3.1. Lease or Licence?

Question 1

LEASE

Answer 1

A PROPRIETARY RIGHT
Binding on 3rd parties
EXCLUSIVE POSSESSION
may be ASSIGNED
SECURITY OF TENURE

Question 2

LICENCE

Answer 2

PERSONAL RIGHT
NOT binding on 3rd parties
NO exclusive possession
CANNOT be assigned
NO security of tenure

Question 3

LEASE OR LICENCE

Answer 3

Failure to meet REQ for a lease means that the arrangement will be a licence.

TWO essential requirements for a lease to exist (Street v Mountford):

• CERTAINTY OF TERM
• EXCLUSIVE POSSESSION

Rent is NOT essential (s.205(1)(xxvii) LPA 1925; Ashburn Anstalt v Arnold) but lack of rent will weigh AGAINST a lease being found to exist (Heslop v Burns; Foster v Robinson), ESPECIALLY where the arrangement is between family/friends (Facchini v Bryson) or where the arrangement is E.

Courts look at SUBSTANCE, not FORM. Their assessment is OBJ, intent is IRRELEVANT.

Question 4

Le or Lic: CERTAINTY OF TERM - FIXED

Answer 4

The rules of certainty of term depend on whether the term is FIXED or PERIODIC

FIXED
A fixed term is where:
- the maximum possible length of the arrangement is KNOWN at the point of the agreement’s creation (Lace v Chantler; Prudential Assurance v London Residuary Body), AND
- the arrangement has a DEFINITE beginning and end date.

Where a tenancy is uncertain, it will be converted into a lease ‘for life’ (Berrisford v Mexfield Housing) which in turn will be converted into a fixed term lease for 90 years under s.149(6) LPA 1925.

REQ
- lease must be EXPRESSLY CREATED (s.52 LPA 1925)

Termination of the lease can ONLY occur through:

• expiration of the lease’s term
• forfeiture of the lease, or
• exercise of a break clause in the lease (if one exists)

Question 5

Le or Lic: Certainty of Term - PERIODIC

Answer 5

A periodic term lease exists where the lease’s term is determined by how the rent is CALCULATED, NOT how it is paid (Ladies’ Hosiery v Parker)

REQ

• a periodic tenancy may be created either:
• – EXPRESSLY (i.e. in a written agreement), or
• – IMPLIEDLY
• — where NO written agreement exists, the term of the lease can be implied according to how the rent is calculated.

Question 6

Le or Lic: EXCLUSIVE POSSESSION

Answer 6

Def: the right to exclude all others (including the landlord) from the property

FACTORS TO CONSIDER
The court takes ALL circumstances into account to determine whether exclusive possession exists, having particular regard to the following factors:

1. Whether landlord RETAINS A KEY
   - where they do, it will weigh AGAINST exclusive possession being found (Aslan v Murphy), UNLESS the key is only used by arrangement or emergencies.
2. the RIGHT TO SHARE or INTRODUCE OTHERS (Antionades v Villiers cf. AG Securities v Vaughan)
   - where landlord has the ability to reserve the right to introduce others to the property, will weigh AGAINST exclusive possession, UNLESS the right is merely a SHAM (Street v Mountford)
3. PROVISION OF SERVICES
   - where landlord provides services, giving them UNRESTRICTED ACCESS to the property, will weigh AGAINST exclusive possession (Marchant v Charters; Huwyler Ruddy)
4. The EXTENT OF EXCLUSIVE POSSESSION
   - it must extend to the whole property, exclusive possession of certain rooms in a property is NOT sufficient (Vesley v Levy)
   - Courts LESS likely to find exclusive possession, therefore more likely to find licences in BUSINESS tenancies rather than RESIDENTIAL tenancies (Dresden Estates v Collinson)

Even if exclusive possession exists, a lease may NOT be found if:

• NO INTENTION TO CREATE LEGAL RELATIONS EXISTS
• – a presumption exists that there is NO such intention in family relationships (Facchini v Bryson; Cobb v Lane), this will prevail UNLESS REBUTTED.
• – intention judged OBJ
• a SERVICE OCCUPANCY EXISTS
• – where an EMPee granted occupancy in order to help perform job, will be a service occupancy and will ONLY EVER constitute a LICENCE, REGARDLESS of whether rent is paid (Norris v Checksfield cf. Royal Philanthropic v County)

Question 7

Le or Lic: Exclusive Possession - MULTIPLE OCCUPANCY

Answer 7

Where multiple occupants exist, it is necessary to establish whether:
- They share the lease IN COMMON (as JTs), OR
- have INDIVIDUAL LEASES
Otherwise they will only be licensees.

JOINT TENANCY

• For a JT to exist, the tenants must have the FOUR UNITIES (Antionades v Villiers cf. Ag Securities v Vaughan)
• – POSSESSION: each tenant must be able to occupy and access the WHOLE of the property
• – INTEREST: each tenant must have the SAME LEASE. Will not exist where rent is paid SEPARATELY.
• – TIME: the lease must start and end at THE SAME TIME for all tenants.
• – TITLE: tenants must derive their interests from the SAME DOCUMENTS or separate IDENTICAL DOCUMENTS.

