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Leasehold Property Questions

A leasehold property is a piece of land used by an occupant who doesn’t own it. In the same way a car, apartment, or an office space is rented out, the owner of the land allows a third party to use it for a certain length of time in exchange for payment. Usually, non-agricultural leasehold interests are leased for a longer period that sometimes runs into decades at a time. This gives the holder of the property enough time to benefit from the land and to justify the cost of erecting buildings which ultimately will be given back to the owner once the lease is over.

Listed below are a few questions answered by real estate lawyers on leasehold properties.

I live in a leasehold property, and once my lease is up after ten years, does the property owner have an obligation to sell me this land?

Unless you have a written agreement that says otherwise, the property owner is not obliged to sell the land to you. If you have made any leasehold improvements while you have been a tenant, these will become the property of the property owner when the lease terminates, unless you have an agreement in writing that says something else.

I have a tenant staying in a buy-to-let one bedroom leasehold property. Can he stay in the bedroom and sublet the living room of my property? What is the legal implication of this?

If you have the landlord’s permission to sublet to an individual, it should be alright to do so. However, ensure that your tenant has the tenant to whom he is subletting sign a lease which contains not only the rent details but also the same lease terms that you agreed upon with your tenant in the beginning.

We leased a property from a man who owns a sand company and used it to park our bulldozers and scrapers. Based on a verbal agreement, we agreed to dip sand out of a river for him in exchange for letting us park our equipment there. Now he won’t let us clear the equipment and summoned the police when we decided to move. What are our rights?

You would need to take civil action since the police did not help you. It would be suitable to hire a civil litigation lawyer to help you file for a breach of contract along with a replevin action.

Usually, when two parties have a contract in place and one party chooses to not honor what both parties have agreed upon, it is seen as a breach of contract. The party that did not breach the contract would then be entitled to damages that have been incurred as a result of the breach. In your case, since your contract has been breached by your lessor, you should be entitled to any damages that have resulted from this event.

A replevin count is an action to get back personal property that has been unlawfully taken over or held by someone else. In your case, by pursuing a replevin action, you should be able to get back your equipment.

Can a landlord post a 3-day notice to pay rent or quit on the tenant’s door of a leased property, or does he have to give the notice to them in person?

The notice can be served on the tenant or the leasehold property. It would be suitable to hire a process server. If you can’t do that, you should be able to nail the notice to the front door as well as send a copy of the notice via regular mail to the tenant at the property address.

Ensure that the notice to quit contains the following:
  • The full name of the tenant or tenants
  • The address the notice is about
  • How much rent is owed by the tenant (the amount can't date back more than 1 year, even if the tenant owes back rent for that long a time)
  • The dates the overdue rent is for
  • A statement that says the rent must be paid in full within 3 days of receiving the notice or the tenant will be asked to move out
  • The days and times the tenant can pay the rent s/he owes, and the address he/she can pay it at
  • The address the tenant can send the money to if he/she wants to pay the back rent by mail
  • The landlord’s signature and the date of the notice

Purchasing a leasehold property often has tax benefits. In many cases, you can cut taxes on your cash flow by depreciating your purchase price on the property, since a leasehold property is usually looked upon as personal property instead of real estate. Once the ground lease expires, you generally save more by recording a large capital loss for any remaining basis. Finally, the IRS even allows you to do 1031 tax-deferred exchanges in and out of leasehold interests, as long as the ground lease of the property extends for at least 30 years. In the end this means that cash flow still remains high while you reap the benefits of purchasing and selling property minus capital gains tax payments.
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