leases Flashcards
what is a lease
- an estate in land which may exist at law or in equity
when does a lease arise
when one party (lessor/landlord), confers on another party (lessee/tenant):
- the right to exclusive possession of certain land (distinguishing it from a licence)
- for a period which is subject to a definite limit, or which can be made subject to a definite limit by either party
what is the duality of character of leases
both an executory contract - things have to continue to occur throughout the lease (the contractual terms and conditions that the lease agreement sets out)
and an executed demise - grant of an interest in land is completed at the moment the lease is finalised
what are the contractual aspects of leases
in recent years, there has been a “contractualisation” of leases, with a tendency by courts to explore contract law as a source of alternative remedies and as a basis of implied terms. where the lease is written, the court will apply the usual rules for the construction of contracts
what are the legal basis’ for leases
primary basis of NZ law relating to leases = common law.
several relevant statutory interventions:
- residential tenancies act 1986
- property law act 2007 (part 4) - applies to all other leases
how to leases for maori land work
under the te ture whenua maori act 1993, maori customary and freehold land is inalienable; except:
- for dispositions (including leases) effected by order of the maori land court
- for leases of a term of not more than 3 years (including any term(s) of renewal
- every title and interest in maori customary land must be determined according to tikanga maori
what are the 4 essentials of a lease
- fixed/periodic term
- certain premises
- exclusive possession
- proper creation
what is the ‘fixed and period term’ requirement of a lease
a lease must have a time of commencement and time of ended. it must be express, implicit or capable of being rendered certain from the outset of the term. it may be granted for a term that ensures regular but non-consecutive periods of enjoyment (e.g. like leasing a timeshare every July).
periodic leases satisfy the certainty of term requirement because inherent in the nature of a periodic lease is the power of each party to determine the lease at the end of any period by giving appropriate notice (Prudential Assurance Co Ltd v London Residuary Body).
Where the future termination date is uncertain, but rather termination is based on the occurence of a future event, PLA 2007 s 212 provides for the creation of an equitable lease. the future event must be sufficiently defined in the lease so that the event can be identified when it occurs. if the future event has not occured before the 10th anniversary of the date the lease began, the lease automatically terminates on the 10th anniversary. E.g. if the lease for a quarry provides the lease will run until 500 tonnes of ore have been extracted, there could be an equitable lease created
what is the certain premises essential of a lease
the subject matter of a lease must be described and identified with certainty. it is generally not difficult to meet this requirement
what happened in Goldsworthy Minding Ltd v Commissioner of Taxation in relation to the certain premises essential of a lease
there was a lease to dredge a harbour to facilitate the transportation of iron ore. there was question as to whether the description of the sea bed in the agreement was sufficiently certain to support a lease because the seabed will change overtime in natural state as well as dredging changing boundaries. the court held that wasn’t a problem as long as you could tell it at a given time - “no reason the law should not recognise a boundary capable of moving, so long as it was capable of ascertainment at any point in time”
what is the exclusive possession essential of a lease
legal right of exclusive possession is distinct from mere factual occupation and is the essential distinction between a lease and a licence. a lessee may exclude everyone, including the landlord (subject to the reservation of a limited right of entry by the landlord) and you can bring tort claims in trespass or nuisance for third parties coming onto the property.
the legal right to exclusive possession implies freedom of the lessee from any detailed supervisory control in respect of the use and occupation of the premises.
the NZ approach is that the parties’ subjective intention, or the label they have attached to the arrangement, is not decisive. the agreement must be construed as a whole and in context to determine whether the legal right of exclusive possession has been granted
what is the proper creation essential of a lease
there is no restriction on the length of term of a lease which may be registered. however, where the fixed term of a lease exceeds one year, legal estate will not pass until a lease instrument in the appropriate form has been registered.
until PLA 2007, only short term leases (less than one year) do not require registration - they can be made orally or in writing and amount to a legal interest in land.
however, it is not mandatory to register a lease even if it exceeds one year, and in practice many go unregistered. an unregistered lease instrument for a fixed term of over one year has the effect of a deed, making an equitable lease. The Doctrine of Walsh v Londsale will apply, specific performance will be available and parties’ rights and liabilities will be determined according to the terms of the memorandum.
