4.6 Leases

Question 1

Define the nature of a lease

Answer 1

A lease is one of the two legal estates that can exist in land - the other is freehold.

A legal lease must be created by deed. An equitable lease can also be created (often if the formalities for a legal lease have not been fully met)

Question 2

What are the 3 types of leasehold estates?

Answer 2

1. Defined tenancy: has a known start and end date
2. Periodic tenancy: renews automatically at the end of a specified period (e.g weekly, monthly or yearly)
3. Tenancy at will: no fixed term, can be brought to an end at any time

Question 3

What is meant by ‘privity of contract’?

Answer 3

Only parties to the contract can enforce its terms for the entire duration of the contract

[Important to determine whether leasehold or freehold covenants are enforceable against successors in title]

Question 4

What is meant by ‘privity of estate’?

Answer 4

Two persons have a relationship of landlord and tenant

Question 5

What are the provisions implied in a new lease (dated on or after 1 January 1996)?

Answer 5

The LANDLORD remains liable for leasehold covenants on sale of the freehold reversion - unless they obtain an express release or use the procedure for statutory release under the 1995 Act.

The ORIGINAL TENANT is relieved from liability unless the landlord is entitled to insist on an AGA (Authorised Guarantee Agreement)

Question 6

What are the provisions implied in an old lease (dated before 1 January 1996)?

Answer 6

The TENANT remains liable for the tenant covenants throughout the term of the lease, even after assignment.

Question 7

What is the lease / licence distinction?

Answer 7

LEASE: Interest in land which grants the tenant the right to exclude all others (including the landlord) for the duration of the term.

LICENCE: Merely a personal permission to use the land. A licence can be created formally (terms can be written down) or can be an informal arrangement. As it is a personal right, it does not bind third parties.

Question 8

What are the requirements for a lease (Street v Mountford 1985)?

Answer 8

1) Exclusive legal possession of
2) defined premises
3) for a term certain and
4) at a rent

Question 9

What formalities should be done for a legal lease of > 7 years?

Answer 9

Must be created by deed and substantively registered at HM Land Registry

Question 10

What formalities should be done for a legal lease of 3 - 7 years?

Answer 10

Must be created by deed but is not substantively registrable at HM Land Registry

Question 11

What formalities should be done for a legal lease < 3 years?

Answer 11

A legal lease for less than 3 years does not have to be by deed provided that:

1) It is at the best rent
2) It takes effect in possession; and
3) No fine is payable by the tenant

Question 12

When may an equitable lease be created?

Answer 12

This may arise if the formalities to create a legal lease have not been followed

Question 13

Name some examples of a landlord’s express and implied covenants?

Answer 13

Express covenants: Quiet enjoyment, to insure and enforcement of other covenants against other tenants

Implied covenants: Quiet enjoyment, and repair.

Question 14

Name some examples of a tenant’s express covenants?

Answer 14

To pay rent
To repair
Alterations
Use, and
Alienation

Question 15

What are a landlord’s remedies for non-payment of rent?

Answer 15

1) Debt action (including statutory demands)
2) Taking possession of goods
3) Forfeiture (expressly written as a term)
4) Deduction from tenant’s deposit

Question 16

What are a landlord’s remedies for other breaches caused by the tenant?

Answer 16

1) Injunction
2) Forfeiture
3) Tenant remedies
4) Injunction
5) Specific performance, and
6) Damages

Question 17

Explain the landlord remedy for non-payment of rent: ‘Commercial Rent Arrears Recovery (CRAR)’

Answer 17

CRAR - Statutory procedure that allows landlords of commercial premises to recover rent arrears by taking control of the tenant’s goods and selling them.

Applies to all new and existing commercial leases from 6 April 2014.

Question 18

Explain the landlord remedy for non-payment of rent: ‘forfeiture’

Answer 18

Forfeiture - The right of the landlord to re-enter the premises and bring the lease to an early end due to default by the tenant.

There is statutory protection for the tenant. This may include peaceable re-entry or forfeiture by the court.

Question 19

Explain the landlord remedy for non-payment of rent: ‘debt action’

Answer 19

Debt action - The landlord can bring court proceedings for a debt action if rent or other money due under the terms of the lease is owed.

They might also serve a statutory demand for payment which threatens insolvency action if the debt is not settled.

Question 20

Explain the landlord remedy for non-payment of rent: ‘guarantors and / or rent deposit’

Answer 20

A landlord may take a sum of money from the tenant at the beginning of a tenancy (“rent deposit”).

Held on deposit and can be used by the landlord in the event of default.

The landlord can also pursue the guarantor for any breach or arrears in addition to the tenant.

Question 21

What is meant by ‘security of tenure’?

Answer 21

A business tenant of commercial premises might have the right to remain in the premises at the end of the term under the Landlord and Tenant Act 1954.

A tenancy protected by the Act will automatically continue at the end of term unless it is brought to an end in the specified ways (statutory methods)

Question 22

What are the statutory methods for bringing a commercial tenancy to an end and ending security of tenure?

Answer 22

1) Forfeiture by the landlord
2) Surrender
3) Landlord serves s25 notice
4) Tenant serves s26 notice
5) Tenant vacating and/or serving a s27 notice

Question 23

What are the exceptions to security of tenure under the Landlord and Tenant Act 1954?

Answer 23

The 1954 Act does NOT apply to:
- Agricultural tenancies
- Fixed term tenancies not exceeding 6 months;
- Contracted out tenancies

There is a statutory procedure which must be followed for the landlord and tenant to agree at the beginning of the tenancy to contract out of the provision of the Act - meaning that the tenant will not enjoy security of tenure at the end of the term

Question 24

What is the landlord’s unopposed s25 notice under the 1954 Act?

Answer 24

The landlord does not oppose the grant of a new lease but will state the terms on which that lease will be granted.

The tenant can then counter-propose terms and if they cannot agree, a court application will settle the matter.

Question 25

What is the landlord’s opposed s25 notice under the 1954 Act?

Answer 25

The landlord requires the premises back at the end of the contractual term.

The notice must give between 6 and 12 months’ notice to the tenant.

Must specify:
1) One or more of the statutory grounds upon which possession can be claimed; and
2) The renewal opposed pursuant to section 30 of the 1954 Act

Question 26

What is the tenant’s s26 notice?

Answer 26

The notice must be served on the tenant’s ‘competent landlord’ or agent and request that the landlord grant a new lease to the tenant (outlining required terms).

From this notice, the landlord has 2 months to inform tenant whether they intend to oppose the request. Must specify the statutory grounds for opposition.