Correctly Interpreting Long-Term Leases Pursuant to Modern Contract Law: Toward a Theory of Relational Leases
Most jurisdictions have long viewed residential or commercial leases of real property as regulated solely by traditional property law. By calling something "a lease," as opposed to "a contract," these jurisdictions have reflexively applied certain rules to the transaction. Hence, the form of the transaction, not its substance, has dictated the applicable legal rules. The fact that a lease represents an agreement between two parties regarding the use of something is often overlooked, when that "something" is land-real property-which has mystical connotations in our legal system. Due to land's importance and immobility, a whole body and history of law have developed concerning this type of asset.
The nature of a lease as both a conveyance of real property and a contract has led to the development of the rules that are the focus of this Article. Traditional property rules dictate that a lessee may alienate a leasehold, absent a specific lease provision restricting the assignability or subleasing of the demised premises.' Until recently, the vast majority of courts in the United States routinely have resorted to traditional property law principles to uphold and enforce clauses that restrict a lessee's right to alienate his interest in the premises. Consequently, parties commonly insert into commercial leases clauses that require the lessee to obtain the lessor's consent prior to alienating the leasehold. Historically, the lessor used such a clause to ensure that the proposed assignment to a second assignee-lessee ("T2") would not have a detrimental effect on the lessor's reversionary interest or, for that matter, on the lessor's present interest in the premises.