Types of tenancies

This article discusses the different types of tenancies and how each is established.

Know your tenancy or lose time

A landlord and tenant enter into a lease agreement without including an option to renew or extend the term of the occupancy on expiration of the lease.

Several months before the lease expires, they begin negotiations to enter into a new lease agreement extending the term of occupancy. An agreement is not reached before the original tenancy expires. The tenant remains in possession on expiration of the lease — an unlawful detainer of the premises, commonly called a holdover, unless agreed to.

The landlord and tenant continue lease negotiations. Meanwhile, the tenant pays monthly rent at the same rate he was paying when the lease expired, which the landlord accepts.

Ultimately, they fail to agree on the terms for a new lease. The landlord then serves a 30-day notice on the tenant to either stay and pay a substantially higher monthly rent or vacate and forfeit the right to possession. [See first tuesday Forms 569, 571 or 579]

The tenant does neither; he remains in possession and does not pay the increased rent.

Can the landlord file an unlawful detainer (UD) action and proceed to evict the tenant on expiration of the 30-day notice and without further notice?

Yes! The tenant went from a fixed-term tenancy (the lease) to a tenancy-at-sufferance on expiration of the lease (a holdover) to a periodic (month-to-month) tenancy on the landlord’s acceptance of rent for occupancy after the lease expired. The right to possession under the periodic tenancy ended due to the expiration of the notice and the tenant’s failure to pay rent (set by the notice).

However, the type of notice to quit used when the landlord decides to terminate the tenant’s right to possession will change depending on the type of tenancy that exists and the purpose of the notice.

Tenancies as leasehold estates

Tenancies are possessory interests in real estate, called leasehold estates.

Four types of tenancies exist:

Fixed-term tenancies.

Periodic tenancies.

Tenancies-at-sufferance.

Tenancies-at-will.

To initially establish a tenancy, a landlord must somehow transfer to the tenant — either in writing, orally or by his conduct — the right to occupy the real estate. If the landlord does not transfer the right to occupy, the occupant who takes possession is a trespasser.

All tenancies have an agreed-to termination date or are capable of termination by notice. Termination of a fixed-term tenancy held by the tenant, which was conveyed by the lease-agreement, occurs on the expiration date stated in the lease and without further notice.

A month-to-month rental agreement conveys an automatically renewable periodic tenancy, which is terminated by service of a 30- day notice to vacate at any time or a 3-day notice to vacate on a breach of the rental agreement.

A tenant’s possessory interest in real estate can shift from one type of tenancy to another due to:

a notice;
expiration of a lease; or
by conduct.

Thus, before a landlord can file a UD action and proceed with the eviction process based on an unlawful detainer of the premises by the tenant, the tenant’s right to possession under his tenancy must be terminated by the proper notice to vacate (quit), unless the tenant holdover is under an expired lease.

In our opening example, the tenant traversed three types of tenancies:

fixed-term (lease);
sufferance (no agreed-to holdover); and
month-to-month (acceptance of monthly payments), also called a periodic tenancy.

The tenant entered into his occupancy under a fixed- term tenancy, a leasehold estate commonly called a lease. During the term of the lease, the tenant can only be evicted for cause — and then only after the service of a 3-day notice to cure the breach or vacate (quit) the property. [See first tuesday Form 576]

On expiration of a lease, the tenant who remains in possession without an agreement or acceptance of rent by the landlord for the extended occupancy becomes a holdover tenant, legally called a tenant-at-sufferance. The landlord does not have to serve a notice to vacate on the holdover tenant before filing a UD action to evict the tenant. [Calif. Code of Civil Procedure §1161(1)]

However, if the landlord accepts monthly rent from a tenant in payment for his continued occupation after expiration of the lease, a month-to-month tenancy is established on the terms and conditions of the expired lease agreement, unless a renewal or extension option exists. When an option to renew or extend exists, the lease is renewed or extended by the post-expiration acceptance of the rent called for in the option. [Calif. Civil Code §1945]

To terminate a month-to-month tenancy which was created by acceptance of monthly rent after expiration of a lease which is not in default, the landlord must serve the tenant with a 30-day notice to vacate before filing a UD action. [Colyear v. Tobriner (1936) 7 C2d 735]

Fixed-term tenancy

A fixed-term tenancy, also known as an estate for years or more commonly as a leasehold, is the result of an agreement between the landlord and the tenant for a fixed time period, typically called a lease. [CC §761]

