essential requirements of a lease Flashcards
what is a lease?
when one person with an estate in land (the Landlord) grants the temporary right to another person (the Tenant) to use and enjoy that land exclusively
what are the other names of a lease?
- leasehold estate
- tenancy
what is another name of a landlord?
lessor
what is another name for a tenant?
lessee
what is a licence?
confers a personal permission
(personal right) to be on someone’s land (would otherwise be a trespass)
what are the characteristics of a lease?
- proprietary right in the land
- capable of being enforced against third parties
- tenant can sue a 3rd party for nuisance or trespass
- can confer the right of security of tenure
- enforceable in rem
- various statutory protections available
what are the characteristics of a licence?
- personal permission to be on someone’s land
- can only be enforced against the grantor
- licensee is not entitled to sue a third party for nuisance or trespass
- no security of tenure
- enforceable in personam
- no statutory protection for licensees
what is security of tenure?
the right of occupants of residential or commercial accommodation (if
certain circumstances exist) to remain after the formal arrangement ends and request a new lease.
facts in Street v
Mountford [1985] AC 809
Facts: Mr Street granted to Miss Mountford a right to occupy rooms. The parties entered into a
written agreement which described the arrangement throughout as a ‘licence’ and called the
agreed payment a ‘licence fee’.
outcome in Street v Mountford [1985] AC 809
The House of Lords held that this was in substance a tenancy, a lease, rather than a licence.
Street v Mountford makes it clear that for a lease to exist there must be:
- Certainty of term; and
- Exclusive possession.
is rent also essential?
no (Ashburn
Anstalt v Arnold [1989])
what are the requirements for a lease?
- certainty of term
- exclusive possession
- the correct formalities
what is meant by ‘certainty of term’?
the tenancy must be granted for a certain
duration. This means you need to know when the arrangement will end:
- fixed; or
- periodic
example of leases failing for lack of certainty
a lease ‘for the duration of the war’ (Lace v Chantler [1944] KB 368)
what is a fixed term
maximum duration of the arrangement is known from the outset
how can a party unilaterally bring a lease to an end before the fixed term expiry?
break clause
periodic tenancy
a lease for one period:
- weekly
- monthly
- quarterly
- yearly
how does a periodic tenancy end?
landlord or tenant serves notice to quit
until then, goes on extending itself
automatically
example of a periodic term
A landlord and tenant enter into a monthly tenancy of a storage locker. Technically there is a
lease of one month, then another, then another (which could go on for years) until either the
tenant or the landlord give one month’s notice to terminate the arrangement.
how can a periodic term be created?
- expressly
- impliedly
express periodic tenancy
where there is a written agreement documenting the agreement
implied periodic tenancy
where there is nothing set out in writing, but the certain term arises
by looking objectively at all relevant circumstances including payment and acceptance of rent on
a periodic basis.
what does the term of the periodic tenancy depend upon
depends upon the period by reference to which the rent is calculated, rather than the intervals at which it is payable
(this may often be the same)
if the rent is £12,000pa, the term will be YEARLY. This means notice to quit must be served six months before the term ends.
example of the term of a periodic tenancy
an occupier will be asked to pay £500 per month and will actually
pay monthly. But if the tenant agrees to pay £10,000 a year by four quarterly payments, the
tenancy is a yearly tenancy not a quarterly tenancy, because the rent is calculated annually.
example of implied periodic tenancy
Monthly payments of rent (without agreement on a fixed term from the outset) by a tenant in
occupation will create an implied monthly periodic tenancy
facts in Prudential Assurance Co Ltd v London Residuary Body [1992] 2 A.C.
386
A piece of land was sold to the Greater London Council. It was leased back to the seller on a lease which was to continue until the land was required by the council for road widening purposes. On the abolition of the Greater London Council, the freehold reversion passed to the London Residuary Body (LRB). The LRB had no authority to create roads but served six months’ notice bringing the ‘lease’ to an
end.
principle in Prudential Assurance Co Ltd v London Residuary Body [1992] 2 A.C.
386
The House of Lords held that the arrangement was for an uncertain period at the outset and
was therefore not a lease. The court did, however, say that the land was held under a yearly periodic tenancy that had arisen by virtue of the tenant’s possession and payment of rent by
reference to a year.
what is exclusive possession
the right to exclude all others from the
property, including the landlord.
in what situations would a clause be a sham?
clause appears to defeat exclusive possession, but has been inserted into a lease only to make what would otherwise be a lease appear like a licence, e.g.,:
what factors may indicate that an occupier does not have exclusive possession?
