Landlords

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Landlords

A landlord is a person or organization that rents out real estate, holding the rights to receive the rentals paid by tenants. Usually a landlord has a freehold estate, a legal right to the possession of, and income from, real estate. A landlord can also be a tenant who subleases the premises to another tenant. A lease divides the estate into a leased fee estate for the owner and a leasehold estate for the renter, the latter providing rights of possession, as laid out in the lease, for a specified duration. If the lease expires and the tenant continues to have possession, he has a tenancy at sufferance.

“Land” in this context includes all space that can be controlled, including territory with water and in the atmosphere, and “real estate” consists of the land and the objects attached to the land, the rest being movable property. Land that is common property, such as the oceans beyond the jurisdiction of governments, are rent free, although international organizations and international law can be considered landlords if they can enforce their authority.

HISTORY OF LAND TENURE

“Land tenure” is the pattern of land ownership. In some small-group societies, the community as a whole often owns territory. The land can either have open access by anyone, or be allocated to families for use, but without inheritance. In some cases, an individual or family has periodic access to lands forming the commons of a village, and families have access to the commons for hunting, fishing, and gathering. Some societies provide priority rights to land when a member makes improvements on the site.

Social scientists such as Franz Oppenheimer have theorized that such land tenure changed mostly because of conquest, as the conquerors became the landlords and the original inhabitants became tenant farmers. In Europe after the collapse of the Roman Empire, the feudal system took hold, where serfs became attached to the land held by the aristocracy.

As trade became more widespread, land became more of a commodity that could be exchanged and operated by landlords for profit rather than for governing power. This change was facilitated in the United Kingdom by the “enclosure” movement, in which the aristocracy took over land that had been held collectively by village residents. The landlords switched much of the enclosed land from farming to raising sheep, and the expelled villagers had to move to cities where they became vagabonds and beggars, some of whom suffered from hunger and illness. Eventually, many became “proletarians” who had little choice but to work for the emerging Industrial Revolution for low wages.

Modern markets for the sale and rental of real estate and of mortgages on real estate are based on having secure and transferable titles to real estate, including the ability to verify a deed to real property. A governmental cadastre or registry of deeds and titles of ownership of estates in land facilitates the real estate market. During the Middle Ages in Europe, manorial court rolls recorded the title-holders and descriptions of the landholdings. As land become more marketable, the registration of deeds by governments developed to facilitate loans and transactions. In the United States, the recording of titles is the responsibility of the states, usually implemented at the county level. In the United Kingdom, governmental registration of land titles was not fully developed until the twentieth century with the Land Registration Acts of 1925 and 2002.

In his book The Mystery of Capital, Peruvian economist Hernando de Soto has emphasized that the absence of land titles has hampered economic development, as squatters avoid building improvements when they fear that their investment may be confiscated. Societies with communal or governmental land can obtain similar security with long-term (e.g., ninety-nine-year) transferable leaseholds.

In Latin America, the Spanish and Portuguese seized land from the Indians and turned the native population into tenants working on large estates, the “latifundia,” as well as working small plots of land for their subsistence. In the southern states of the United States, the Indians were mostly expelled, and plantations utilized slaves imported from Africa.

Although Americans commonly think of the frontier as having been settled by homesteading, most of the western lands were not settled that way but were granted to various special interests such as the railroads, veterans, land-grant colleges, and speculators. As Henry George (1871) described, much land was obtained through dishonest means, such as by fraudulent titles. In California, the Southern Pacific Railroad became the largest landlord, giving the company great political clout.

In continental Europe, the aristocracy continued to own much of the land after the end of feudalism. In Germany, the Prussian aristocrats, called Junkers, owned half the land. In Russia, where the aristocracy remained landlords after the serfs were legally freed, revolution gained popular support with the slogan, “land and liberty,” as popular movements for liberation have recognized a close relationship between liberty and land-ownership.

In the United States, some two-thirds of the people live in owner-occupied homes, but commercial and industrial land value remains highly concentrated. Landowners and real estate interests have great political clout, which they maintain with significant contributions to political campaigns. As a result, landowners obtain great tax benefits relative to those from other property and sources of income.

The tax benefits of real estate owners include being able to deduct mortgage interest and property taxes from taxable income and to exchange rental properties while deferring payment of capital gains taxes. Further, owner-occupants have a large capital-gains exemption, and in most places, they enjoy a rather light property tax on their land value relative to the civic benefits that raise their land values and rentals.