The occupancy under a lease agreement must have a beginning date, called the commencement date, and an ending date, called the expiration date. If the rental period is longer than one year, the lease arrangements must be in writing and signed by the landlord and tenant to be enforceable, called a lease agreement, and sometimes loosely referred to as the lease. [CC §1624]

In a fixed-term tenancy, the tenant has an exclusive right to possession of the premises for the term of the occupancy stated in the lease agreement. On expiration of the lease, the tenancy automatically terminates. The tenant is not entitled to any notice to vacate other than the notice provided by the tenancy’s expiration date stated in the lease agreement. [CCP §1161(1)]

For example, a landlord and tenant orally agree to a six-month lease. At the end of six months, the landlord and tenant orally agree to another six-month lease.

At the end of the second term, the tenant refuses to vacate. The tenant claims the landlord must first serve him with a notice to vacate.

Here, the tenant is not entitled to any further notice beyond the agreed-to termination date. The oral occupancy agreement was not a periodic tenancy, such as a month-to-month rental agreement, even though it contained monthly rent payments. Instead, the occupancy agreement was a fixed-term lease with a set expiration date.

Thus, the tenant’s right to possession terminates on expiration of the orally agreed-to six-month period. The oral lease agreement is enforceable since it was for a term of less than one year. [Camp v. Matich (1948) 87 CA2d 660]

A fixed-term tenancy provides a tenant with several advantages:

the right to occupy for the fixed term;
a predetermined rental amount; and
limitations on termination or modification.

However, some disadvantages also exist for the fixed- term tenant:

the tenant is liable for the total amount of rent due over the entire term of the lease (subject to the landlord’s duty to mitigate losses); and
the tenant may want to vacate prior to expiration of the leasing period and assign or sublet the premises to a new tenant to cover rent obligations, but cannot due to prohibitions in the lease against his transfer of possession, called restraints on alienation.

Periodic tenancy

If the landlord finds a fixed-term tenancy too restrictive or inflexible for his financial purposes or use requirements, a periodic tenancy may be more suitable.

A periodic tenancy automatically continues for successive periods, each for the same length of time, until terminated by a notice to vacate. The length of each successive period of time is determined by the interval between scheduled rental payments.

Examples of periodic payment intervals include:

annual rental payments, indicating a year-to-year tenancy;
monthly rental payments, indicating a month-to-month tenancy; and
weekly rental payments, indicating a week-to-week tenancy.

Consider a property manager who rents an apartment to a tenant under a fixed-term lease. At the end of the leasing period, the tenant retains possession and continues to pay rent monthly, which the property manager accepts.

Later, the tenant is served with a 30-day notice to vacate. On the running of the 30 days, the tenant refuses to vacate. The tenant claims he is now a tenant-at-will and entitled to an additional 3- day notice to vacate before he is unlawfully detaining the property since the notice to vacate served on him merely terminated his right to possession and made him a tenant-at-will on expiration of the notice.

However, an occupancy agreement for an indefinite term with a monthly rent schedule is a month-to-month tenancy. Thus, a tenant is only entitled to one notice to vacate before a UD action may be filed to evict him. [Palmer v. Zeis (1944) 65 CA2d Supp. 859]

The flexibility of a periodic tenancy allows the landlord and the tenant to terminate a month-to-month tenancy by giving the appropriate notice to vacate to the other party. [CC §1946]

Also, the operator of a residential hotel may not require a resident to change units or to check out and re- register in order to avoid creating a month-to-month tenancy and falling under landlord/tenant law. A residential hotel operator violating this rule is liable for a $500 civil penalty and attorney fees. [CC §1940.1]

Tenancy-at-sufferance

When a fixed-term (lease) or periodic (month-to-month) tenancy terminates by prior agreement or notice, the tenant who remains in possession — a tenant-at- sufferance — unlawfully detains the property from the landlord.

A tenant-at-sufferance is more commonly called a holdover tenant. A holdover tenant retains possession of the premises without any contractual right to do so, a situation called an unlawful detainer.

A holdover tenant no longer owes rent under the expired lease or terminated rental agreement since he no longer has the right to possession. However, the lease or rental agreement usually calls for a penalty rate of daily rent owed for each day the tenant holds over. Without a holdover rent provision, the tenant owes the landlord the reasonable rental value of the property, a daily rate owed for each day the tenant holds over in possession after expiration of his tenancy.

