Whether a contract is a lease or a license is not to be determined from the language that the parties choose to call it, but from the legal effect of its provisions.
The dormitory residents entered into residence hall contracts with the dormitory, which was privately owned. The contracts stated that the dormitory shall furnish the residents accommodation, services and meals. The contracts also granted the dormitory the right to make assignments of space and make roommate changes. Security deposits were also required from the dormitory residents. Relying on a statute that provides interest on security deposits to tenants, the dormitory residents brought a class action. The dormitory argued that no tenant-landlord relationship has been created that calls for the application of the statute. The trial court dismissed the class action.
Are the residence hall contracts lease contracts that entitle the dormitory residents interest on the security deposits they paid?
The court affirmed and held that a leasehold required that the lessee's possession be more than merely coextensive with the lessor; it had to be exclusive against the world and the lessor. While the agreement contained certain aspects normally associated with leases, such as a definite and agreed term and a definite and agreed price of rental and manner of payment, the court concluded that it lacked the essential requirement of being a definite agreement as to the extent and bounds of the property to be used. The fact that the residents could be moved from room to room at the will of the dormitory was the principal feature of the agreement that the court found persuasive in its determination that the parties did not intend to enter into a landlord and tenant relationship because the agreement failed to pass a possessory interest in specific property. The statute only covered parties if the agreement between the residents and the dormitory could be considered a lease.