INDIVIDUAL LEASES
- To have individual lease, the tenants each require EXCLUSIVE POSSESSION over a PART of the property INDIVIDUALLY.

Question 8

Le or Lic: FORMALITIES

Answer 8

Where a lease exists it must comply with the necessary creation formalities in order to be valid. The formalities vary depending on whether the lease is LEGAL or E and the DURATION.

Question 9

Le or Lic: Formalities - LEGAL LEASES

Answer 9

Greater than 7 years

• By DEED (s.52(1) LPA 1925)
• – signed by GRANTOR, attested, delivered and clear on face (s.1 LP(MP)A 1989)
• Registration
• – Registered land (s.27(2)(b)(i) LRA 2002)
• – Unregistered land (s.4(1)(c) LRA 2002)

Equal to or less than 7 years but greater than 3 years

• By DEED
• Registration
• – Registered land: no registration required as it constitutes an OVERRIDING INTEREST (Sche 3, para 1 LRA 2002)
• – Unregistered Land: AUTO binding, NO registration required.

Equal to or less than 3 years, there are TWO types of lease in this area

• FIXED TERM LEASE
• – by DEED
• PERIODIC TERM LEASE (“parol” lease) (express/implied)
• – may be oral provided that the tenant (s.54(2) LPA 1925; Fitzkriston LLP v Panayi):
• — is in POSSESSION, AND
• — pays the BEST RENT WITHOUT PAYING A FINE.

In both there is NO REGISTRATION REQUIREMENT

• Registered Land: no registration as OVERRIDING INTEREST (Sche 3, para 1 LRA 2002)
• Unregistered Land: AUTO binding, NO registration required.

Question 10

Le or Lic: Formalities - E LEASES

Answer 10

May arise:

• through agreement to create a lease (a valid estate contract)
• the failed grant of a legal lease
• where the lease is granted over an E estate

Greater than 3 years

• IN WRITING, ALL TERMS (rent, premises, parties, duration, commencement terms AT LEAST) and SIGNED BY BOTH PARTIES (or both signed identical contracts) (s.2 LP(MP)A 1989), AND
• Capable of specific performance (Walsh v Lonsdale)

Equal to or less than 3 years
- NO formalities required (s.2(5) LP(MP)A 1989)

Question 11

Le or Lic: ENFORCEABILITY - LEGAL LEASES

Answer 11

Greater than 7 years
REGISTERED LAND
- Registration (s.27(2)(b))
- If lease not registered, will still be binding on purchaser if the tenant is in ACTUAL OCCUPATION at completion date (Sche 3, para 2 LRA 2002) UNLESS
— the tenant fails to disclose their occupation to the purchaser on R enquiry (sche 3, para 2(b) LRA 2002), OR
— actual occupation would not have been obvious on a R careful inspection AND the purchaser does not have ACTUAL KNOWLEDGE of the lease at the time.
UNREGISTERED LAND
- Registration IS required (s.4(1)(c) LRA 2002)

Equal to or less than 7 years but greater than 3 years
REGISTERED LAND
- NO registration required as lease will constitute an OVERRIDING INTEREST (Sche 3, para 1 LRA 2002)
UNREGISTERED LAND
- AUTO binding, no registration required.

Equal to or less than 3 years (excluded interests under s.33 LRA)
FIXED TERM LEASE
- Registered land: NO registration is required as lease constitutes an OVERRIDING INTEREST (Sche 3, para 1 LRA 2002)
- Unregistered Land: AUTO BINDING, no registration required.
PERIODIC TERM LEASE
- Registered Land: No registration required, lease will constitute an OVERRIDING INTEREST (Sche 3, para 1 LRA 2002)
- Unregistered Land: AUTO binding, no registration needed.

Question 12

Le or Lic: Enforceability - E LEASES

Answer 12

REGISTERED LAND

• NOTICE on the charges register of Serv land required to bind ALL purchasers (s.32 and 29(2) LRA 2002)
• if NO NOTICE, purchaser will NOT be bound if purchaser for VALUABLE CONSIDERATION (s.29(1) regardless of any notice of the interest (De Lusignan v Johnson)
• – any other type of purchaser will be bound if it constitutes an OVERRIDING INTEREST. It will be such if the lessee is in ACTUAL OCCUPATION (Sche 3, para 2 LRA 2002) UNLESS:
• — lease was not disclosed by lessee on R enquiry by purchaser (Sche 3, para 2(b) LRA 2002), OR
• — lease would not have been obvious on R inspection AND purchaser had NO actual knowledge of the lease (sche 3, para 2(c)(i and ii) LRA 2002)

UNREGISTERED LAND

• Lease must be registered as a C(iv) LAND CHARGE on the Land Charges Register (s.2(4)(iv) LCA 1972) BEFORE the completion date (s.4(5) LCA 1972) in order to constitute notice and bind all purchasers (s.198 LPA 1925)
• if the lease is NOT registered, it will bind anyone EXCEPT a purchaser of a legal estate for MONEY or MONEY’s WORTH (s.4(6) LCA 1972).