Common use of Death of a Party Clause in Contracts

Death of a Party. A lease terminable at the will of the landlord and tenant is terminated upon the death (or incapacity) of either party upon delivery of written notice to the other of such death (or incapacity). Although written notice is not required to terminate a tenancy at will or at sufferance upon the death of either party, if the landlord desires to terminate the lease upon the death of the tenant, the landlord must file and prosecute against the tenant an unlawful detainer action. In the absence of a provision to the contrary contained in the lease, a lease for a fixed term is not terminable or terminated upon the death of either party. The trustee in bankruptcy must, however, accept or reject a bankrupt’s leases within a certain period of time (which period varies according to the nature of the property and the bankruptcy filing). If the trustee fails to do so within the specified time-frame, the lease is deemed rejected. While the trustee decides whether to reject or confirm the lease, the landlord may petition the bankruptcy court for relief from the automatic stay (which requires a showing of either inadequate protection or both that the tenant lacks equity in the premises and the lease is not essential to the reorganization). During that time, the court may enforce specific lease provisions, including, without limitation, provisions regarding payment of rent and maintenance of the premises. A lease is generally breached if a trustee rejects it. After rejection, the landlord can proceed with unlawful detainer proceedings to recover possession. In addition, as soon as a plan of reorganization is filed and the automatic stay is removed, the landlord may employ remedies for defaults which occurred after the bankruptcy petition. leases that would not, under federal bankruptcy law, be binding on a bona fide purchaser; situations where rejection would provide substantial benefit to the bankrupt’s estate and other creditors. If the trustee elects to reject a lease, the tenant may treat the lease as terminated or may remain in possession of the premises as permitted under state law. Exercise of option to terminate. A lease may provide that it is terminable at the election of a particular party (or either party) upon: the occurrence or non-occurrence of a particular event (e.g., sale of the premises); the passage of time; or simply the party’s election, for no particular reason at all. Such options to terminate may be exercised only by the delivery of notice from the terminating party to the other in strict accordance with the terms and provisions specified in the lease, regardless of statutory notice requirements for termination of leases. Tenant’s or landlord’s breach of a condition or covenant. A condition is a prerequisite to a party’s performance. If the condition does not occur, the party whose performance is conditioned need not perform. The non-occurrence of a lease condition entitles the party whose performance is conditioned to terminate the lease. A covenant, however, is a promise to do or not do a certain act. If the promise is not honored, the non-breaching party is generally only entitled to remedies for breach of lease (such as suing for damages or injunctive relief), which are usually less drastic than termination. Lease provisions are often construed as both conditions and covenants. Because of the severity of the remedy for breach of a condition (termination), a court is likely to construe an ambiguous provision as merely a covenant. In addition, conditions are narrowly construed, and even if a condition is breached, the breach must generally be material or substantial to warrant the remedy of termination and forfeiture. On the other hand, some covenants are so material to the efficacy of the lease that their breach justifies termination and forfeiture. For example, a landlord’s implied covenant of habitability in a residential lease and a tenant’s express covenant to not assign a lease or use the premises for unlawful purposes are deemed so material that their breach may warrant termination and forfeiture of the lease. A landlord’s and tenant’s covenants to one another are the inducements by each of them to the other to enter into the lease transaction, and to the extent that covenants are not merely incidental or subordinate to the main purposes of the lease, they are mutual. Accordingly, a landlord’s and tenant’s covenants to one another are deemed dependent obligations, and each party’s performance of its covenants is a condition precedent to its right to recover for the breach of a covenant by the other party. For example, if a landlord fails to continue to provide quiet possession of the premises or constructively evicts the tenant, the tenant may elect to terminate the lease. There is, however, one significant exception to the doctrine of dependent covenants: if the tenant fails to pay rent, the landlord must continue to honor its lease obligations (e.g., the promise to maintain and repair the premises) and, conversely, if the landlord fails to honor its lease obligations, the tenant must continue to pay rent. This exception, however, does not apply to the landlord’s implied covenant of habitability for residential premises. If the landlord breaches the implied covenant of habitability, the tenant may withhold rent until the landlord satisfies its maintenance and repair obligations. A surrender may occur by express mutual agreement between the landlord and tenant, or by implication and operation of law. If a lease is surrendered and that lease is required by the Statute of Frauds to be in writing, the surrender must also be in writing, unless the surrender either occurs by an executed oral agreement or operation of law. For example, a surrender by implication and operation of law occurs if a tenant abandons the premises and tenders it to the landlord, and thereafter the landlord relets the premises to a new tenant. In this scenario, the landlord will be deemed to have accepted the abandoned premises from the original tenant and that lease is automatically terminated, even without a writing, and the landlord will be estopped from asserting that the premises were not surrendered since it took actions inconsistent with such an assertion.