Chapter 1 - § 1.2 • COMMON LAW AND STATUTORY BACKGROUND
| Jurisdiction | Colorado |
Leases arose from a fascinating historical context, reflected in a rich and evolving body of common law. There are numerous treatises that deal with this history.12 In addition to this case law, the Colorado legislature has codified a few leasing issues, including when leases must be in writing and the procedure for evicting a tenant.
§ 1.2.1—Common Law
In Colorado, most of the law relating to leasing is common law. As indicated below, Colorado has very few statutes. In other states, such as California and New York, much of landlord-tenant law is statutory. Thus, for the most part, in determining the rights and obligations of the landlord and the tenant we look to the lease itself. In interpreting the lease, we look to the precedents of reported cases from Colorado courts (and to some degree to the courts of other states), that is, case law, for guidance. Case law tells us, for example, that the intention of the parties to the lease controls, and such intention should ordinarily be determined in the light of good sense and the plain understanding of the words used.13 The courts are to look to the "four corners" of the lease document, and parol evidence is admissible to explain and apply the writing, but not to vary its terms.14 The construction of an unambiguous lease is an issue of law to be decided by the court.15 The court must construe a lease according to the general rules applicable to written instruments.
Case law also dictates what the rights and obligations of the parties are in the absence of a specific provision in a lease. For example, if the lease does not have a stated duration, a periodic tenancy is presumed for a period equivalent to that for which rent is paid.16 If a lease does not restrict the use of the premises for any particular purpose, the premises may be used for any purpose that is not unlawful, that does not crease a nuisance, and that does not cause damage to the reversion (i.e., what the landlord gets back at the end of the term).17
Case law also establishes some fundamental rules applicable to leases and the landlord-tenant relationship. For example, every lease includes an implied covenant of good faith and fair dealing.18
At the same time, the doctrine of caveat emptor applies. There is no implied warranty of habitability or fitness in Colorado commercial leases. In residential leases, there is a statutory warranty of habitability.19 Thus, unless there is an express warranty in the lease or a fraud or misrepresentation by the landlord, a tenant takes the premises in the condition it found them, with all defects of which it knew or would have ascertained upon a reasonable inspection.20 The landlord must, however, disclose a defective condition known by the landlord and not ascertainable by the tenant upon an ordinary or reasonable inspection of the premises.21 In addition, if the landlord has undertaken the duty to repair the premises and fails to exercise reasonable care in doing so, the landlord may be held liable for any unreasonable risks to persons on the land that performance of the duty torepair would have prevented.22
Throughout this book, we endeavor to state the common rules that apply if the lease does not address the subject matter.
§ 1.2.2—Why Have a Written Lease?
One of the most important reasons for having a written lease is to satisfy the Statute of Frauds. C.R.S. §§ 38-10-106 and 38-10-108 state that a lease for a term of longer than one year is not enforceable unless it is in writing. Even if the Statute of Frauds were not a concern, it is in both the landlord's and tenant's interest to have a written lease, rather than relying on the common law. Using the common law to define the obligations of the parties may leave many issues unaddressed, as the common law does not deal with many of the important issues that landlords and tenants face today; relying on the common law may lead to results that neither party wants. The common law can be particularly bad for tenants, as it often favors landlords.
As to oral leases, Yogi Berra's oft quoted evaluation is apt: They aren't worth the paper they're written on. The big, and obvious, problem with oral leases is that they lead to disputes.
At any rate, in reality, most commercial properties are encumbered by liens to secure indebtedness, and lenders almost universally insist on written leases that address the lenders' concerns about getting paid, having functional security for the indebtedness in the event of default, and clearly setting forth the deal between the landlord and the tenant.
§ 1.2.3—How Did Leases Get to be so Long?
Abraham Lincoln once wrote a lease for his residence. It is one sentence and, true to Lincoln's style, an elegant one. The lease reads as follows:
It is hereby agreed by and between Abraham Lincoln of the City of Springfield, Illinois, and Cornelius Ludlum of the same place, that the said Lincoln lets to the said Ludlum the dwelling house in which said Lincoln now lives, in said city, together with the lot on which it stands, and other appurtenances of said lot, for the term of one year, to commence on the first day of November next; for which the said Ludlum agrees to pay said Lincoln the sum of ninety dollars, in quarter yearly payments, to be especially careful to prevent any destruction by fire, to allow said Lincoln, the use of the North-upstairs room, during the term, in which to store his furniture, and to return the premises at the end of the year in as good repair as he may receive them ordinary decay only excepted. (October 23, 1847.)23
No lease, even a residential lease, would be that short today. What has changed? Leases are now viewed as a contract, not just a conveyance of a property interest. Therefore, modern leases contain additional contractual covenants that govern the continuing relationship between landlord and tenant. The historical lease was brief because it was viewed as a conveyance of a property interest, and therefore it looked more like a deed. The rights and obligations of the parties were, for the most part, left to the common law to define. Today, parties usually want to opt out of these default common law positions. The complexities of modern life also require more provisions to adequately describe the parties' rights and obligations and allocations of risk.
Nevertheless, to create an enforceable lease only three essential points must be agreed on:
First, there must be a definite agreement as to the extent and bounds of the property leased; second, a definite and agreed term; and, third, a definite and agreed price of rental, and the time and manner of payment.24
§ 1.2.4—Colorado Statutes Relating to Leases
Several Colorado statutes deal directly with leases and with landlord-tenant relationships. Every practitioner should be aware of these Colorado statutes, and this section summarizes the most important ones.
Statute of Frauds
As noted above, C.R.S. §§ 38-10-106 and 38-10-108 provide that a lease of a term greater than one year must be in writing and signed by the lessor to satisfy the Statute of Frauds and be enforceable. Even if there is not a written lease, however, the lease may be enforceable if there has been complete or partial performance of the lease, as performance can also satisfy the Statute of Frauds. Thus, if a landlord and tenant do not have a written lease, but they act as though they have entered into a lease, a court might enforce the agreement.25 Statute of Frauds considerations sometimes come into play in disputes over letters of intent. The Statute of Frauds also dictates that a...
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