Privity of Estate
Also known as privity of title or privity in estate. In a real estate context, it is the legal relationship between parties whose estates constitute one estate in law. Privity of estate exists when two or more parties hold an interest in the same real property.
In a leasing context, a lease agreement is both a conveyance of an interest in real property and a contract. The landlord and tenant have both privity of estate and privity of contractunder a lease agreement. If the tenant assigns its interest in the lease to an assignee, and then the assignee assumes the tenant's obligations under the lease, as of the effective date of the assignment:
- The original tenant no longer has privity of estate with the landlord and it cannot occupy the premises any more.
- The original tenant most likely retains its privity of contract with the landlord and remains liable for the tenant's obligations under the lease, unless:
- the landlord expressly releases the original tenant; or
- there are state or local laws that establish the tenant's privity of contract terminated when the tenant's privity of estate terminated.
- The assignee and the landlord will have privity of estate and privity of contract as of the effective date of the assignment and assumption of the lease.
If, however, the tenant subleases all, or a portion, of its leased premises to a subtenant, then as of the effective date of the sublease:
- The original tenant retains its privity of estate and privity of contract with the landlord.
- The subtenant does not have privity of estate or privity of contract with the landlord.
- The subtenant has privity of estate and privity of contract with the original tenant.
See also privity.