LANDLORDISM

The term landlordism is used in sociology and anthropology to refer to land tenure and status relationships with three characteristics: The land tenure is extremely unequal, the landlords tend to be rentiers who receive rent but do not actively manage their lands, and the landowning class controls and benefits most from the government.

The most stark examples of landlordism are the landed aristocracy and the large landed estates, as in Latin America, but most economies today have significant landlordism. Landlords of dilapidated buildings in blighted areas are disparagingly called “slumlords.”

Since the supply of land is fixed, as the population and wealth grow, a rising demand for land increases rentals and land prices. Much of the gains from increased productivity flow to the landowners as rent and site values. Land value is enhanced even more by public works. The political clout of landowners induces government to place much of the tax burden on labor and enterprise, thus implicitly subsidizing landownership. Landlordism is thus endemic in most economies today, even if it is not as obvious as in the more visible form of a landed agricultural aristocracy.

Some governments have enacted rent control in order to set a maximum rental paid by tenants. Such price controls create shortages of rental units and can discourage maintenance.

In developing countries, prevailing landlordism has induced movements for land reform, a change in land tenure to a more widespread ownership of land. Land reformers have usually advocated a redivision of the land by splitting up large estates. In some cases, the “reform” has granted land to the politically well connected and to inefficient farmers. An effective way to accomplish land reform is by taxing the land value, which then induces the large holders who are not using their land efficiently to sell their land, thus accomplishing redistribution with greater productivity. This policy was implemented to some degree by Japan in the latter 1800s and Taiwan after 1950.

LANDLORD–TENANT LAW AND RELATIONSHIPS

The landlord–tenant relationship is governed by private law as set by the lease and by governmental law regarding landlording. A lease is a contract of tenancy, which transfers some of the rights of possession from the landlord as lessor to the tenant as lessee. A tenant has the right of quiet enjoyment, meaning an unmolested, tranquil use, free from interference or disturbance. However, the landlord retains the right of entry either with advance notice or in an emergency. Upon the expiration of the lease, the landlord is entitled to reversion, that is, to retake possession.

The lease provides an implied if not explicit warranty of habitability that requires the landlord to maintain the premises in a reasonably safe condition, but tenants can be held liable for the damage they cause. Usually the landlord pays the property taxes, but in a gross lease, usually for commercial real estate, the tenant pays the gross costs of occupancy, including real property taxes, utilities, insurance, and operating expenses. For residential leases, the landlord usually does the maintenance and pays the taxes and insurance, although tenants pay for any renters’ insurance on their personal property.

The lease can specify a fixed time interval of tenancy, or go from month to month. If there is no written lease or no specified time, the relationship is a tenancy at will, subject to termination by the landlord or the tenant at any time. If the tenant remains after the expiration of a lease, the tenant remains liable for the rent. Governmental law limits the power of a landlord to choose a tenant. In the United States, the Civil Rights Act of 1968 prohibits discrimination in housing based on national origin, race, religion, or color. In 1974, sex or gender discrimination was added. The 1988 Fair Housing Act extended antidiscrimination protection to familial status. The Americans with Disabilities Act prohibits discrimination that denies the equal use of property due to physical or mental disabilities. State laws can duplicate or extend the application of antidiscrimination law; for example, the California Fair Housing Laws prohibit discrimination based on sex, color, race, religion, marital status, ancestry, or national origin.

Tenants can exploit landlords as well by causing damage and taking advantage of laws that delay eviction. Landlords can protect themselves by screening tenants in legal ways, by visiting where they live, observing the condition of their car, asking parents of young tenants to cosign leases, making tenants responsible for minor repairs, and providing a discount for prompt payments of rental (which is better psychologically than fines for late payment).

Landlords in the United States are also vulnerable to civil asset forfeiture, that is, the confiscation of their property if the police suspect that there is illegal drug activity on the premises, even if the landlord is not aware of it. While large-scale landowners and developers typically have political clout, they sometimes use their political power at the expense of other real estate owners, such as when a government uses eminent domain to forcibly take real estate from some owners and transfer it to private developers, a practice that was widely reported in Kelo v. City of New London (2005). The Supreme Court’s decision alarmed many property owners, who feared the case would facilitate more real estate “takings” by governments, and some states have enacted laws limiting such wide powers of eminent domain.

SEE ALSO Aristocracy; Class, Rentier; Common Land; Land Claims; Land Reform; Latifundia; Rent