- (a) The landlord retains a key and has a right of access;
- (b) The landlord provides services;
- (c) There is a sharing clause; and/or
- (d) The landlord retains a right to relocate the tenant.
the distinction between a lease and a licence is of far less importance since the introduction of…
Assured Shorthold Tenancies (ASTs)
what is the difference between exclusive possession and exclusive occupation?
exclusive occupation = a person occupies
land by themselves, without others
exclusive possession = Multiple occupiers are capable of having exclusive
possession together if they have, for example, the four unities of title (and are therefore joint tenants)
if a landlord retains a key, what matters?
the purpose for which the key is retained
if the landlord retains the key, when might exclusive possession still exist?
for example:
- only in an emergency
- by arrangement
- to carry out out repairs (acts as a restriction on the landlord, and more like an acknowledgment of exclusive possession!)
if a landlord provides attendance or services, would this be a tenancy?
no, it would be a licence (Marchant v
Charters [1977] 1 WLR 1181)
the occupier is simply a lodger. lodgers will never have exclusive possession
If a landlord reserves the right to share the property with the occupiers or reserves the right to
introduce others to share, that may mean that there is no exclusive possession. why?
the occupier
cannot exclude whoever the landlord is able to introduce
facts in A G Securities v Vaughan [1990] 1 AC 417t
The occupants lived in a large flat with four bedrooms and spacious shared
accommodation. The occupants, at least at first, did not know each other. They all signed
separate agreements setting out the terms of their occupancy; the agreements contained
different monthly payments and began at different times. The landowner reserved a right to
introduce others to share the flat up to a maximum of four people.
principle in A G Securities v Vaughan [1990] 1 AC 417t
The court held that the arrangement was a sensible and realistic one to provide
accommodation for a ‘shifting population of individuals’ who were genuinely prepared to share
the flat with others introduced from time to time who would, at least initially, be strangers to them’
and therefore the occupiers did not have exclusive possession of the flat.
facts in Antoniades v Villiers [1990] 1 AC 417t
The accommodation comprised a small attic flat with a bedroom, sitting room, kitchen and
bathroom. The occupiers, a couple, had been looking for somewhere to live together for several
months. When they viewed the flat they asked for a double bed to be provided. They signed
separate agreements which were identical; including the level of payments. The agreements
reserved a right for the landowner to introduce others to share and indeed to share the premises
himself with the occupants. They also contained acknowledgements that the occupants did not
have exclusive possession and that the agreements constituted a licence and that the agreements
would be terminated if the parties married.
principle in Antoniades v Villiers [1990] 1 AC 417t
The House of Lords held it could not realistically have been contemplated that the landlord
would either himself use or occupy any part of the flat or put some other person in to
what circs should be considered when determining if a sharing clause is genuine or a sham?
(a) The size and nature of the accommodation – would it be realistic to introduce others into the accommodation given its size?
(b) The relationship between the occupiers (if there is more than one) – would it be appropriate
to introduce another to share given the relationship between the occupiers?
(c) The wording of the clause (ie how widely it is drafted, as the wider it is drafted, the more
likely it is a sham clause).
(d) Whether the clause has ever been exercised – if it has not been exercised then this may
indicate it is a sham clause.
will a right of the landlord to relocate and move the tenant to alternative premises be a lease?
no
what must business tenants show to be a tenant rather than a licensee?
- certain term
- exclusive possession
why is it desirable for business tenants to be tenants and not licensees?
they may be entitled to security of tenure (entitling them to remain in the premises at the end of the lease term and request a new lease)
how do the courts assess whether businesses are tenants or licensees?
construe the document as a whole to see if the landlord
retains control over the property (more likely to be a license because there tends to be more equality in bargaining power in commercial leases)
question in Esso Petroleum Co Ltd v
Fumegrange Ltd and others [1994] 2 EGLR 90
was exclusive possession of two service stations
was granted to Fumegrange?
principle in Esso Petroleum Co Ltd v
Fumegrange Ltd and others [1994] 2 EGLR 90
The court held that the degree of control exercised by Esso over the premises and the way in
which it was conducted was inconsistent with an exclusive right to possession of the service
stations being vested in Fumegrange. Esso could make alterations on the premises; it could install
a car wash (as was in fact done); and it could change the layout of the shop.
This degree of physical control over the premises and conduct of the business at the service station was held to be very significant.
can multiple occupiers have a lease?
- one single lease
- several individual leases
what are the characteristics of one single lease (joint tenancy)?
