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CHAPTER 16

Transfers of the Lease

PRIVITY OF CONTRACT AND PRIVITY OF ESTATE

A landlord and tenant relationship, from the outset, involves both privity of contract and privity of estate. Privity of contract is a relationship existing between both parties to a contract. The lease is a contract. Thus the landlord and the tenant are in privity of contract with respect to the leased premises.

At one time only persons in privity of contract could enforce or be held liable for a contract. This caused problems when a tenant transferred her leasehold to a third party (assignee) and the landlord wanted to collect rent from the assignee who was not a party to the original lease, and hence was not in privity of contract with the landlord. The courts resolved this sticky problem by crafting another type of privity—privity of estate.

Landlord and tenant are also in the relationship known as privity of estate because both the landlord and the tenant have a mutual, immediate, and simultaneous interest in the leased premises—the tenant having the right to possession for a term, and the landlord having the reversion after the term. See Restatement (Second) of Property §16.1 (1977). Privity of estate permits a landlord to collect rent from the tenant's assignee, even though there is no direct contract between them.

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