why is mortgagee consent required for proper creation of a lease
most mortgages contain a term that no lease or sublease should be granted without first obtaining the mortgagee’s consent. if consent is not obtained, the mortgagee is formally entitled to treat the grant as a default and require payment of the loan. under LTA 2017, lease is not valid and binding against mortgagee or charge unless they have consented to the lease before registration (s 91). consent requires a positive affirmative act, such as written or oral acceptance, or implied acceptance by conduct (New Zealand Fisheries Ltd v Napier City Council)
what are the 7 types of leases
- fixed term
- perpetual leases
- express periodic tenancies
- implied tenancies and leases (s 210 leases)
- tenancy at will
- tenancy at sufferance
- lease for life
what is a fixed term lease
- granted for any length of time, whether long or short, continuous or discontinuous
- specified end date for the lease
- PLA s 212 equitable leases can be determined based on the occurence of a future event so are also fixed term leases
what is a ‘perpetual’ lease
- not recognised at common law, would result in a tenancy at will or the grant of a fee simple subject to the payment of an annual rent charge in perpetuity
- phrase is often inaccurately used to refer to perpetually renewable leases, which are for a fixed period and then perpetually renewable for the same period - Glasgow leases are usually for perpetually renewable periods of 14 or 21 years
- pastoral leases of Crown land granted under Land Act 1948
what is an express periodic tenancy
- grant for a period e.g. week, month, year that will continue to renew itself until either party terminates the lease by giving notice to quit
- apparent exception to the common law requirement that the maximum duration of a lease must be certain at its beginning
- right of each party to give notice is inherent
- like a Glasgow perpetually renewable lease except the period is much shorter than 14 or 21 years
- common in residential situations
- most fall under ‘short term lease’ - can be created orally or in writing, without needing to be registered under LTA 2017 for the legal estate to pass
- may be assigned
- will not determine on the death of the tenant - it vests in the executors/administrators of the deceased tenant until terminated - not a personal interest
what is a s 210 implies tenancy or lease
applies where:
- lessee is in possession of the land, but there is no agreement (express or implied) as to duration of the term
- lessee remains in possession of the land with lessor’s consent, although term of the lease has expired
- terminable at will by either party, by 20 working days’ written notice
- not estates in land and not registrable under LTA 2017
- can arise at termination of a fixed term lease e.g. where the lessee remains in possession of the property with the consent of the lessor even though the term has expired or the lessee is in possession but not agreement as to the term
what is a tenancy at will
- created by express or implied agreement
- confers exclusive possession on occupier for indefinite period
- period may be terminated at any time, at will of either party. No notice to quit is necessary to determine
- has the characteristics of both licences and periodic tenancies - the tenant at will has no estate in the land and cannot assign their interest, but they do have an exclusive right of occupation and can maintain an action of trespass against a third party (unlike a licensee)
what is an express tenancy at will
- unusual
- may arise in the “holding over” situation if the parties have agreed that this kind of arrangement should be recognised
- not a short-term lease under PLA 2007
- it would be more common to recognise an express periodic tenancy if there is any kind of express recognition rather than this
what is an implied tenancy at will
examples (non-exhaustive):
- prospective purchaser is let into possession before completion of the land transfer
- prospective tenant is allowed into occupation while negotiations for a lease are still continuing
- tenant holds over after expiry of a fixed term and before rent has been paid on a basis from which a periodic or s 210 lease can be implied
what is a tenancy at sufferance
- can only arise by operation of law
- cannot be expressly created by the parties
- no tenure between the parties
- lawful occupation of the land in particular circumstances
- results where a tenant holds over at the expiry of a fixed term without the consent or dissent of the landlord - absence of consent distinguishes tenancy at sufferance from tenancy at will and absence of dissent prevents tenant at sufferance from being a trespasser (clear toleration)
- tenant at sufferance may maintain an action of trespass against a third party and may recover possession
- tenant may leave at any time without notice
- landlord may bring action for use and occupation, and may eject tenant at any time
what is a lease for life
- under PLA 2007, in NZ it is possible to create a lease for life without needing to specify a maximum fixed term of years, and without it being a freehold estate (s 61)
- often used in conjunction with family trusts - owner sells house to a family trust for current market value, subject to a lease for life. This reduces the value of an individual’s estate, maximising their entitlement to asset-tested benefits and subsidies, while also avoiding gift duty
- also common in retirement villages
what are the 2 main rights and obligations under a lease
- quiet enjoyment
2. principle of non-derogation from grant
what does quiet enjoyment as a right and obligation of a lease entail?
- covenant that secures the lessee against interruption by any means in the possession of the property leased
- broken if acts of the landlord (or person claiming under or acting through landlord) interferes physically and substantially with the tenant’s possession. the landlord may be in breach even if the act complained of is legal, on the landlord’s own property, and arguably reasonably necessary (Owen v Gadd)
- implied at common law, codified in PLA 2007 s 218
- enjoyment refers to the exercise and use of the right and having the full benefit of it, rather than to derive pleasure from it (Kenny v Preen)
- not absolute, but in recent years courts have expanded the covenant for quiet enjoyment to protect against a third party’s activities (Norden v Blueport Enterprises Ltd)
- there is considerable overlap between the covenant for quiet enjoyment and the principle of non-derogation from grant
what happened in Norden v Blueport Enterprises Ltd
- landlord leased upstairs floor of an office building to an escort agency who was running a brothel with a software company underneath
- the brothel affecting the software companies’ business
- landlord argued they weren’t responsible for the activities of the co-tenant and that there would be a nuisance claim against that tenant
- court held the landlord had authorised, consented or allowed offending activities to proceed so they were liable
what are the remedies for the breach of quiet enjoyment
- injunction (to stop the interference)
- damages (including damages for mental upset and distress)
- exemplary damages may be available if the tort of trespass has also been committed
what is the right to non-derogation from Grant
“The general rule is that a lessor must not voluntarily prejudice the rights which he has created and he will not be permitted to do anything which is inconsistent with the purpose for which the demised premises are let.”
