Land - Leases (8) Flashcards
What are leases?
Leases: Leases are a form of estate in land. They may be subject to a number of formalities, burdens and remedies.
What are the essential characteristic of a lease?
Essential Characteristics: Valid leases must comply with the essential characteristics. It is the substance and not the name that matters - a ‘licence’ in name may be a lease in practice.
(1) Permitted Duration: A duration permitted for a leasehold estate.
(2) Exclusive Possession: Must grant exclusive possession.
(3) Formalities: Comply with the valid formalities for legal or equitable lease (below).
Permitted Duration
Permitted Duration: A lease must be granted for a ‘definite’ term, meaning a defined beginning and end.
(1) Uncertain Terms: Uncertain terms, such as ‘for the duration’ or ‘until needed’ are void (Lace v Chantler).
(2) Leases for Life: Leases ‘for life’ mean either 90 years or death of tenant, unless agreed otherwise (s49 LPA).
(3) Break Clause: Break clauses are permitted, so long as the lease has a fixed period in practice.
Exclusive Possession
Exclusive Possession: Leases must grant tenants exclusive possession, else it will be a licence (no security of tenure).
(1) Exclusive Possession: Tenant may exclude all parties from the land, including landlord. Extends beyond occupation.
(2) Lack of General Control: If tenants lack general control, then it is a licence (Wells v Hull).
Service Contracts: If employees are granted occupation for their job, it is a licence.
Flat Sharing: Flat sharing may be a lease if all tenants entered a single contract at once, or a licence if entered into separately and on different terms (AG v Vaughan; Antoniades v Villiers).
Case: If landlord seek to eschew lease protections by inserting a clause that they can add new tenants, it is a sham, and a lease likely exists (Antoniades).
Case: If each tenant has different agreement and different terms, and share space, then it is likely a licence (AG v Vaughan).
Rent
Rent: Rent is not required, but rent may imply a formal agreement which may constitute a lease (Ashburn v Arnold).
What different types of leases are there?
Types of Lease: Leases are generally ‘fixed term’ or ‘periodic’.
(1) Fixed Term: Gives right to occupy for a certain fixed period, i.e. ‘10 years’. Automatically ends.
(2) Periodic: Gives right to occupy until terminated by notice, subject to ‘rent periods’, i.e. ‘rent paid every 4 weeks’. Automatically renews. May arise incidentally.
What are the formalities of a legal lease?
Formalities for Legal Lease: The formalities for conveying a legal lease varies by length.
(1) General Requirement: Must be conveyed for a term of years absolute in possession (s1(1)(b) LPA 1925).
(2) Lease Exceeding 3 Years: Deed required (s52 LPA). Clear on face, written, witnessed and signed (s1 LPMPA).
(3) Lease 3 Years or Less: Deed or ‘parol lease exception’, no formalities provided compliant (s54 LPA).
Term: Three years or less, including periodic leases with periods of three years or less.
Immediacy: Takes effect in immediate possession - tenant can immediately use lease.
Best Rent: Tenant pays best rent (market rent).
No Premium: Landlord charges no fine or premium on top of the rent.
What are the formalities of an equitable lease?
Formalities for Equitable Lease: Equity may intervene to create a lease where the formalities for legal lease have failed, either because:
(1) Contract: Lease was created or transferred by contract, not deed.
(2) Invalid Deed: Attempt to use deed failed, rendering it invalid.
Equitable Lease by Contract
Lease by Contract: Equitable lease will be conveyed by contract if it complies with formalities and enforced with ‘clean hands’.
(1) Contract: Contract must be in writing, containing all express terms, and signed by both parties (s2 LPMPA).
(2) Clean Hands: The party seeking to enforce the lease must do so with ‘clean hands’, meaning no part of the contract was breached (Walsh v Lonsdale).
Equitable Lease by Failed Deed
Lease by Failed Deed: Equitable lease will be conveyed where parties intended to use a deed but incorrectly executed it.
(1) Parol Lease: If the deed fails, could it be a legal parol lease instead? This is preferable.