- all co-owners/tenants are deemed to constitute one single entity, and own/lease the whole property as one collective entity. - Nobody owns a
single/specific share; rather each are jointly and severally liable for the terms of the
agreement. - they must hold the four unities: AG Securities v
Vaughan [1990] AC 417: unity of possession; unity of interest; unity of time; and unity of title.
unity of interest and joint liability
Joint liability in a lease means if one occupier left, the remaining occupier(s) would be liable for the whole rent payment, not an individual share of it.
unity of time can mean
signing on the same day, just at different times e.g., 9am and 4pm
what happens if neither a joint tenancy nor an individual tenancy exists
occupants can only
be individual licensees sharing with each other.
what are the main situations where something which would otherwise be a lease is merely a licence?
- Where there is no intention to create legal relations; or
- Where there is a service occupancy
intention to create legal relations
Facchini v Bryson [1952] 1 TLR 1386:
a lack of intention can be presumed in:
- a family arrangement
- act of friendship
- generosity
however, a degree of formality and / or market rent being paid can rebut the presumption.
when does a service occupancy arise?
employer/employee relationship between the landowner and the occupier - where the occupier is
required to live in the premises for the better performance of his duties as an employee
examples of service occupancy
- caretaker’s flat,
- gamekeeper’s cottage - domestic staff accommodation
Norris v Checksfield [1991] 1 WLR 1241 - lorry driver claimed a lease of the premises he was occupying as part of his job.
The court held there was no lease and it was a service occupancy
because he required the premises for the better performance of his job. It meant he could do late
night/emergency on short notice deliveries.
Royal Philanthropic v County (1985) 276 EG 1068
a teacher, who was occupying a
house near the school where he taught, was held by the court to have a lease (ie there was no service occupancy) because the occupation did not enable him to better perform his duties as a
teacher and it was simply a perk of the job.
formalities to create a legal lease over 7 years
- deed
- registered
formalities to create a legal lease of 7 years or less
- deed
- no registration
lease will be binding on a freehold owner as an overriding interest
short lease (parol lease) exception applies to
leases with a term of three years or less
do short leases require a deed or created in writing or registered?
no
what conditions need to be met for a short lease
(a) The lease takes effect in possession (ie the tenant takes the lease immediately).
(b) The lease is granted at ‘best rent’ (which has been interpreted as meaning ‘market rent’).
(c) The lease is not subject to a fine or premium (meaning there is no upfront payment for the
grant of the lease, which you could commonly expect to see with very long leases).
what types of leases fall under the short lease exception? (making all of these legal leases)
- Short fixed-term leases (those with a maximum term of three years or less)
- Express periodic tenancies (where there is a tenancy agreement)*
- Implied periodic tenancies (where an occupier is in possession and paying a rent at regular
intervals)*
express and implied periodic tenancies only fall within the ambit of LPA 1925, s54(2) if each individual period of the tenancy is for three years or less
example of Short fixed-term lease
A tenant rents a flat for an agreed fixed term of two years. This
arrangement does not need to be in writing.
example of Express periodic tenancy
A tenant rents a flat on a rolling monthly basis paying an agreed
monthly rent. There is a written agreement documenting the agreement. In this situation, the
written agreement does not need to comply with any formalities.
example of implied periodic tenancy
A tenant is in occupation of premises paying an agreed rent on a
monthly basis, but nothing documents this arrangement. In this situation, a periodic tenancy
may be implied. It will still be a legal lease because no formalities are required to document the
arrangement.
what are the two ways an equitable lease can be created?
- deliberately, if the parties choose to enter into a contract for
lease - the parties try to create a legal lease but fail, by either not creating a valid deed or not registering the lease, if required.
formalities for equitable lease (Estate contract)
LP(MP)A 1989, s 2:
* in writing
* contains all the terms
* signed by both parties
- The remedy of specific performance is available.
facts in Walsh v Lonsdale (1882)
By way of a valid agreement, Lonsdale agreed to grant to Walsh a seven-year lease over a
cotton mill in return for an annual payment of rent. No deed was executed as required to create a
legal lease of this duration. Walsh took possession of the mill. Lonsdale demanded that Walsh pay
a year’s rent in advance in accordance with the clause in the agreement. Lonsdale was not paid.
The legal issue for the court was, what was the nature of the relationship between the parties. This
would determine whether the rent clause in the agreement was enforceable entitling Lonsdale to
exercise a remedy. On the facts there could be both an implied annual periodic tenancy and an
equitable seven-year lease.
outcome in Walsh v Lonsdale (1882)
Walsh occupied under a seven-year equitable lease. There was only one lease; the equitable lease on the terms of the agreement for lease.
principle in Walsh v Lonsdale (1882)
Where there is conflict between the common law and equity, equity will prevail.
