In property law, there are concepts and terms for land that is owned outright and to certain degrees. There are also concepts and terms for land that is merely leased for a set amount of time. These are known respectively as freehold and leasehold estates.
What is a Leasehold Estate?
The term "estate" may sound antiquated to most property owners today. For those purchasing real estate in Erie, Colorado and neighboring areas it invokes imagery of regal, sprawling manors of times past. In many ways, this is a true assessment.
Like much of the United States' common law system, our property law derives from England in its original form where there were, incidentally, a myriad of traditional estates, especially in centuries past. Just as we kept their laws, we also often kept their terminology. An estate is just one of these terms.
Length and Requirements of an Estate For Years Leasehold Estate
An estate for years represents what is known as a leasehold estate. It is also known as an estate for term or a tenancy for years. Since it is a leasehold estate, as opposed to a freehold estate, in most instances the original owner has leased out the land for a specified period of time to someone else. This is really no different than a renter who is leasing an apartment today. In this specific type of lease, the property owner defines a beginning and ending date, set for a specific term.
As a result, the landowner is not required to provide a notice to vacate once the term ends. The ending date is simply the date the tenant needs to leave the property. As an added protection to tenants, this lease can't be terminated before the specified end date unless both parties agree to it. The lease dictates the rights and obligations a landowner has to his or her tenant.
Other Types of Leasehold Estates
Leasehold estates thus imbue a tenant with the rights of possession and use but not of actual ownership. While an estate for years is generally considered the most common, there are three other types of leasehold estates.
As a property owner looking to lease land or property, it's important to know the different types of leases available between you and the potential lessee. You can choose a lease that automatically renews, one that doesn't offer a time period, or a lease that is for a specific time length. How you negotiate your lease with your tenants can greatly impact your overall success as a property investor. Common types of leases include:
- Periodic Estates. The lease will renew at a set time, either every month, or every year in general.
- Estate at Wills. The lease is signed and there is no end date.
- Estate for Years. Also called a leaseholder estate, this has a specific end date and the tenant vacates the property at the end of the term.
- Tenancy at Sufferance. This is a lease arrangement where the tenant stays after the lease has expired and is not recommended for property owners.
As a property owner, know the type of lease you want to have between you and your tenants. Make sure that all the parameters are set and you know what you can expect from your tenants. While leases can be extended, get the lease agreement you want from the start to keep your profits up.
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