Understanding Lease Agreements in Iowa

What is a Lease/Rental Agreement?

“A ‘rental agreement’ means an agreement ... embodying the terms and conditions concerning the use and occupancy of a dwelling unit and premises.” (See Iowa Code § 562A.6(11); Albaugh v. Reserve (2019) 930 N.W.2d 676, 682.)

“Iowahas a relatively broad definition of a rental agreement, as an agreement written or oral, and a valid rule, adopted [by the landlord] under section 562A.18, embodying the terms and conditions concerning the use and occupancy of a dwelling unit and premises.” (See GOFF v. BROWN (2006) 715 N.W.2d 769; Iowa Code § 562A.6(10); § 562A.18 [setting forth criteria for rules adopted by the landlord "concerning the tenant's use and occupancy of the premises].)

“The landlord and tenant may include in a rental agreement, terms and conditions not prohibited by . . . chapter [562A] or other rule of law including rent, term of the agreement, and other provisions governing the rights and obligations of the parties.” (See id § 562A.9.)

“When a written lease is entered into between two parties competent to make a lease, the purpose of it is to give to the lessee the possession, or the right to the possession, of the property leased, for the period provided in the lease.” (See Duck Creek Tire Serv. v. Goodyear Corners, No. 0-092 / 09-0999, at *12 (Iowa Ct. App. Apr. 8, 2010); Cohen v. Hayden, 180 Iowa 232, 245, 157 N.W. 217, 221 (1916), aff'd on reh'g, 163 N.W. 238, 239 (Iowa 1917).)

“When a lease is executed, the landlord, by the lease, gives the tenant the exclusive right to possession and enjoyment of the premises.” (See Becker v. Rute (1940) 228 Iowa 533, 540.)

Legal Elements to Lease Agreements

“The payment of rent is a material provision of a lease.” (See LIBERTY BK. TRUST v. ALPANA ALUM, No. 0-704 / 99-1605, at *1 (Iowa Ct. App. Feb. 28, 2001).)

“The facts necessary to create the relationship of landlord and tenant were set out in McCarter v. Uban (1969) 166 N.W.2d 910, 914.” (See Palmer v. Albert (1981) 310 N.W.2d 169, 172.)

“Generally, to create the relationship of landlord and tenant, it is only necessary to identify the parties, provide a definite description of the property, and include a statement of the term and the amount of rent agreed to be paid. This may be done orally or by writing, subject of course to the statute of frauds...” (See id.)

“In deciding whether there is an enforceable contract, we consider not only the language used but also the surrounding circumstances and the conduct of the parties. Contractual obligations may arise from implication as well as from express writing.” (See id; McCarter v. Uban (1969) 166 N.W.2d 910, 913; Decker v. Juzwik (1963) 255 Iowa 358, 368, 121 N.W.2d 652, 657; Fashion Fabrics of Iowa v. Retail Investors (1978) 266 N.W.2d 22, 27.)

Standard of Review for Breach of Contract

“A breach-of-contract claim tried at law to the district court is reviewed by us for correction of errors at law.” (See Dolly Invs. v. MMG Sioux City, LLC (2023) 984 N.W.2d 168, 173; NevadaCare, Inc. v. Dep't of Hum. Servs. (2010) 783 N.W.2d 459, 465; EnviroGas, L.P. v. Cedar Rapids/Linn Cnty. Solid Waste Agency (2002) 641 N.W.2d 776, 780.)

“[T]he district court's findings of fact are binding on us if they are supported by substantial evidence.” (See id; Falczynski v. Amoco Oil Co. (1995) 533 N.W.2d 226, 230.)

“However, [w]e will reverse a district court's judgment if we find the court has applied erroneous rules of law, which materially affected its decision.” (See id.)

“Parties to a contract can explicitly or implicitly define what constitutes a material breach. Indeed, many lease agreements specify that nonpayment of rent is a material breach of contract.” (See Dolly Invs. v. MMG Sioux City, LLC (2023) 984 N.W.2d 168, 174; see e.g. , Kimp v. Fire Lake Plaza II, LLC (2021) 484 P.3d 80, 87–88 [Rent was due on the first of the month, and failure to make timely payment was grounds for immediate default, entitling Fire Lake to exercise any and all remedies available to it under the lease].)

Tenancy At Will

“Under Iowa Code section 562.4 [a] person in the possession of real estate, with the assent of the owner, is presumed to be a tenant at will until the contrary is shown. The parties can change the default presumption of at will tenancy through agreement.” (See Knight v. Grow (2013) 834 N.W.2d 82.) “A tenancy from month to month is actually a type of tenancy at will.” (See Garrison v. Fetters (1986) 383 N.W.2d 550, 552.)