- acts in derogation from the grant are acts of the lessor which prejudice the successful fulfilment of the purpose of the lease
what happened in Mt Cook National Park Board v Mt Cook Motels Ltd
the national park board was the lessor of the land also the government authority charged with granting licences to operate businesses within the national park. One such business was the motel and the parties negotiated a lease contingent on motels obtaining a licence to operate within the park. the initial fee for the licence was £10 per annum but increased in a short amount of time to $700 per year. this frustrated the purpose of the lease in their capacity as lessor - derogation from grant
does non-derogation from grant impose an absolute obligation
- no general principle or implied contractual term that the premises are suitable for the purposes for which they have been let, or that they can be lawfully used for the lessee’s purpose
what are some examples of non-derogation from grant
- obstruction of air to timber drying sheds
- where construction of building close to a premises used to store explosives would endanger the requisite statutory licence
- nuisance, where the leased premises were being used as a brothel
- attempt to subsequently “redefine” permitted use of premises in lease
- dispute over naming rights of the Majestic Centre in Wellington
what are the inherent obligations of the lessee
- obligation to pay rent - implied at common law, codified in PLA 2007
- obligation to use premises in a “tenant like manner”
- obligation to yield up possession - implied at common law, codified in PLA 2007, lessee must deliver up vacant possession (them and their things) to the lessor when the term expires or the tenancy is determined
- obligation not to commit waste - implied at common law, codified in PLA 2007 - waste is a tort - 2 principal classes at common law: voluntary waste (positive acts), permissive waste (omissions)
what are the obligations of the lessor and of the lessee
lessor - quiet enjoyment, non-derogation
lessee - pay rent, use premises in “tenant like manner”, yield up possession, not commit waste
what are the statutory obligations (implied covenants) under PLA 2007
imposed on lessor: non derogation, quiet enjoyment
imposed on lessee: pay rent, not to alter buildings without lessor’s consent (though consent may not be unreasonably withheld), not to cause nuisance or commit waste, keep and yield up premises in existing condition, use premises reasonably
what are the implied covenants statutory powers under PLA 2007
powers of lessor - enter the premises at all reasonable times for the purposes of inspection, repair or compliance (but must not unreasonably interfere with the lessee’s occupation or use), cancel the lease if rent remains unpaid for 15 working days or if breach remains unremedied for 15 working days (non-residential)
powers of lessee: terminate the lease if the premises are or become unusable for the purpose(s) specified, expressly or by indication, in the lease (lessee must give reasonable notice)
what is an express covenant in a lease agreement
where an express covenant is included in a lease, it will exclude any implied covenant that covers the same subject matter. express covenants may negative, vary or extend the statutory covenants implied into leases under the PLA 2007.
what is the express covenant of quiet enjoymment
- in principle, no difference between express and implied covenants
- when expressed, the court will look to the contract document and construe it according to its language and context within that lease
- it is an independent covenant. the lessee may sue for breach even if rent is in arrears or if the lessee is in breach of some other covenant(s)
what is the express covenant of lessor’s repairing covenant
- no implied warranty from a lessor that the premises are physically or legally fit for the purpose of the lease, nor is there any duty on the lessor to disclose any defects in the state of repair of the premises before the lease is granted.
- generally no liability on lessor to undertake repairs unless there is an express repairing covenant in the lease
- lessor under no duty to repair until notified of the need for repairs. once informed, lessor should act with reasonable expedition to effect repairs
- lessor has an implied licence to enter for purpose of carrying out repairs
what are the lessee’s remedies for breach of the lessor’s repairing covenant
- seek specific performance
- do the work and claim the cost as damages
- do the work and deduct the expenses from the rent (must notify lessor in advance)
- claim an abatement of rent
- claim damages
(if lessor is in breach of the covenant to repair, lessee must still pay rent)
what is the lessee’s covenant to pay rent
- rent normally a money payment, but this is not necessary. can also consist of tender of goods or performance of services.
