Indefinite Lease Definition

An indefinite lease refers to a leasing relationship in which the duration of the lease is not explicitly specified within the lease contract. According to civil law, if the lease period is not clearly stated in the lease agreement, or if the tenant continues to use the property after the expiration of the initially agreed lease term without the landlord's opposition, the leasing relationship automatically transitions to an indefinite lease. This form of leasing provides both parties with greater flexibility and freedom but may also introduce certain uncertainties and risks.

Risks and Common Disputes of Indefinite Leases

Although indefinite leases can provide landlords and tenants with higher flexibility in some situations, they also come with certain risks and potential disputes. The most common issues include rent adjustments and unclear lease terms.

Firstly, rent adjustments in indefinite leases are particularly complex. Since the lease does not explicitly specify a mechanism for rent adjustments, landlords may find it difficult to adjust rent reasonably in the face of rising costs. If landlords attempt to unilaterally increase the rent, they may face opposition from tenants, leading to tension and even legal disputes. Similarly, tenants may feel insecure about the possibility of rent increases at any time, and this uncertainty can affect their long-term living plans.

Another significant risk of indefinite leases is the uncertainty over the lease term. Since the lease does not have a fixed end date, this can lead to differing expectations and understandings about the duration of the lease relationship between the parties. For example, a landlord might want the tenant to move out soon for personal use of the property, while the tenant might expect to continue living there until finding a suitable next residence. This ambiguity regarding the lease term is often the root cause of disputes between the parties.

When the lease relationship ends, issues such as the return of the security deposit and compensation for damages often become focal points of dispute. Due to the lack of specific regulations and constraints in indefinite leases, resolving these issues typically requires negotiation between the parties. If negotiations fail, legal action may be necessary.

In summary, while indefinite leases offer a degree of operational freedom, they also come with risks such as difficulties in adjusting rent, unclear lease terms, and potential disputes over security deposits and damages. To reduce these risks and disputes, it is advisable to reach a clear written agreement on key issues such as rent adjustment mechanisms, lease terms, and deposit management at the outset of the lease. Additionally, considering the inclusion of dispute resolution mechanisms in the lease can help protect the interests of both parties.

How to Terminate an Indefinite Lease

Terminating an indefinite lease contract requires adherence to the provisions of civil and land laws, ensuring that the correct steps and methods are followed. Here is a basic guide to terminating an indefinite lease agreement:

Step One: Understand the Legal Provisions

According to Article 450, Section 2 of the Civil Code, an indefinite lease contract allows either party to terminate the lease at any time, provided that notice is given in advance in accordance with customary practices. This means that both the landlord and the tenant must notify the other party in advance of their intention to terminate the lease.

Although indefinite leases offer greater freedom to terminate, in practice, if a landlord wishes to reclaim the property for use, they must still meet specific conditions set out in Article 100 of the Land Law. These conditions are designed to balance the interests of both parties and prevent landlords from abusing their right to terminate and evicting tenants without cause. The conditions under which a landlord may not reclaim the property unless one of the following situations applies are as follows:

1. The landlord reclaims the property for personal use or reconstruction.

2. The tenant sublets the property to another person in violation of Article 443, Section 1 of the Civil Code.

3. The tenant is in arrears of rent for two months or more, beyond what the security deposit covers.

4. The tenant uses the property in violation of laws.

5. The tenant breaches the lease agreement.

6. The tenant damages the landlord’s property or attached assets without adequate compensation.

Step Two: Determine the Appropriate Notice Period

Typically, the notice period should be at least one month, especially when rent is paid monthly. This is explicitly stated in Article 450, Section 3 of the Civil Code, termination of the contract should be notified in advance according to custom. For real estate rentals paid by week, half a month, or month, the landlord should designate the end of the scheduled week, half-month, or month as the termination date of the contract and must notify at least a week, half a month, or a month in advance. The notice period should be sufficient to allow the other party ample time to find a new residence or tenant.

Step Three: Written Notice

To avoid future disputes, the notice of termination should be made in writing, such as sending a letter through a lawyer or a registered letter. The notice should detail the date and reason for the termination (if any) to ensure it has legal evidentiary value, proving that the notice was delivered.

Step Four: Negotiate Termination Details

After notifying the other party, both parties can negotiate the specifics of ending the lease, such as the moving of belongings and the return of the security deposit. Through negotiation, any issues arising during the termination process can be resolved smoothly and amicably.

Step Five: Execute Termination Procedures

Once an agreement is reached and all necessary formalities are completed, the lease agreement is officially terminated. The landlord should ensure that the tenant moves out on time, and the tenant should ensure that the property is returned to its original condition (unless otherwise agreed).

