What it means
Property is often held in layers. One person may have the right to occupy it now, for a lease or for their lifetime, while someone else will own it afterwards.
The law of waste protects the person who will own it later by limiting what the present occupier can do. There are three main types, and the first is voluntary waste, also called affirmative waste, which is an act that damages the property, such as demolishing a building or stripping valuable timber.
Permissive waste is a failure to take reasonable care, such as letting a roof leak or not paying property taxes. Ameliorative waste is a change that increases value but alters the property, such as converting a house into offices.
Courts are often reluctant to treat it as harmful, although the owner of the future interest can still object to the change. A claimant can ask for an injunction, which is a court order to stop the activity, or for damages.
The usual measure of damages is the fall in the property's value caused by the waste, or the reasonable cost of restoring it if that is lower. Commercial leases usually deal with these issues in detail, with covenants (promises) to repair, restrictions on alterations and obligations to return the property in good condition.
The common law of waste is a fallback when the lease is silent, and the contract terms usually matter more in practice. Details also vary by country and state, because some places have changed the rules by statute.
For businesses, waste matters in leased premises, in properties held in trust and in lending. Lenders often require borrowers to maintain the property that secures the loan for the same reason.
In practice
Real-world examples.
Example
A tenant in a commercial building removes a load-bearing wall to create an open showroom without the landlord's consent. The work lowers the building's value and requires costly structural repairs. The landlord sues for voluntary waste.
Example
A person holds a house for life under a will, with the property passing to a nephew afterwards. She stops paying for roof maintenance for years and water damage spreads through the upper floors. The nephew claims permissive waste.
Example
A tenant converts an old warehouse into modern offices at his own cost, which raises its market value. The landlord objects because the building was altered without permission. A court may find that no harm resulted, since the change was ameliorative.
Formula
Calculation
Damages for waste = Value of the property before the waste - Value of the property after the waste
A tenant farmer leases a property valued at $900,000 and cuts down a stand of mature timber without permission. After the logging, the property is valued at $780,000. Damages for waste = 900,000 - 780,000 = $120,000. If the reasonable cost of replanting and restoring the land is $95,000, a court may award that lower figure instead, since restoration is cheaper than the loss in value.Case study
Seen in the real world.
Oakhurst Farms is an illustrative, fictional estate held by a widow for her lifetime, with the remainder passing to her late husband's nephew. She sold the mature oak woodland on the land for $80,000 to pay for a holiday property.
The nephew obtained a valuation showing that the estate was worth $1,400,000 before the felling and $1,250,000 afterwards. The fall in value was 1,400,000 - 1,250,000 = $150,000, which was nearly double the price she received.
In the illustrative outcome, the court granted an injunction against further felling and awarded damages of $150,000 to be held for the nephew. The case shows that the profit to the person in possession is not the measure of the harm to the person who will inherit.
Watch out
Common mistakes.
- Assuming a tenant can do whatever they like with the property during the lease, when waste rules and the lease terms limit damaging acts.
- Thinking only active damage counts, when a failure to maintain the property can also be permissive waste.
- Using the profit made by the occupier as the measure of damages, when the usual measure is the loss in value to the owner.
Questions
People also ask.
Does waste apply to ordinary wear and tear?
No, normal deterioration from reasonable use is not treated as waste.
Who can bring a claim for waste?
The person who holds the later interest in the property, such as a landlord or a remainder owner, can bring a claim.
Can a lease override the law of waste?
Yes, the terms of a lease usually set the detailed duties, and they can widen or narrow the common law rules.
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