(2) Failed Deed: Failed deed must be in writing, containing all express terms, and signed by both parties (s2 LPMPA).
(3) Clean Hands: The party seeking to enforce the lease must do so with ‘clean hands’, meaning no part of the contract was breached (Walsh v Lonsdale).
What are leasehold covenants?
Leasehold Covenants: Leases tend to impose covenants on both parties, which are contractual terms in practice.
(1) Tenant Covenants: Typically include: a) rent; b) insurance; c) repair; d) alteration; e) alienation.
(2) Landlord Covenants: Typically include: a) quiet enjoyment; b) insurance.
(3) Implied Covenants: Most covenants must be express. However, some are implied: a) quiet enjoyment: b) certain repair covenants.
What are implied covenants?
Quiet Enjoyment
Quiet Enjoyment: Landlord will not substantially interfere with tenant’s lawful possession.
(1) Residential Tenants: Landlords cannot unlawfully deprive residential tenants of occupation, meaning acts intended to interfere with tenant’s peace and comfort to cause them to cease occupation (PEA 1977).
Repair Covenants
Repair Covenants: Landlords have certain repair obligations in respect of ‘dwelling-houses’ (s11 LTA 1985).
(1) Structure: Keep in repair structure and exterior.
(2) Installations: Keep in repair and working order installations of water, gas, electricity and sanitation.
(3) Heating: Keep in repair and working order installations of space heating and water heating.
(4) Notice: Landlord only liable if tenant has notified the landlord of any relevant disrepair.
What are alienation covenants?
Alienation Covenants: Tenant usually covenants not to alienate lease, meaning assign or sublet. This must be express.
(1) Absolute Covenant: Tenant absolutely prohibited from alienation.
(2) Qualified Covenant: Assignment permitted with landlord consent, which must not be unreasonably withheld. Refusal must be given within a reasonable time with reasons, in writing (s1 LTA).
AGA: New lease may require tenant to enter an ‘AGA’, if ‘reasonable’ to do so, or as a condition of assignment in a commercial lease (s19(1)(a) LTA).
What is the liability on assignment of a lease?
Liability on Assignment: Leases can be assigned, meaning the lease is sold to a new tenant. Landlords will often attempt to ensure former tenants remain liable for any breach, as they have less control over who the lease is assigned to.
How do old leases work?
Old Leases
Old Leases: Leases granted before 1996 are ‘old’, which affects the liability of parties following sale or alienation.
(1) Original Parties: Original parties are bound by ‘privity of contract’. This continues for the duration of the lease, meaning original parties are liable for breach by successors until the lease expires.
Liability on Assignment
Original Tenant: Original tenants are liable for all lease covenants for duration of lease (s79 LPA). Enforced by privity of contract.
Claim Notice: Only liable if given notice within 6 months of charge being due, specifying the sum due. This means only rent missed or damage caused in the last 6 months can be sought at a time (s17 LTCA).
Successive Tenant: Successive tenants are liable for real covenants during occupation. Enforced by privity of estate.
Real Covenants: Covenant must ‘touch and concern’ the land (Spencer’s Case; City v Fell).
Duration: Duration of their interest in the lease, unless they enter a direct covenant on assignment.
>If they enter this direct covenant, they will also remain liable for the duration of the lease.
Successive Landlord: Successive landlords are liable and benefit from real covenants. Enforced by privity of estate.
Real Covenant: Must ‘reference the subject matter’ of the lease (ss141-142 LPA).
Duration: Duration of their interest in the lease.
Real Covenants
Real Covenants: Real covenants ‘touch and concern’ or ‘reference subject matter’ under P&A Swift v Combined English.
(1) Temporary: Covenant only benefits party for time being, and ceases on vacation of land.
(2) Affects Land: Affects nature, quality, user or value of land. May include money payments if relevant.
(3) Not Personal: Covenant is not expressed to be personal.
(4) Criticism: Romer LJ suggested rules are ‘arbitrary and for the most part illogical’ (Grant v Edmondson).
