Leases

Lease agreements

Are lease agreements in your state subject to any formal requirements?

Residential lease agreements must be in writing to be effective for a term longer than one year, and landlords must provide a copy of such written agreement to the tenant. If the lease agreement is oral, the landlord shall, on demand, furnish the tenant with a written lease agreement disclosing the name and business addresses of all persons who are owners of the rental property or deemed to be a landlord of the unit. 25 Del. C. §§ 5105, 5106.

Commercial leases can be in writing or oral, and will establish the terms, regulations, conditions, rules and other provisions concerning the use and occupancy of the commercial rental unit. 25 Del. C. § 6102(6). When the landlord purchases utility services, redistributes the utility to tenants, and continuously meters the tenants’ use in the commercial unit, the landlord may charge and collect from the tenants, by way of rent or otherwise, an amount not to exceed what the tenants would be billed by the public utility for the utility service. 25 Del. C. § 6101.

Do state or local laws set out any mandatory or prohibited provisions in lease agreements?

A residential lease agreement must state the name and business addresses of all persons who are owners of the rental property or their resident agent, and all persons who are deemed to be a landlord of the unit. 25 Del. C. § 5105. A residential lease agreement shall not include provisions where the tenant agrees to waive or forego rights or remedies under the Delaware Code, authorizes any person to confess judgment on a claim arising out of the rental agreement, or agrees to the exculpation or limitation of any liability of the landlord arising under law or to indemnify the landlord for that liability or the costs connected therewith. Such provisions appearing in a lease agreement are unenforceable, and the tenant may bring an action and recover if the landlord attempts to enforce such provisions. 25 Del. C. § 5301.

A commercial written lease provision authorizing a person other than the tenant to confess judgment against the tenant is void and unenforceable. 25 Del. C. § 6104.

What are the standard forms of lease agreement used in your state?

There are no standard forms of lease agreement in Delaware; however, the Commercial-Industrial Real Estate Council in Delaware has promulgated a form commercial lease.

Length of term

Are there any state or local laws regulating the terms of leases? Are long-term tenants accorded any special rights as to extension or renewal of leases?

In a residential lease, a landlord must provide 60 days’ notice to the tenant prior to expiration of the rental agreement to renew the rental agreement subject to amended or modified provisions. 25 Del. C. § 5107. A permanent leasehold estate, renewable forever, is considered a fee simple estate. 25 Del. C. § 5304. Residential leases with a term longer than one year must be in writing. 25 Del. C. § 106.

Any lessee of any lands or premises situate in Delaware for a term of 10 years or more may mortgage the lessee’s lease or term in the demised premises. 25 Del. C. § 2501. The mortgage of the term of the lessee shall be in like manner acknowledged, recorded in the proper county, and indexed in the same manner as required by law for freehold interests and titles. Id. Such mortgage shall not interfere with the landlord’s rights, priority or remedy for rent. Id.

Rent and security deposits

Are there any state or local laws regulating rent increases?

In a residential lease, a landlord must provide 60 days’ notice to the tenant before expiration of the rental agreement that the agreement shall be renewed subject to amended or modified provisions, including amount of security deposit or rent. If the tenant wishes to terminate the existing lease agreement, the tenant must notify the landlord a minimum of 45 days prior to the last day of term. 25 Del. C. § 5107.

Are there any state or local laws governing rent security deposits?

Delaware statutory law addresses security deposits for residential leases and provides that security deposits must be held in an escrow account in a federally insured banking institution with an office in Delaware. 25 Del. C. § 5514. The security deposit shall not exceed one month’s rent where the rental agreement is for one year or more or for primary residential tenancies of undefined terms, or month-to-month where the tenancy has lasted one year or more. Id.

Delaware case law does not restrict the amount that a commercial landlord can require as a security deposit, and there are no regulations or requirements governing the return of the security deposit. Commercial leases can provide for the tenant to post a letter of credit as the form of security deposit. Letters of credit are governed by article 5 of the Delaware Uniform Commercial Code (UCC). A letter of credit is generally enforceable according to its terms and is only revocable if it so provides. A letter of credit with no explicit expiration date or other indication of duration expires one year after issuance, and five years after issuance if the letter of credit states it is perpetual.

Can the tenant withhold rent payments on any legal grounds?

In Delaware, a commercial tenant has no statutory right to withhold rent, and a commercial tenant’s right to withhold rent will be governed by applicable contract law principles and the terms of the lease. While Delaware recognizes the doctrine of constructive eviction and permits a tenant to quit the premises and terminate the lease if, by the landlord’s acts, the tenant is deprived of the use and beneficial enjoyment of the premises and is for that reason forced to abandon the premises, the lease terms can preclude a tenant from being able to bring a claim for constructive eviction. Tandy Corp. v. Fusco Properties, L.P., 1996 WL 280774 (Del. Super. Ct. 10 April 1996).

