March 9, 2011

Lease Termination

It is undisputed that millions of Americans rent their place of living. Whether it is a house, condominium, duplex, manufactured home, triplex, townhouse, fourplex, etc., renters make up a large segment of the housing population. Since it is very likely that at least a portion of those renters will pass away while they were renting, the continuity of their lease is a topic for estate planning.

First, it is worth discussing the lease types a renter may sign because California law treats specific leases in unique ways. Although there are a couple of different types of leases, the two main types are a month-to-month lease and a fixed-term lease. Generally speaking, in a month-to-month lease the tenant is only obligated to live in the unit for at most 1 month and they are free to vacate the unit, provided appropriate notice is given to the landlord, at the end of the month. Whereas in a fixed-term lease, the tenant is obligated to live at the dwelling for the duration of the lease even though they might want to vacate the unit beforehand.

California law says that a month-to-month lease is automatically terminated when the landlord receives notice that the tenant has died, whereby the tenant’s beneficiaries have no rights to the lease but may occupy the dwelling until 30 days have passed since the last rent payment was tendered. Miller & Desatnik Mgmt. Co. v Bullock (1990) 221 CA3d Supp 13. Conversely, in a fixed-term lease, California law says such a lease does not terminate due to the death of either the tenant or the landlord. Joost v Castel (1939) 33 CA2d 138; City of Los Angeles v Greines (1930) 107 CA 481.

For illustrative purposes, assume Thierry signed a month-to-month lease on January 1, 2011. Thierry unfortunately died in a tragic car accident on June 10, 2011. Thierry timely paid his monthly rent on June 1, 2011. Thierry wrote a will the previous year and named his friend Cesc as the sole beneficiary of his estate. Cesc is therefore entitled to occupy Thierry’s unit, albeit only until June 30 because Thierry’s death automatically terminated the lease. On the other hand, if Thierry had signed a fixed-term lease, January 1, 2011 to December 31, 2011 for instance, then Cesc would be entitled to occupy Thierry’s apartment because Thierry’s death did not end the lease. However, the lease may provide that upon Thierry’s death, the fixed-term lease would terminate and his beneficiaries would have 30 days to gather his belongings and move out. It is common to see the aforementioned clause placed in a fixed-term lease because landlords want to avoid the hassle of dealing with the tenant’s beneficiaries because the landlord has no prior history with them.