- rent does not need to represent the value of the premises. nominal rent is valid
- a rent-free lease is also valid
- liability for rent accrues on a daily basis unless lease provides otherwise
- amount of rent must be certain, but it may vary or fluctuate throughout the lease - however, if there is no provision in the lease for variation of rent, it may only be altered by agreement of the parties
- time and method of payment should be specified - under PLA 2007, rent is payable monthly in advance unless parties agree otherwise
under the lessee’s covenant to pay rent (an express covenant), what is abatement
(suspension of rent)
- complete or proportionate if premises are destroyed or damages (fire, flood, explosion, lightening, storms, volcanic activity and any other risk for which the lessor has insured the property)
- where there is breach of a repairing covenant and lessee has work done (subtract from rent)
- lessee may be able to withhold rent if lessor is in breach of covenant
is a lessee liable for rent or the performance of other covenants during any period in which the lessee is evicted from the premises
no - eviction may be direct and physical, or it may be any act of a permanent character done by the lessor with the intention of depriving the lessee of enjoyment of the premises. if lessee is evicted from only part of the premises, liability to pay rent is abated proportionally
what is the lessee’s covenant to repair
PLA 2007 implies a covenant by the lessee to keep premises in repair but it is usual to modify and expand the lease provisions regarding repairs. the implied covenant will not apply where there is an express repairing covenant, or will only apply to the extent that the express covenant does not.
“reasonable wear and tear” expected - what is “reasonable” depends on the contemplated use of the premises (in context of what they’re doing in it)
what is the lessee’s express covenant not to assign, sub-let or part with possession
right to assign a lease is inherent, so any limitation on lessee’s right must be express - because it is inhibiting an inherent incident of the lessee’s estate, any covenant against assigning, subletting, or parting with possession will be construed strictly against the lessor (contra proferentem)
in what two forms are lessee’s covenant not to assign etc.
absolute - where the lessee acts in breach of an absolute covenant against assignment, the assignee or sublesee will nevertheless obtain an estate in the land. the lessor can leave the arrangement to stand and sue for damages or can cancel the lease, if there is an express or implied forfeiture clause.
qualified prohibition - where the lease states that the lessee cannot assign etc “without lessor’s consent.” This may include “consent not to be unreasonably withheld.” Under PLA 2007 s 226, written notice must be given within a reasonable time if consent is refused, and the lessee may request reasons for the refusal or imposition of any condition. the burden of showing the refusal is unreasonable is on the lessee/assignee and the lessee and other affected parties may recover damages from the lessor if loss is caused by reason of the delay in giving consent
what is the lessee’s covenant to pay rates
- no implied covenant to pay rates
- express obligation is normally included in the lease
- owner of the fee simple remains ultimately responsible for paying rates, even if the lessee is recorded by the local authority as the ratepayer
what is the lessee’s covenant to insure
- no implied covenant to insure, no liability without an express covenant
- alternative approach: lessor undertakes to insure premises but lessee undertakes to reimburse the premiums to lessor
what are fixtures, chattels and tenants fixtures
chattel = personal property
fixture = part of the realty
tenant’s fixtures = trade fixtures like office partitions (Short & Schneideman v Kirkpatrick) or machinery/looms (Holland v Hodgson), or domestic or ornamental fixtures like cupboards lightly supported by affixation to the wall (R v St Dunstan Inhabitants, Kent) or carpets and light fittings (Young v Dalgety plc)
how do judges go about deciding if something is a fixture or a chattel
- degree of annexation - if an item rests merely on its own weight, it is prima facie a chattel. if it is attached to the land, it is prima facie realty (Holland v Hodgson)
- purpose of annexation - intended permanence of item or structure, considerations of the parties’ subjective intentions - whether it has become part and parcel of the land (Lockwood)
what are the consequences of the distinction between a chattel and a fixture
if a chattel, it may be removed during the lease
- if a tenants fixture it may be removed
- if the item is a fixture other than a tenant’s fixture, it must be left on the property until the end of the lease, unless the lease expressly authorises its removal
what are the 4 types of transactions with leases
renewal, purchase of the reversion, assignment, subleases
how does an express right of renewal for a lease work
- right to a further term(s) at the end of the current term
- may be presented as a covenant on the part of the lessor or as an option to renew in favour of the lessee. the difference in form is likely insignificant (Wed Motors Ltd v Hales)
- should indicate the number of renewed terms the lessee is entitled to
- may be perpetual
what formalities surround the renewal of a lease
- subject to writing requirement of PLA 2007 s 24, unless a short term lease
- where the writing requirement is not satisfied, the doctrine of part performance may come into play, its 3 elements are (Mahoe Buildings Ltd v Fair Investments Ltd):
1. sufficient oral agreement that would have been enforceable but for the writing requirement under s 24
- appropriate act of part performance
- circumstances of the part performance would be such that it would be unconscionable for the defendant to rely on the Act
where may proprietary estoppel be available for renewal of lease
available where interactions do not amount to a contract, providing for different types of remedies a court can offer to fulfil the parties’ bargain
Andrews v Colonial Mutual Life Assurance Society Ltd - lease for a bookshop for a period of 3 years with right of renewal for “either 3 or 6 years.” Lessees spent money on refurbishing the shop with the facts suggesting an understanding that this lease would be a long term situation. the court held that the lessees were entitled to proprietary estoppel because the lessor had allowed the lessees to assume that they had security of tenure for a lease of 3 or 6 years, and encouraged them to spend money on improvements
what applies to refusal to renew
- where the lessor refuses to renew the lease in breach of a covenant for renewal, lessee’s normal remedy will be an action for specific performance
- specific performance will not be available if the lessee is in breach of covenant or is out of time with notice to renew
- however some relief may still be available under PLA 2007 ss 261-264: court has discretion under PLA 2007 to grant relief, based on a balancing of lessor and lessee’s rights
what applies to the purchase of the reversion
reversion = future interest in the property that the lessor retains, and which reverts to lessor upon expiry of the lease. some leases, particularly ground leases, contain an option for lessee to purchase the lessor’s reversion for a stated price by giving appropriate notice. this is not itself a contract, but a unilateral offer.
