Land Law - Distinction between Leases and Licences Flashcards
Lease
Legal estate with exclusive possession
Creates an interest in land enforceable against third parties
Licence
Mere personal right to use land
Characteristics of a Lease
- Certainty of term
- Appropriate formalities
- Tenant has exclusive possession of property and can exclude anyone (including landlord)
Rent is not essential
Courts will look at the substance of a document as opposed to its form
Certainty of term
Fixed duration
Satisfied by agreeing a fixed term at the outset
Can also be satisfied by a periodic tenancy - defined periods until brought to an end
Lease unclear as to duration will often be void for uncertainty - still applies if duration certain but start date is not
Apply in commercial contexts as well as residential - however, courts less likely to find clauses are a sham in commercial contexts
Formalities for Creating a Lease
Must be created by deed (unless for 3 years or less which can be agreed orally as long as rent set at market rate and no upfront payment)
If no deed equity may step in and assist
Exclusive Possession
Right to exclude all others including the landlord (a clause allowing the landlord to introduce others, if possible of being exercised, will be a licence)
Multiple occupants can have exclusive possession together as long as:
- Granted at the same time;
- In the same title document;
- Each party is granted the same interest and right of possession
Time, title, interest and possession
Contents of a Lease
Lease Covenants
- Term of the lease
- Rent payable
- Quiet enjoyment
- Repair
- Use of premises
- Alteration of premises (‘qualified’ alterations convenants and ‘absolute bar’ on alterations)
Implied Covenants in Residential Leases
- Structure and exterior
- Standard of repair
- Repair within reasonable time
Remedies for Breach of Covenant
- Landlord has a right to forfeit the lease - cannot be implied into the lease and, therefore, if this remedy is not included as an express provision it cannot be used
- Different remedies available for different breaches
NON-PAYMENT OF RENT
Commercial Rent Arrears Recovery
- Applies only to commercial leases
- Allows landlords to recover rent arrears by taking control of tenant’s goods and selling them
- Applies to all new and existing leases from 6 April 2014
- Landlord must give 7 days notice of enforcement
- Premises must be ‘wholly commercial’
- Not available for service charge arrears
Forfeiture
- Right of landlord to re-enter the premises and bring lease to an early end due to non-payment of rent
- Tenant has right to settle the arrears and apply for ‘relief’ from forfeiture
- Will not be implied into a lease and must be expressly provided for
- Landlord may waive his right to forfeit (e.g. if landlord aware of breach and accepts or demands payment)
BREACH OF REPAIRING COVENANT
Damages or specific performance
Self-help clause
- Allows a landlord to enter a premises and make repairs themselves and then claim cost from the tenant as long as the landlord has served a notice on tenant requiring them to do the work and the tenant has failed to do so
- Also known as Jervis v Harris clauses
- Have the benefit of the cost being recoverable through simple debt action rather than a more complex damages action
Forfeiture
- Landlord must serve a s.146 notice on the tenant to warn the tenant and allow time for rectification
OTHER REMEDIES
Debt Action
Pursue Guarantors and/or take a Rent Deposit
Continuing Liability for Covenants
Governed by Landlord and Tenant Covenants Act 1995
Assignment of a lease = sale of the remainder of the lease by a tenant to someone else
Different liability rules depending on when lease entered into:
Pre-1st January 1996: an ‘old’ lease. Original landlord and original tenant remain liable to each other under the lease for the entire lease term even after the tenant has assigned the lease (unless one party has released the other). Therefore, old tenant can be liable for breach of convenants by the new tenant
On or after 1st January 1996: a ‘new’ lease. Tenants are automatically released from their convenants upon assignment. Therefore, old tenant not liable for new tenant’s breach of covenant
Controls on Assignment:
- Authorised Guarantee Agreement: the landlord can require the outgoing tenant to enter into an agreement to guarantee the incoming tenant’s performance - guarantee does not extend beyond Tenant B and is not included automatically
- Absolute covenant against assignment: tenant cannot assign the lease
- Qualified convenant: landlord may require consent to assignment and landlord’s consent may not be unreasonably withheld
Reversion
The landlord’s interest in the land
May be assigned
The person who buys the reversion is called the ‘assignee’ of the reversion
Head lease v Underlease
Head lease = main lease between the landlord and the tenant
Underlease = a sub-lease granted by the tenant which must be for a lesser term than the head lease
Under an underlease the tenant remains a tenant of the head lease and a landlord of the underlease- contrast this with assignment where the tenant drops out of the title completely
Service occupancy
If property provided as part of an employment agreement, employee will have a licence to occupy rather than a lease
Must be a factual nexus between the employment and the occupation of the property (i.e. the occupation must enable the employee to better perform their duties)
Common Types of Lease
- Fixed term tenancies
- Reversionary leases: an agreement for tenant to take possession of property in the future (valid unless period between lease being entered into and tenant taking possession exceeds 21 years)
- Period tenancies: can be express or implied (courts will imply a periodic tenancy provided the tenant has gone into possession and started to pay rent - the period of the tenancy will depend upon the period by which rent is due)
- Tenancy at will: allowing a buyer to take possession of the land before entering into a written agreement - does not create an estate in land and can be terminated at will by either party (an attempt to assign the tenancy will operate as notice to terminate)
- Contractual period tenancy: If prospective buyer in a tenancy at will is in possession and begins to pay rent
Legal leases
All legal leases over three years must be created by deed
A short legal lease for 3 years or less can be created orally if:
- The tenant takes possession immediately; and
- The rent is set at market value and the tenant does not have to pay any upfront lump sum or premium
Short leases can be assigned only by deed
All legal leases over 7 years must be registered - leases of 7 years or less are overriding interests and are binding without registration
Equitable Leases
A lease which has not been created by deed and is not within the provision for short-term leases
Still enforceable through equity if it is a) in writing b) contains all of the agreed terms and c) signed by both parties
If a lease does not comply with the above then it cannot be a lease and the occupier has a licence
Protected in unregistered land by the registration of a Class C(iv) land charge
Protected in registered land by a notice on the Charges Register
