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16. What is the likely outcome of the lawsuit?
A landlord leased an apartment to a tenant by written lease for two years ending on the last day of a recent month. The lease provided for $700 in monthly rent. The tenant occupied the apartment and paid the rent for the first 15 months of the lease term, until he moved to another city to take a new job. Without consulting the landlord, the tenant moved a friend into the apartment and signed an informal writing transferring to the friend his «lease rights» for the remaining nine months of the lease. The friend made the next four monthly $700 rent payments to the landlord. For the final five months of the lease term, no rent was paid by anyone, and the friend moved out with three months left of the lease term. The landlord was on an extended trip abroad, and did not learn of the default and the vacancy until the end of the lease term. The landlord has sued the tenant and the friend, jointly and severally, for $3,500 for the last five months' rent.
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The principal significance of the assignment of a lease is that a new landlord-tenant relationship is established between the landlord and the assignee. The landlord and the assignee are now in privity of estate with one another, and the assignee will obtain the benefits and bear the burdens of all covenants running with the land.
A sublease by a tenant does not establish privity of estate between the sublessee and lessor. This means the sublessee is not liable to the landlord, and the original lessee is still liable to the landlord under privity of contract and privity of estate.
A is correct. In this case, prior to the agreement with the friend, the tenant had privity of contract with the landlord because of the lease. The tenant also had privity of estate because the tenant was in possession of the apartment. Subsequently, an assignment arose when the tenant transferred the premise to the friend for the remainder of the lease term of nine months. The friend was then in privity of estate with the landlord as to all promises that run with the land, including the covenant to pay rent. The tenant was not released by the landlord, however, and thus remains liable on privity of contract.
B is incorrect. Here, the tenant transferred the premise to the friend for the remainder of the lease term and retained no other interest. Accordingly, this was an assignment, and the friend was in privity of estate with the landlord. The privity of estate remained with the friend until the end of the lease term, because that was the friend's assigned interest. The friend made no assignment and remains liable on privity of estate for the period after he vacated. Furthermore, because the landlord never released the tenant, the tenant remains liable for the full $3,500 on privity of contract.
C is incorrect. It is true that the friend is liable for $3,500 on privity of estate. However, because the landlord never released the tenant, the tenant remains liable on privity of contract based on the original lease. There was no express release, and a release would not be implied merely because the landlord accepted rent from the friend.
D is incorrect. This answer assumes that the friend was a sublessee, which he was not. A sublease arises when a tenant transfers the right of possession to all or some of the leased premises to another for a period of time less than the remaining time of the lease, or when the tenant retains some other interest in the premises. Here, the tenant transferred all the remaining time of the lease to the friend and retained no other interest. Accordingly, this was an assignment and not a sublease. As an assignee, the friend was in privity of estate with the landlord as to all promises that run with the land, including the covenant to pay rent.