Statutory Indemnities
Statutory Indemnities: By implication, assignees indemnify assignors in respect of covenant breach on assignment (Moule v Garrett). This creates a chain to the original party. This means if the old tenant is sued, they can reclaim from the new tenant.
(1) Unregistered: Under s77 LPA.
(2) Registered: Under Sch 12 P20 LRA.
What are new leases?
New Leases
New Leases: Leases granted during or since 1996 are ‘new’.
(1) Original Parties: Original parties liable for duration of interest only, through privity of contract.
Liability on Assignment
Vacating Tenant: A vacating tenant is released from benefit and burden of all covenants not expressed to be personal unless they enter into an AGA on assignment (s5(2)).
AGA: AGAs may be required in the lease, or requested where ‘reasonable’, requiring the outgoing tenant to indemnify the incoming tenant in respect of covenants. Lasts for duration of assignee’s interest (s16 LTCA).
Claim Notice: Only liable if given notice within 6 months of charge being due, specifying sum due. This means only up to 6 months of dues may be sought (s17 LTCA).
Indemnity: Can seek indemnity, but must be express (Moule v Garrett).
Vacating Landlord: Vacating landlords must apply for release of landlord covenants not expressed to be personal, and if successful, will cease to benefit from tenant covenants (s6(2) LTCA).
Application: Must serve notice on tenant within 4 weeks of assignment, informing them of assignment and requesting release of covenants (s8(1)).
Reply: Landlord will be released to extent requested if: a) tenant does not object in writing within 4 weeks; or b) does, but court declares release is reasonable; or c) tenant consents (s8(2)).
Alternative: If the lease provides liability ends on disposal, then landlord will be released (Avonridge v Mashru).
Incoming Tenant: Incoming tenant is burdened and will benefit from all covenants.
Personal Covenants: Will not benefit from personal covenants but will be burdened by them in respect of original landlords (s3(6)).
Incoming Landlord: Incoming landlord is burdened and bound by all covenants, including right to forfeiture (s4 LTCA).
Personal Covenants: Will not benefit from personal covenants but will be burdened by them in respect of original landlords (s3(6)).
What is the effect of LTCA 1995?
LTCA 1995 Effect: The LTCA 1995 has retrospective effect, meaning it applies to both old and new leases.
(1) AGAs: In respect of commercial leases, landlords can withhold consent to assign pursuant to the terms of an AGA if this is expressly written in the original lease (s22).
What is the landlord remedy for non-payment of rent?
Landlord Remedies (Non-Payment): Landlord’s have a number of remedies in respect of non-rent payment.
Debt Action
Debt Action: Landlords can recover rent arrears for the last 6 years by debt action. If pursuing former tenants, this will be limited by the 6 month default notice requirement (s17 LTCA).
Commercial Rent Arrears Recovery
CRAR: Rent can be recovered by CRAR in respect of commercial properties (Tribunals, Courts and Enforcement Act 2007).
(1) Minimum Due: At least 7 days rent must be due and payable, at least 7 days notice must be served.
(2) Procedure: Enforcement agent serves notice, binding tenant’s goods until arrears paid or goods sold.
Forfeiture
Forfeiture: Landlord can exercise forfeiture (‘right to re-enter’) against current tenant, prematurely terminating the lease.
(1) Forfeiture Clause: The right to forfeit must be expressly reserved in lease, in a ‘forfeiture clause’.
>This will also set out the grounds to forfeit, i.e. ‘non-payment of rent for 14 days’.
(2) Waiver: If right has arisen, landlord will lose right if they ‘waive’ the breach, such as by exercising other remedies or acknowledging continuance of the lease. This right will renew each time the ground to forfeit arises again.
(3) Method: Landlords can forfeit by: a) peaceable re-entry; or b) service of proceedings.
Peaceable Re-Entry: Cannot re-enter dwelling houses unless vacant. Threats to obtain property are a criminal offence (s6 CLA 1977).
Proceedings: Usually better to seek court order (s2 PFEA).