Holdover rent is due after the tenant vacates or is evicted, when the holdover period is known and the amount owed can be determined.

The landlord’s acceptance of “holdover” rent prior to the tenant vacating or being evicted establishes a periodic tenancy on receipt of the rent.

For example, a tenant with a fixed-term lease holds over after the lease agreement expires. The lease agreement contains no provisions for the amount of rent due during any holdover period.

On the tenant’s failure to vacate, the landlord serves the tenant a 30-day notice to either pay a rent amount substantially higher than rental market rates or vacate. The tenant refuses to pay any rent or vacate.

The landlord files a UD action seeking payment of rent at the rate stated in the notice to pay or quit since the tenant did not vacate.

At the UD hearing, the landlord is awarded the reasonable market rental value for the entire time the tenant held over, not the higher rent demanded in the notice to pay or quit. The tenant never paid nor agreed to pay any amount of rent after the lease expired. Thus, a periodic tenancy was not established.

The higher rental amount demanded in the notice to pay or quit was not accepted by the holdover tenant since he refused to pay it. Thus, a UD court will only award a reasonable rental value for the time period the tenant held over since he is a tenant-at-sufferance in unlawful possession of the property. Also, the notice to (pay or) quit was not needed to evict the tenant on expiration of the lease. [Shenson v. Shenson (1954) 124 CA2d 747]

Expired first refusal becomes a holdover

Now consider a tenant who enters into a fixed-term lease for the second floor of a building.

Without a charge for additional rent, the tenant will also take and retain possession of the third floor until the landlord secures a bona fide tenant. The tenant has the right of first refusal to rent the third floor should the landlord find a tenant. If the tenant does not exercise his right of first refusal to rent the third floor, his right to possession of the third floor ends.

The tenant moves into the second and third floors of the building. Later, the landlord locates a prospective tenant to rent the third floor.

The landlord notifies the tenant he must immediately exercise his right of first refusal or vacate the third floor.

The tenant does not exercise his right of first refusal and refuses to move. The tenant claims he is a tenant-at- will with the right to receive a notice to vacate before his right to occupancy can be terminated.

However, the tenant’s lease of the third floor had a specific termination date — the date the tenant fails to exercise his right of first refusal. Thus, he is a tenant for a fixed-term and not a tenant-at-will since his occupancy ended on expiration of his right of first refusal.

The tenant, now a holdover, becomes a tenant-at- sufferance on expiration of his right of first refusal. Thus, the tenant is not entitled to any further notice to quit before his unlawful detainer of the premises is established. The tenant’s notice of the date of termination of the occupancy was his failure to exercise his right of first refusal prior to its expiration. [Vandenbergh v. Davis (1961) 190 CA2d 694]

For the tenant with a right of first refusal to also be entitled to an additional period of lawful occupancy and a notice to vacate after expiration of a lease, a provision so stating must be included in the lease agreement or the right of first refusal agreement.

A tenancy-at-sufferance also arises when a resident manager’s compensation includes the right to occupy a unit rent-free. When the landlord terminates the employment and the resident manager fails to vacate immediately, a tenancy-at- sufferance exists.

For example, a landlord hires a caretaker to do general maintenance work around an apartment complex in exchange for rent-free possession of a unit in the complex.

Several months later, during a dispute with the landlord, the tenant refuses to work, which results in his dismissal as an employee.

The landlord delivers a notice to the tenant to immediately pay rent (as demanded in the notice) or quit. The tenant does neither and the landlord files a UD action.

The tenant contends he is a tenant-at-will, entitled to a notice to vacate before the landlord can establish an unlawful detainer and file his UD action.

However, the tenant’s right to occupancy ended when his employment ended, the expiration of a fixed-term lease. Thus, the tenant became a holdover tenant who was not entitled to notice, other than the notice from the landlord terminating the employment, before the landlord could commence a UD action to evict him. [Karz v. Mecham (1981) 120 CA3d Supp. 1]

If the employee is to receive notice and time to pay or vacate on termination of his employment (and right to occupancy), his employment agreement must provide for it.

Under rent control ordinances, a tenant-at-sufferance must receive a notice to vacate. However, courts in rent-controlled areas have exempted employee-tenants from rent control protection by classifying them, for purposes of rent control, as licensees rather than tenants.