If the landlord fails to keep the rental unit in habitable condition, the tenant has a right to withhold rent until repairs are made. The tenant also has the right to make repairs to the rental unit and then deduct those costs from the rent. 25 Del. C. §§ 5307, 5308. Delaware recognizes the doctrine of constructive eviction and codifies this protection for residential tenants, and the tenant may seek damages, including a rent deduction, if constructively evicted. 25 Del. C. § 5302; Leech v. Husbands, 152 A. 729, 733-34 (Del. Super. Ct. 1930).

Sub-letting

Under what circumstances is sub-letting allowed?

Delaware statutes do not regulate whether a tenant of a commercial lease may assign the lease. A commercial lease, like any other contract, is generally assignable unless the lease restricts assignments. Likewise, a tenant under a commercial lease can generally sublet unless the lease expressly limits subleasing. Case law is not clear on whether a reasonableness standard would be implied when the lease is silent on whether a landlord must be reasonable when granting its consent. Lola Cars Intern. Ltd. v. Krohn Racing, LLC, 2009 WL 4052681 (Del. Ch. 2009).

For residential leases, the tenant may assign the lease or sublease the premises without the landlord’s consent, unless the landlord and the tenant agree otherwise in writing. Even when otherwise agreed on, a landlord may not unreasonably withhold consent for a sublease. 25 Del. C. § 5508.

Obligations and liabilities

What are the general obligations and liabilities of the landlord in respect of the property and what are the consequences of breach?

The landlord to a residential lease must deliver possession of the rental unit, and if the landlord fails to do so, the tenant may terminate the rental agreement or recover expenditures necessary to secure equivalent substitute housing for up to one month. A residential landlord shall also have the obligations listed under 25 Del. C. § 5304 at all times during the tenancy. A landlord must keep the rental unit in reasonable repair and fit for human habitation, including the maintenance of all electrical, plumbing and heating systems. If the landlord commits a breach that deprives the tenant of a substantial part of the benefit or enjoyment of the tenant’s bargain, the tenant may notify the landlord in writing of the condition, and if the landlord does not remedy the condition within 15 days following receipt of notice, the tenant may terminate the rental agreement.

The landlord to a commercial lease is subject to the obligations agreed to in the lease agreement, and the Delaware courts have not found a commercial landlord or lease agreement to have an implied warranty for habitability, covenant of quiet enjoyment, or duty to make repairs. The consequences of a landlord’s breach are established by the contract.

What are the general obligations and liabilities of the tenant in respect of the property and what are the consequences of breach?

A residential tenant must pay rent when due and comply with the obligations set out in 25 Del. C. § 5503.

The tenant to a commercial lease is subject to the obligations agreed to in the lease agreement, and the consequences of the tenant’s breach are established by the contract. Taxes paid or levied from the tenant shall be set off against the rent or other demand of the owner for use or profits to the premises. 25 Del. C. § 6105. A distress for rent action exists for commercial leases and allows for the landlord to file an action in the Justice of the Peace Court. 25 Del. C. §§ 6302, 6303. Upon a determination of distress for rent, the court shall promptly issue an order requiring plaintiff to file a cash bond or a bond with surety in such amount and in such form as the court shall determine, and an order to a constable or sheriff of that county directing that all goods on the leased premises be levied upon once plaintiff has filed the bond. Property of the tenant may be released from the levy upon the filing of a bond with surety with the court. 25 Del. C. § 6307.

Insurance

Are the landlord and tenant bound by any insurance requirements?

There are no statutory requirements for insurance to be obtained for a commercial or residential lease. Parties to a commercial lease can agree that the tenant will obtain property and liability insurance or such other insurance as may be needed, and for the parties to agree that the landlord will be listed as an additional named insured.

Parties to a residential lease can agree that the tenant will obtain an insurance policy to insure the tenant’s personal property. In such instances residential tenants can be considered implied insureds under the landlord’s insurance policies for the landlord’s realty. Lexington Ins. Co. v. Raboin, 712 A.2d 1011, 1015 (Del. Super. Ct.), aff’d, 723 A.2d 397 (Del. 1998).

Termination and eviction

What rules and procedures govern termination of the lease by the landlord and the tenant’s eviction from the property?

A landlord may not engage in self-help measures for a residential lease. Delaware requires a landlord to file a 15-day notice to vacate action to evict a tenant. Landlords may evict tenants for unpaid rent, breach of lease agreements, tenant’s actions affecting the health and safety of other tenants on the premises, and tenant’s actions causing physical damage to the premises.

Delaware does not permit self-help evictions; instead, landlords, including commercial landlords, must bring a summary proceeding through the Justice of the Peace Court. Affordable Autos, Inc. v. Dietert, 2016 Del. Super. LEXIS 134 (Del. Super. Ct. 24 March 2016).