Considerations

If there are any disputes between the parties that cannot be resolved through negotiation, legal assistance should be sought.
Landlords cannot arbitrarily terminate the lease and reclaim the property without just cause. Actions must comply with the provisions of the Civil Code, Land Law, or other relevant laws.
By following these steps and procedures, it's possible to terminate an indefinite lease agreement correctly and legally, thus protecting the rights of both parties and reducing unnecessary legal risks and disputes.

Indefinite Lease - The Experience Sharing of the WHP Case

Case Background

Xiao De rented out his idle factory to Xiao Yi for business use. Over the years, Xiao Yi cooperated smoothly with Xiao De in terms of paying rent and renewing the lease agreement, with no disputes arising. However, Xiao De recently had other plans for the factory and, out of goodwill, had already informed Xiao Yi in advance that the lease would not be renewed after the current term expired. Xiao De also provided Xiao Yi with a relocation period to find a new factory when the lease term ended. In response, Xiao Yi issued several checks to Xiao De as payment for the use period until a new location was found. Unexpectedly, Xiao Yi later refused to move out and claimed that since Xiao De continued to accept rent, despite stating the lease would not be renewed, this did not prevent the use of the property. Therefore, the relationship between the two parties had changed to an indefinite lease, and there was no need for a return, even if Xiao De was unwilling to continue cashing the checks. Xiao Yi further deposited the checks with the court...

Local Court: Victory Judgment

The key issue in this case was whether there was an indefinite lease agreement. If, as Xiao Yi claimed, the contractual relationship between Xiao De and him had become an indefinite lease, Xiao De could only reclaim the factory under specific conditions outlined in Article 100 of the Land Law, otherwise, he could not reclaim the property. These conditions are: 1) The landlord reclaims the property for personal use or reconstruction. 2) The tenant sublets the property to another person in violation of Article 443, Section 1 of the Civil Code. 3) The tenant is in arrears of rent for two months or more, beyond the security deposit. 4) The tenant uses the property in violation of laws. 5) The tenant breaches the lease agreement. 6) The tenant damages the landlord’s property or attached assets without adequate compensation. In other words, the decision power over whether and when to reclaim Xiao De's factory was effectively in Xiao Yi's hands.

However, according to "If, after the expiration of the lease term, the tenant continues to use and benefit from the leased property without immediate opposition from the landlord, it is considered a continuation of the contract for an indefinite period," explicitly stated in Article 451 of the Civil Code. The transformation of a fixed-term lease contract into an indefinite lease contract after the expiration of its term actually depends on whether the landlord has immediately expressed opposition, rather than on whether rent has been collected. Based on societal experience in our country, it is common for landlords to grant tenants a grace period of several months at the end of a fixed-term lease to find another place or prepare for relocation. This grace period is merely a favor granted by the landlord to the tenant, and it is common for landlords to collect the rent agreed in the original lease contract during this grace period, aligning with general public understanding. Therefore, Xiao De's repeated expressions of intent not to renew the lease before and upon its expiration are considered an opposition to the tenant's continued use and benefit from the property, thus legally preventing the contract from continuing for an indefinite period. Furthermore, the benefits Xiao De received from cashing the checks monthly at most represent the unjust enrichment equivalent to the rent that Xiao Yi should pay for the actual continued occupation of the factory before finding a new location, which still differs from the rental income originally received under the lease contract.

Despite the years of litigation, Xiao De truly experienced the difficulty of "easy to invite, hard to send away." Fortunately, the New Taipei District Court in Taiwan clearly understood the situation and accepted our arguments, applying the law correctly to grant Xiao De a victorious judgment. The court explicitly recognized that the relationship between the parties was not an indefinite lease and ruled correctly that Xiao Yi should return the factory to Xiao De.

Common Questions for Landlords

Q1: Can a landlord enter a rented property at will?

A: No, once the property is rented out, the right to use it has been transferred to the tenant. Entering the property without permission could violate privacy rights and constitute criminal trespassing. If entry is necessary, it is recommended to contact the tenant in advance and gain their consent before entering.

Q2: How should a landlord deal with a tenant who damages the property?

A: According to Article 184, Section 1 of the Civil Code, anyone who unlawfully infringes upon the rights of another through intentional or negligent actions is liable for damages. This includes intentional harm done in a manner contrary to good morals. Therefore, the landlord can legally seek compensation from the tenant.

Q3: Does an indefinite lease receive the same protection as "sale does not break lease"?

A: According to Article 425, Section 2 of the Civil Code, tenants in an indefinite lease are not protected by the "sale does not break lease" principle outlined in Section 1 of the same article. This means the tenant's original lease can be affected, and the new owner has the right to reclaim the property.