the lessee would need to undertake some behaviour in order to accept the offer and make a contract e.g. pay money. contrasts with obligation to purchase.
option to purchase generally confers an immediate equitable interest capable of sustaining a caveat (Bevin v Smith). this passes on assignment of the lease, unless expressly drafted as personal to the original lessee.
what is the nature of assignment
for effective assignment, the entire leasehold interest must be transferred to the assignee. if the original lessee retains even the briefest reversion, the transaction will be a sublease, not an assignment (Neva Holdings Ltd v Wilson).
- right to assign is default
what is the concept of privity for the assignment of leases
privity of estate = relationship of tenure between current lessor and current lessee. parties’ have connection to each other through the land.
privity of contract = contractual relationship between the parties.
when a lease is effectively assigned, there is no longer privity of estate between the lessee who has assigned the lease and the lessor. however, the contractual relationship will endure until the end of its term (privity of contract remains). privity of estate exists only between the present lessee and the present lessor.
what formalities surround the assignment of leases
registered lease - assigned by registration of a memorandum of transfer under LTA 2017 (ss 73 and 75)
unregistered lease - assignment is effected by execution and delivery of a deed of assignment (PLA 2007, ss 9-10)
equitable assignment - where formalities are not complied with, there may be an equitable assignment, but it is essential that the actions or words relied on are unequivocal and that a specifically enforceable agreement has been achieved amount to a clear agreement to assign. such an agreement will be enforceable under the doctrine of Walsh v Lonsdale, but will be required to comply with s 24 of PLA 2007, unless there are acts of part performance
what is the effect of assignment
- liability of original lessee to original lessor - under PLA 2007 s 241, transferor/assignor remains liable to lessor for payment of rent and for observance and performance of all the lessee’s covenants. because privity of contract remains, the original lessee may be an additional or alternative defendant when an assignee defaults on the lease. lessor may have first recourse against the original lessee if the lessor chooses, but may only recover from one of the parties.
- original lessee’s liability will continue through extensions of the lease term, as they technically involve no new contract. however, liability will cease if the lease is renewed, whether by surrender and regrant or by expiry and new grant
what are subleases
= transfer of something less than the entire leasehold interest.
right to sublet is inherent in a lease, unless limited by a lease covenant against assigning/subletting/parting with possession.
when a sublease is granted, the grantor (original lessee) reserves a reversion and becomes the sublessor - they have privity of contract and privity of estate with the sublessee.
there is no direct relationship between head lessor and sublessee. enforcement of lease covenants by head lessor is impossible directly against sublessee unless the benefit of head lessor’s covenants may have been assigned in the sublease, making them easy to enforce against head lessor.
what is the difference between a sublease and assignment
essence of sublease - sublessor retains a reversion + it is the substance not the form of any arrangement that will be decisive.
Neva Holdings Ltd v Wilson: “The substance of an assignment is a disposition of the whole leasehold estate. The substance of a sublease is the retention of that estate, and the carving out of it of a lesser estate. The sublessor thus retains a reversion. And so if the substance of the transaction is an assignment, it matters not that it is described as a sublease.”
what is the general principle of a lease determining by expiry
- a fixed term lease will terminate on the expiry of that fixed term
- no need to either party to give notice, unless specifically required by the lease
- requirement of certainty of term should ensure that the expiry date is easily identified
- generally termination is automatic
how does a lease determine by expiry - holding over - express provision in the lease
- express provision in lease - a holding over clause usually allows for the lessee to remain in possession on the basis of a monthly tenancy only, terminable by one month’s written notice (becomes a monthly periodic tenancy). rent will be the same as payable under preceding lease and same covenants and agreements will apply so far as they are applicable to a monthly tenancy.