Yet, employee-tenants clearly are not licensees (for any other purpose) since they have exclusive rights to occupy the unit assigned to them. [Chan v. Antepenko (1988) 203 CA3d Supp. 21]

Tenancy-at-will

The characteristics of a tenancy-at-will include:

possession delivered to the tenant with the landlord’s knowledge and consent;
possession for an indefinite and unspecified period; and
no provision for the payment of rent.

For a tenancy-at-will, a written notice to vacate or pay rent is required to make any change in the right to occupy the premises. However, the parties can always agree to a shorter or longer notice period. [CC §§789, 1946]

For example, an owner-occupant agrees to sell his office building under a purchase agreement providing for him to retain the free use and possession of the property after closing until he can occupy an office building he is constructing. Thus, a tenancy-at- will is created.

The buyer agrees in the purchase agreement to give the seller a 90- day written notice to either vacate the property or pay rent.

The buyer resells the property to a new owner. The new owner demands the tenant-seller pay rent or vacate immediately. The new owner claims he is not subject to the prior owner’s unrecorded agreement to give a 90-day notice.

However, the new owner acquired the property subject to the rights held by the tenant in possession. Thus, the new owner is charged with constructive knowledge of the unrecorded agreement regarding notices and took title subject to the terms of the agreement.

Until the tenant-at-will receives the appropriate notice to vacate, he is not unlawfully detaining the property and the owner/landlord cannot proceed with a UD action to recover possession. [First & C. Corporation v. Wencke (1967) 253 CA2d 719]

However, a tenancy-at-will is automatically terminated if the tenant assigns or sublets his right to occupy the property to another tenant. The new tenant becomes a tenant-at-sufferance or a trespasser. [McLeran v. Benton (1887) 73 C 329]

Also, the tenancy-at-will terminates on the death of either the landlord or tenant, unless an agreement to the contrary exists. [Dugand v. Magnus (1930) 107 CA 243]

Other situations giving rise to a tenancy-at-will include:

when a tenant with the right to indefinitely occupy the property in exchange for making improvements fails to make the improvements [Carteri v. Roberts (1903) 140 C 164];
when a tenant takes possession of the property under an unenforceable lease agreement (e.g., the written lease with terms orally agreed to was never signed by any of the parties) — unless rent is accepted, which establishes a periodic tenancy [Psihozios v. Humberg (1947) 80 CA2d 215]; or
when a tenant is given possession of the property without the payment of rent while negotiations on the lease provisions are still in progress. [Miller v. Smith (1960) 179 CA2d 114]

Terminating a tenancy

A landlord’s primary concern when terminating a tenancy is the type of notice to vacate he must deliver to establish an unlawful detainer under the different types of tenancies, including:

a fixed-term tenancy, in which case the landlord does not need to deliver any notice to vacate prior to commencing a UD action against a holdover tenant after expiration of the lease since the tenancy automatically expires by the terms of the lease [CCP §1161(1)];
a periodic tenancy, in which case the notice to vacate must be for a period at least as long as the interval between scheduled rental payments, but need not exceed 30 days. [CC §1946];
a tenancy-at-sufferance, in which case the holdover tenant is not entitled to any further notice prior to commencing eviction proceedings since a lease has expired or a periodic tenancy has been terminated by notice [CCP §1161];
a tenancy-at-will, in which case a 30-day notice to vacate or otherwise alter the tenancy-at-will is required [CC §789];
a rent-controlled tenancy of residential property, in which case termination of the right to possession is restricted by local ordinances; and
a tenancy-at-will in a mobilehome park, in which case a 60-day written notice is required to be delivered to the tenant. [CC §798.55(b)]

Further, a landlord and tenant by agreement can establish a shorter or lengthier notice period, but not less than seven days, industrial and commercial tenants typically require three months minimum notice due to the time lost receiving and responding to a notice since it must first go through multiple tiers of corporate management. [CC §1946]

Changing the type of tenancy

A landlord, by using an improper notice, can end up with a different tenancy relationship from the one he initially conveyed to a tenant. When an existing tenancy is altered, in writing or by conduct, the tenancy may have been converted into another type of tenancy.

A classic example involving a change in the type of tenancy arises when a holdover tenant (a tenancy-at-sufferance) becomes a month-to-month tenant (a periodic tenancy).

