Thursday, June 12, 2014

The Top Five: Permissive Waste by a Life Tenant

Permissive waste occurs when a life tenant either allows land to fall into disrepair, or fails to take reasonable measures to protect the land. This concept will nearly always be tested in the context of someone holding a remainder interest suing a life tenant for waste. As such, it's important to understand the obligations of a life tenant in determining whether such a lawsuit will be successful. Most importantly you should understand the following five rules in regards to obligations:

(1): A life tenant has an obligation to repair the property. The obligation, specifically, is to keep the property in a reasonable state of repair. The life tenant is under no obligation to make permanent repairs (as the tenant only holds the property for the duration of his life), but is under an obligation to make repairs to the extent of income or profits from renting the property, or if the tenant is not renting the property, to the extent of the reasonable rental value of the land.

(2): A life tenant is obligated to pay interest on any encumbrances on the land. A common encumbrance in this respect would be a mortgage. Note that the tenant, however, is not required to the pay the principal on the encumbrance; that obligation is on the future interest holder (most likely someone either holding a remainder or a reversion).

(3): A life tenant is obligated to pay all ordinary taxes on the land.

(4): If there is a public improvement on the land, and such improvement is shorter than the expected duration of the life estate, then the life tenant is obligated to pay all of the assessment for the public improvement. If, however, the improvement is likely to outlast the estate, then the analysis changes; namely, the taxes and assessment for such an improvement will be apportioned equitably between the life tenant and the holder(s) of any future interest.

(5): Importantly, note that a life tenant is not responsible for insuring the property for the benefit of any future interest holder, and is similarly not responsible to the future interest holder for any damages to the land caused by a third party.

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