how does a lease determine by expiry - holding over - statutory tenancy under PLA 2007 s 210
- statutory tenancy under PLA 2007 s 210 - applies where the lessor and lessee have not agreed (expressly or by implication) that the lessee may continue in possession after the lease term has expired. it is terminable at will with a minimum of 20 working days’ written notice by either party. this is similar to a common law tenancy at will. as far as practicable, the same covenants and conditions as the preceding lease will apply, provided they are not more onerous on the lessee
how does a lease determine by expiry - holding over - tenancy at sufferance
- tenancy at sufferance - holding over without consent or dissent of lessor. PLA 2007 s 213 provides that the lessee in this situation is subject to all obligations of the original lease until ceasing to be in possession. acceptance of rent by lessor, without more, does not turn tenancy at sufferance into a statutory tenancy under s 210. this means lessor can still seek possession at any time
how does a lease determine by the occurence of a terminating event
where a fixed term lease is terminable upon the occurence of a stated event, the occurence of that event brings the lease to an end automatically, without the need for notice or other formality. where a fixed term lease is terminable upon occurence of a breach by the lessee, this is tantamount to cancellation of the lease (governed by ss 244-252 PLA 2007). The lessee may seek relief from cancellation (PLA 2007 pt 4 subpt 6)
how does a lease determine by a break clause/option to determine/option to surrender
may be included in long term leases e.g. lessee may be granted an exercisable option to determine at the end of the 7th year of a 21 year lease.
where the lease is held by joint lessees, notice exercising the option must be given by all lessees - unilateral action will not be effective to determine the lease (same where there are joint lessors)
how can a lease determine by notice to terminate in a periodic tenancy
this is an inherent characteristic of a periodic tenancy and cannot be restricted. notice may be given by fewer than all joint lessors or lessees (need only one). notice must be clear and unambigous. Correct notice period must be given and express conditions concerning giving of notice must be complied with e.g. any writing requirement in the lease or through operation of PLA 2007 s 24.
any period of notice may be expressly agreed on by the parties. In the absence of such express agreement, or any relevant statutory provision, common law periods of notice will apply by implication
how can a lease be determined by merger
merger occurs when the lessee acquires the reversion or where a third party acquires both the lease and reversion (e.g. lessee purchases fee simple from lessor). a merger is also the consequence of surrender (where the lessee gives up the property so the leasehold interest reverts back to the lessor and the two interests are merged into one and held by the lessor.
lessors remedies against the lessee in respect of the lease are preserved, notwithstanding the merger
how can a lease be determined by frustration
this contract law principle reflects the contractualisation of leases. this is where there is a premature determination of the lease because of the happening of an unforeseen event that the law considers to be so significant to the contract that it destroys its whole basis.
recognition of the frustration of a lease is a case of “no never, but hardly ever” (National Carriers Ltd v Panalpina (Northern) Ltd).
how can a lease be determined by express surrender
a lease is terminated by surrender if the lessee offers the leasehold estate to the lessor, who accepts the surrender of the estate. the lease then mergers in the lessors estate and is extinguished. the lessor is free to accept or reject the surrender (it won’t go ahead without their acceptance)
if a registered lease, a lease surrender instrument under LTA 2017 s 94 is required. if an unregistered lease (other than a short term lease) a deed is required
agreements to surrender must be in writing unless a short term lease. if there is no appropriate written material, the doctrine of part performance may be relevant.
the agreement must contain all of the terms of the surrender e.g. date etc.
how can a lease be determined by implied surrender
occurs where the lessee delivers possession and the lessor accepts possession, with intention on both sides to determine the lease. there is no need for express words of surrender, but the conduct must take place in a context of mutual intention (Benjamin v Wareham Associates (NZ) Ltd).
lessee’s act in vacating the premises or giving back means of control of the premises to lessor is the usual starting point. but a lessor is not obligated to accept a surrender. silence on the part of the lessor is not conclusive (Maori Trustee v Prentice).
E.g. they go in and clean up the property and lease to someone else. even the lessee returning the keys doesn’t show the lessor accepted the surrender. there needs to be affirmative conduct on the part of the lessor
how can a lease be determined by repudiation/cancellation
cancellation by lessees under CCLA 2017 ss 34-49. cancellation by lessor under PLA 2007 ss 244-264 which give lessees special protections from cancellation over and above what is available under standard contract law.
it requires repudiatory conduct which gives rise to cancellation. examples are where the lessee abandons the premises or they fail or refuse to pay rent over a substantial period of time.
what is the lessors right to cancel for repudiation/cancellation (determining the lease)
- governed by PLA 2007 ss 244-264
lessor may cancel the lease in one of two ways: “re-enter the land peaceably” in non-residential leases or apply to a court for an order for possession
what does re-entering the land peaceably mean
physical entry, instituting legal proceedings for possession, doing some act which unequivocally indicates that the lessee’s interest is determined eg changing the locks (question as to if the last one is okay under the PLA because the lessor must not do something that harms the former lessee.