A landlord who accepts any rent from a holdover tenant under an expired lease, in payment for a period of occupancy after the lease expired, has elected by his conduct to treat the continuing occupancy as a periodic tenancy. [Peter Kiewit Sons Co. v. Richmond Redevelopment Agency (1986) 178 CA3d 435]

Thus, a proper notice to vacate, a requisite to a UD eviction, must be served on the holdover tenant who paid rent for the continued occupancy, which was accepted by the landlord. [Colyear, supra]

When the tenant holds over after a fixed-term tenancy expires and the landlord accepts rent for the holdover period while the tenant is in possession, the expired lease agreement is renewed on the same terms except for the period of occupancy, which is now periodic. [CC §1945]

On expiration of a fixed-term lease, the landlord’s continued acceptance of rental payments does not renew the tenancy for another term equal to the term of the original lease. Rather, the tenancy is extended as a periodic tenancy for consecutive periods equal to the interval between rent payments — being one month if rent is paid monthly. [CC §1945]

For example, a landlord and tenant agree in writing to a three-year lease with rent paid annually in advance. At the end of the three-year lease, the tenant holds over without further agreement. The tenant tenders an annual rent payment which the landlord accepts.

The landlord’s acceptance of rent extends the expired three-year lease for a period of one year since the rent paid was for an annual period. Without a written agreement to the contrary, the tenancy is extended only for the period of the prepaid rent even though the term of the original lease, which controlled the terms of the extended one-year occupancy, was for a three-year period. [Hagenbuch v. Kosky (1956) 142 CA2d 296]

Transient occupancies and removals

An occupant of a vacation property, hotel, motel, inn, boardinghouse, lodginghouse, tourist home or similar sleeping accommodation for a period of 30 days or less is classified as a guest, also called a transient occupant.

A transient guest occupies property known as lodging, accommodation or unit. The property is not called a rental which is a landlord/tenant characterization of their relationship.

The guest’s occupancy of the accommodations contracted for is labeled a stay, not possession. During a guest stay in the lodging, the owner or manager of the property is entitled to enter the unit at check-out time even though the guest may not yet have departed.

The contract entered into for the lodging is usually called a reservation agreement, but never a rental agreement or lease agreement. [See first tuesday Form 593]

Also, guests pay a daily rate, not a daily or weekly rent, and they arrive at a pre-set date and time for check- in, not for commencement of possession. Likewise, guests depart at an hour on a date agreed to as the check- out time. Unlike a tenant, a guest does not vacate the premises, they check out.

When a guest fails to depart at the scheduled check- out hour on the date agreed, no holdover tenancy is created as occurs under a tenancy for occupancy conveyed by a rental agreement or lease. Thus, a UD action or court involvement is not required to remove the guest. [CC §1940(b)]

However, for the owner or manager to avoid the UD eviction process, the guest, when checking in, must have signed a notice stating:

the unit is needed at check-out time for another guest who has been promised the unit; and
if he has not departed at check-out time, the owner or manager may enter, take possession of the guest’s property, re-key the doors and clean up the unit for the next guest. [CC §1865; see first tuesday Form 593]

To remove a guest who fails to timely depart the unit and remains in the unit after a demand has been made to leave, the police can be called in by the manager if his own intervention might cause a breach of the peace, called self-help. The police or the sheriff will assist, without the need for a court order, to remove the guest and prevent a danger to persons or property during the re-keying, removal of possessions and clean up for the arrival of the next guest. [Calif. Penal Code §§602(r); 803.1(a)(3)]

Transient occupancies include all occupancies that are taxed as such by local ordinance or could be taxed as such by the city or by the county. Taxwise, the occupancy is considered a personal privilege, not a tenancy. Time share units, when occupied by their owners, are not transient occupancies and are not subject to these ordinances and taxes. [Calif. Revenue and Taxation Code §7280]

Transient units do not include residential hotels since the occupants of residential hotels treat the dwelling they occupy as their primary residence. Also, the occupancy of most individuals in residential hotels is for a period of more than 30 days.

A broker or any other person or entity who manages “vacation rental” occupancies for owners of single-family homes, units in a common interest development (condominium project), units in an apartment complex or any other residence subject to a local transient occupancy tax, must maintain accounting records.

Further, the property manager must send a monthly accounting statement to each owner he represents and make the records available for inspection and reproduction by the owner, as well as comply with the transient occupancy tax regarding collection, payment and record keeping. [CC §1864]