(4) Formal Demand: Under the common law, landlords must attend the premises on the day payment is due and demand the exact sum owed hourly until sunset before forfeiting (Duppa v Mayo).
Clause: However, most leases remove this requirement.
(5) Relief: Tenant may apply for relief against forfeiture, allowing them to retake premises on original lease as if there had been no forfeiture.
Mandatory: Court must grant relief if tenant pays arrears and costs before forfeiture trial.
Court Ordered Forfeiture: Court may grant relief if the tenant applies for relief within 6 months of the landlord’s court order.
Re-Entry Forfeiture: If landlord forfeit by valid peaceable re-entry, 6 month limit does not apply, and court can grant relief provided it is equitable to do so.
What is the landlord remedy for other breaches?
Landlord Remedies (Other Breaches): Breach of other covenants, such as repair, is remedied in other ways.
Damages
Damages: Tenants may be sued for damages, provided they arose in the usual course of things or were reasonably contemplated as a probable result of breach (Hadley v Baxendale).
(1) Defendants: Both tenants and liable former tenants are subject.
Default Notice: No default notice required, as damages is not a fixed charge.
(2) Limitation: Damage is limited to the amount of disrepair if this is the breach - this is the diminution of reversion value (s18 LTA). This may be lower than the cost of repair.
(3) Long Lease: If the lease exceeds 7 years with at least three years unexpired, the landlord must serve a long-lease Notice (LPRA).
Contents: Notice must specify entitlement of tenant to serve counter notice claiming benefit of Leasehold Property (Repairs) Act 1938.
Counter Notice: Tenant has 28 days to serve counter notice, and if so, landlord needs leave of court to continue.
Specific Performance
Specific Performance: Courts may compel specific performance if damages are inadequate.
Injunction
Injunction: Courts may order an injunction to prohibit breach of a restrictive covenant.
Self-Help
Self-Help: Landlords may exercise self-help if the lease contains a Jervis v Harris clause.
(1) Conditions: Clause must give landlord the:
Right to enter and inspect property;
Give notice to tenant that repair is required, and time in which to do it;
If work is not complete, landlord can enter and do repair work; and
Recover the cost as a debt, avoiding provisions of s18 LTA and LPRA 1938.
Forfeiture
Forfeiture: Forfeiture for breach of other covenants must be expressly reserved in lease, and will be lost if waived.
(1) Notice: Landlord must generally serve s146 LPA notice: a) specifying breach; b) requiring remedy in a reasonable time; and c) demanding reasonable compensation.
Alienation: Breach of alienation covenant is ‘once and for all’ meaning incapable of remedy.
LPRA Notice: LPRA notice is also required if exceeding 7 years with more than 3 remaining.
(2) Remedied Breach: If tenant remedies breach in specified time of notice, forfeiture cannot occur. If they do not, the landlord may forfeit.
(3) Relief: Tenant may apply for relief as part of possession proceedings or on peaceable re-entry. Court grants at its discretion.
Sub Leases: If a head lease is forfeited, a sublease under it ceases to exist. The subtenant may also be able to grant relief, which could have the effect on becoming a direct lease of the head landlord.
What are the tenant remedies in respect of landlord breach?
Tenant Remedies: A tenant may have a number of remedies in respect of landlord breach.
Specific Performance/Injunction
Specific Performance/Injunction: Discretionary equitable remedies, if damages are inadequate.
Damages
Damages: Ordinary principles apply.
Self-Help by Set-Off
Self-Help: If the landlord does not comply with the landlord repair covenants, tenant may be able to exercise self-help.
(1) Common Law Set-Off: Tenant may notify of need to repair, and carry out if landlord fails to do so. They may then withhold rent until the cost of repair is set off.
(2) Equitable Set-Off: Tenant withholds rent and landlord sues tenant. Equity may allow the tenant to have the breach claim set off against the rent claim. There must be sufficient connection between the two.
(3) In Practice: Most commercial leases will exclude the effect of both types of set-off.