what is the lessor’s right to cancel for repudiation/cancellation
notice must be given before lessor intends to cancel. where the lessee is in breach, giving rise to the lessor’s power to re-enter and cancel, lessor may:
- proceed with the cancellation; or
- pursue the breach by an action for damages; or
- disregard the breach all together
what is the lessee’s right to relief for repudiation/cancellation
- governed by PLA 2007 ss 253-264
would be unusual for relief to be granted without rent being paid up or at least secured. court has discretion to grant relief, even where cancellation is for a breach of an essential term of the lease, or the breach is not capable of being remedies (PLA 2007, s 256)
what are the factors the court may consider for the lessee’s right to relief for repudiation/cancellation
whether the breach was advertent or deliberate
whether tenant has or will remedy the breach and is able and willing to fulfil obligations in the future
landlords conduct
financial position of the tenant
gravity of the breach
whether the breach has caused lasting damage to the landlord
proportionality - whether the damages sustained by the landlord are truly proportional to the advantages s/he would gain if relief is not granted
what are the policy considerations for residential housing
historically tenancy legislation had:
- needed to redress the unequal bargaining power between landlords and tenants
- limited ability of landlords to charge unreasonably high rents
- restricted common law rights of landlords to recover possession in the event of a breach
today:
- concern about unequal bargaining power remains
- but there is also a shortage of housing accomodation in NZ
- need to strike a fair balance of rights between landlords and tenants
what things changed in RTA 2020 reform
- rent increases limited to once every 12 months rather than 6 months
- L cannot terminate tenancy without grounds to do so, previously without a reason with 90 days notice
- Ts who are victims of family violence can terminate tenancy with 2 days’ notice
- L can terminate with 14 days’ notice if T has assaulted L
- rental bidding prohibited, rent price must be included in advertisement
- all requests to assign a tenancy must be considered
what does the RTA 1986 cover
applies to all tenancies for residential purposes, subject to specific s 4 exceptions.
the legal right of exclusive possession is irrelevant. arrangements granting less than exclusive possession cannot be used to evade requirements of the Act.
covers both fixed term and periodic tenancies
may apply where occupancy is intermittent
where leased premises are used for both commercial and residential purposes, they are deemed residential unless it is proved they were let principally for non-residential purposes
- focus on the use not the nature of the premises
what does the RTA 1986 apply to
- application to corporations: act applies to corporate landlords and probably applies to corporate tenants (no case law on this point in NZ< but see Auckland City Apartments Ltd v Stars & Stripes 2000 Ltd)
- applies to service tenancies: tenancies granted in relation to a contract for services between landlord as employer and tenant as employee. covers contractors, government employees, members of the police and armed forces
can the RTA 1986 be contracted in/out of
a tenant is absolutely prevented from waiving their rights/powers under the Act. a landlord may voluntarily waive any or all of their rights/powers. this is because of the foundational policy assumption that tenants have less bargaining power than landlords. if the RTA does not apply to any particular arrangement (e.g. if it falls into the statutory exceptions), parties may still agree in writing to be subject to any or all of the Act’s provisions.
what does the RTA 1986 not apply to
tenancies for commercial, industrial or agricultural purposes - look to the primary use of the premises not what is on the premises
institutional residential accomodation like prisons, police barracks and cells, hospitals, homes for the sick, disabled or aged, employers’ barracks and hostels and tertiary students accomodation owned/operated by the education provider.
transient accomodation for people passing through like hotels, motels, clubs, holiday homes and apartments, camping grounds, mobile homes and caravan parks, though long term accomodation in these may be deemed subject to the act.
short term tenancies with terms of no more than 90 days, though these are only exempted from provisions on market rent and requirements for minimum periods of notice of termination.
what are the special considerations for tenancy agreements under RTA 1986
a tenancy agreement is a contract, but RTA 1986 limits parties’ freedom to contract as many terms are predetermined e.g. you cannot insert a prohibition on assignment.
the Tenancy Tribunal has jurisdiction to exercise the powers of the District and High Courts in relation to contracts.
as a rule of construction, immediate language and express terms specified by parties takes precedence over pre-printed terms
the tenancy tribunal may apply equitable remedies like estoppel, equitable set-off or unjust enrichment
what is the prohibition on discrimination for tenancy agreements
discrimination in contravention of the HRA 1993 is unlawful under s 21. grounds of:
- sex, pregnancy, childbirth
- marital/family/employment status
- sexual orientation
- religious/ethical belief
- colour
- race
- ethnic/national origins
- disability
- age
- political opinion
what does the RTA 1986 not apply to
tenancies for commercial, industrial or agricultural purposes - look to the primary use of the premises not what is on the premises
institutional residential accomodation like prisons, police barracks and cells, hospitals, homes for the sick, disabled or aged, employers’ barracks and hostels and tertiary students accomodation owned/operated by the education provider.
