Chapter 3 - § 3.1 • THE DEMISING CLAUSE

• Jurisdiction: Colorado

§ 3.1 • THE DEMISING CLAUSE

The first "official act" in a lease after the identification of the parties usually is the grant of the leasehold estate. Most leases simply state that "the landlord leases to the tenant, and the tenant leases from the landlord, the following premises," or words to that effect. The old-fashioned words "demises"¹ or "lets" are sometimes used instead of "leases." The tenant is sometimes said to "accept" the premises or, to add a little flair to the grant, "to have and to hold" the demised premises. Some leases only provide that the tenant leases and accepts the premises from the landlord; there is no grant by the landlord. Such an approach seems to be half a loaf, but these authors are not aware of any cases where such an approach has been found to be inadequate. Whatever terminology is used, the landlord should make sure the grant is the present tense ("landlord leases"), rather than the future tense ("landlord will agree to lease"), so that it is clear that the lease is a present agreement, rather than an executory agreement, to lease, which can have the consequence of reducing the landlord's rights.²

These words create or grant a leasehold estate or an estate for years,³ which gives the tenant the exclusive right to possess the premises (whereas the landlord retains ownership) during the term of the lease. The characteristics of a leasehold estate, as distinguished from a license or easement, are described below.

In addition, the tenant is often granted the "right to use" additional real property, generally property that the tenant will not have exclusive use of, such as common areas, parking areas, driveways, walkways, hallways, elevators, and lobbies. These areas are not usually included in the premises, as the tenant usually shares their use with other parties. In addition, they are not usually leased by the tenant; the tenant is merely granted a license to use these areas during the time that it is leasing the premises.

§ 3.1.1—Lease and Agreement

Many leases add language that makes clear that the lease is also an agreement. The lease might, in fact, be titled "Lease and Agreement." The landlord and tenant may each "agree as follows: . . ." or "covenant and agree as follows: . . . ." These clauses recognize that a modern lease is both a conveyance and a contract.⁴ The dual nature of a lease has become important in the legal interpretation of leases, allowing courts to draw not only on the common law of real property (which has a very old history and is strongly landlord-oriented), but also on the more modern law of contracts, which, generally speaking, has a more even-handed approach between parties and grants tenants morerights.⁵

In probably the most important leasing case in recent times in Colorado,⁶ the Colorado Supreme Court recited this evolution in the law governing leases and found it appropriate for Colorado to recognize the dual nature of leases as both conveyances and contracts. Therefore, certain contractual defenses and covenants have been applied to leases that were not available when leases were viewed as only a conveyance of property. For example, the contractual duty of good faith and fair dealing is used in interpreting leases,⁷ landlords and tenants have a duty to mitigate damages,⁸ and landlords are obligated to be reasonable with respect to assignment and subletting.⁹

§ 3.1.2—Covenants and Conditions

The grant clause is often worded for another legal purpose, to make clear that the tenant's obligations under the lease are both covenants and conditions.¹⁰ That is, the grant clause will state that the tenant "covenants and agrees" to perform its obligation under the lease. This phrase indicates that the lease obligations are covenants the tenant must perform or be liable to the landlord for damages. Additionally, the grant is made "subject to the terms and conditions of this Lease." This conveys the notion that if the conditions of the lease are not fulfilled, the grant of the leasehold estate may be terminated.

§ 3.1.3—On Leases, Licenses, and Easements

In the law of real property, leaseholds and easements are each distinct types of lesser interests in real property (that is, lesser than fee title, which is full ownership of the real property). A license is not an interest in real property at all, but rather a personal property right that entitles the owner to enter onto certain real property...