“Tenancies at will or tenancies for a term are two common forms of tenancies in Iowa. The former is easily created, for "[a]ny person in the possession of real estate, with the assent of the owner, is presumed to be a tenant at will until the contrary is shown.” (See Sunset Mobile Home Park v. Parsons (1982) 324 N.W.2d 452, 455.)

“This presumption is one of fact, not law, and is not conclusive; consequently, it may be shown that the tenancy was for a term.” (See id; McCarter v. Uban (1969) 166 N.W.2d 910, 912.)

“A thirty-day termination notice is required in a tenancy at will. A tenancy for a fixed period is a tenancy for a term. If there is an agreement for a termination date, the tenancy is for a term and is not a tenancy at will.” (See id; Benschoter v. Hakes (1943) 232 Iowa 1354, 1358, 8 N.W.2d 481, 484.)

“An agreement for a tenancy may be written or oral and may be inferred from the situation and surrounding circumstances; if it is oral, however, it may be subject to the Statute of Frauds. When an agreement is made setting the time for termination, whether in writing or not, it shall cease at the time agreed upon, without notice.” (See id; Iowa Code § 622.32 ; McCarter v. Uban (1969) 166 N.W.2d 910, 913.)

Joint Tenancy

“The common-law presumption favoring joint tenancies have been reversed by statute in many jurisdictions, including Iowa. In Iowa, even where ownership is shared there is a presumption against joint tenancy. . . [T]here is no presumption conveyances of real estate or transfers of personalty to two or more persons create a joint tenancy with rights of survivorship. Rather the presumption is they create a tenancy in common unless a contrary intent is expressed.” (See Matter of Estate of Clark (1984) 357 N.W.2d 34, 36; Hyland v. Standiford (1961) 253 Iowa 294, 300, 111 N.W.2d 260, 264; Matter of Estate of Allen (1976) 239 N.W.2d 163, 168; In Matter of Lovan (2011) 798 N.W.2d 350; In Re Estate of Stamets (1967) 260 Iowa 93, 98, 148 N.W.2d 468, 471 [holding a presumption exists that conveyances of real estate or transfers of personalty to two or more persons create a tenancy in common, rather than a joint tenancy with right of survivorship, unless a contrary intent is expressed].)

“Our case law likewise holds that establishment of a joint tenancy creates a rebuttable presumption that joint tenants hold in equal shares.” (See Frederick v. Shorman (1966) 259 Iowa 1050, 1056, 147 N.W.2d 478, 482; Anderson v. Iowa Dept. of Human Serv (1985) 368 N.W.2d 104, 109.)

“There is also the recognized rule that a conveyance terminates a joint tenancy.” (See In re Estate of Heckmann (1940) 228 Iowa 967, 974.)

“Traditionally, Iowa followed the four unities of title test, that is to create a joint tenancy the four unities had to be present—interest, title, time, and possession. To sever or terminate a joint tenancy, a joint tenant simply had to destroy one of the unities.” (See Kettler v. Sec. Nat'l Bank of Sioux City (2011) 805 N.W.2d 817, 822; In re Estate of Johnson (2007) 739 N.W.2d 493, 496.)

“That changed with the Johnson opinion, when our supreme court rejected the “four unities of title” test and adopted an ‘intent-based approach’ in determining whether a joint tenancy had been created, severed, or terminated. Under the intent-based test, a court is not permitted “to determine the intent of a party under the facts and then fulfill it. Instead, it seems fundamental that intent must be derived from an instrument effectuating the intent to sever the joint tenancy.” (See id.)

“[I]ntent unaccompanied by some action or instrument sufficient to corroborate and give effect to that intent will not create, sever, or terminate a joint tenancy.” (See Thielen v. Anderson (2023) 990 N.W.2d 324, 327; In re Est. of Johnson (2007) 739 N.W.2d 493, 498–99 [noting that while intent of the parties is important in Iowa, courts should look to find their intent in the instrument that attempts to sever the joint tenancy].)

Sublease and Assignment

“A sublease reserves a reversionary interest in the lessee, whereas an assignment is the transfer of the lessee's entire interest, without reserving any reversionary interest.” (See Duck Creek Tire Serv. v. Goodyear Corners (2011) 796 N.W.2d 886, 894; Berg v. Ridgway (1966) 258 Iowa 640, 646-47; accord 1 Milton R. Friedman Patrick A. Randolph Jr., Friedman on Leases § 7:4.1, at 7-82 (5th ed. 2010).)

“A sublease reserves a reversionary interest in the lessee.” (See id.)