458 U.S. 419, 427 (1982)
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.
How is the lessee's interest valued for assignment purposes?
The value is the appraised worth of the leased property from the lessee's perspective. It is usually calculated as the property's market value minus the lessor's interest.
When is a landlord's consent to assignment of the lessee's interest required?
A restraint on alienation of the tenant's interest without the landlord's consent is valid. The landlord cannot withhold consent unreasonably unless the lease grants an absolute right to refuse.
Supporting sources
Does a lease by one joint tenant survive the lessor's death?
Under the modern approach a lease by one joint tenant does not sever the joint tenancy. The lessee acquires only the rights the leasing tenant possessed during life. Upon the leasing tenant's death the interest extinguishes and the lease ends.
Supporting sources
interest
, which "consists entirely of insisting that some negligible unoccupied space remain unoccupied. The
tenant's interest
clearly is more substantial, consisting of a right to receive (and perhaps send) communications from and to the outside world. In the electronic age, the landlord should not be able to…