transient accomodation for people passing through like hotels, motels, clubs, holiday homes and apartments, camping grounds, mobile homes and caravan parks, though long term accomodation in these may be deemed subject to the act.
short term tenancies with terms of no more than 90 days, though these are only exempted from provisions on market rent and requirements for minimum periods of notice of termination.
what are the special considerations for tenancy agreements under RTA 1986
a tenancy agreement is a contract, but RTA 1986 limits parties’ freedom to contract as many terms are predetermined e.g. you cannot insert a prohibition on assignment.
the Tenancy Tribunal has jurisdiction to exercise the powers of the District and High Courts in relation to contracts.
as a rule of construction, immediate language and express terms specified by parties takes precedence over pre-printed terms
the tenancy tribunal may apply equitable remedies like estoppel, equitable set-off or unjust enrichment
what is the prohibition on discrimination for tenancy agreements
discrimination in contravention of the HRA 1993 is unlawful under s 21. grounds of:
- sex, pregnancy, childbirth
what are the writing requirements for tenancy agreements
- must be in writing and signed (s 13). before the tenancy commences, the landlord must sign the agreement and provide a copy to the tenant (whether or not the tenant has signed it). the tenant must always sign the agreement.
tenancy agreements that are not in writing are not unenforceable
what are the required contents for tenancy agreements
- full names, addresses, mobile phone numbers, email addresses of L and T
- address of the premises
- date of tenancy agreement and of commencement of tenancy
- whether T is under 18
- amount of bond
- rent payable and any fees to be paid
- frequency of rent payments
- place/bank account number where rent is to be paid
- list of chattels provided by L
- if tenancy is fixed term, the date when it will expire
- insulation statement
- insurance statement
- healthy homes standard statement
what is the use of the form agreement for a residential tenancy important for
- L can add certain extra conditions to the form agreement like a prohibition on smoking, a limitation on the number of people allowed to live on premises, a stipulation about where cars can be parked, rules about pets and clauses on meth testing
- L cannot add unenforceable clauses like requiring T to do more than RTA 1986 requires, reducing or removing T’s rights or expanding L’s rights, evade requirements of RTA 1986
what are some examples of unenforceable clauses within residential tenancy agreements
carpets must be professionally cleaned at end of tenancy
T must replace stove elements and fuses
L can raise rent with one weeks notice
T cannot have visitors without L’s consent
why would a clause stating: “carpets must be professionally cleaned at end of tenancy” be unenforceable in a residential tenancy agreement
T only needs to leave the premises in a reasonably clean and tidy condition
why would a clause stating: “T must replace stove elements and fuses” be unenforceable in a residential tenancy agreement
L is responsible for maintaining premises in a reasonable state of repair
what are letting fees
any fee or charge for services rendered by the letting agent or any other person that relate to the grant, continuance, extension, variation or renewal of any tenancy agreement; the assignment of T’s interest under a tenancy agreement; or the subletting of the whole or part of the premises. e.g. lawyers fees
no letting agent or other person may require T to pay a letting fee. L may nevertheless recover reasonable expenses on consenting to T’s assignment, subletting or parting with possession.
why would a clause stating: “T cannot have visitors without L’s consent” be unenforceable in a residential tenancy agreement
T is entitled to quiet enjoyment of the premises
what is key money
when the landlord asks the tenant to pay something for granting or making changes to the tenancy agreement by way of fine, premium, foregift, reimbursement of expenses, administration charged, or otherwise as consideration for the grant, continuance, variation or renewal of the tenancy agreement.
this fee does not include rent or bond but is absolutely prohibited unless the Tenancy Tribunal grants prior consent
what are letting fees
any fee or charge for services rendered by the letting agent or any other person that relate to the grant, continuance, extension, variation or renewal of any tenancy agreement; the assignment of T’s interest under a tenancy agreement; or the subletting of the whole or part of the premises. e.g. lawyers fees
no letting agent or other person may require T to pay a letting fee. L may nevertheless recover reasonable expenses on consenting to T’s assignment, subletting or parting with possession.
what is bond
any sum of money payable or paid under a tenancy agreement as security for the observance and performance of T’s obligations under the agreement, not including rent. it cannot be more than 4 weeks’ rent. if rent increases or decreases, bond may change accordingly to the limit of 4 weeks.
L may not require T to provide any form of security other than the bond - money only.
upon receipt of bond, L must give written receipt
what is rent under RTA 1986
any money, goods, services, or other valuable consideration in the nature of rent to be paid or supplied under a tenancy agreement by T; but does not include any sum of money payable by way of bond.
L must state the amount of rent when advertising the premises and L cannot invite or encourage a prospective T to pay an amount of rent that exceeds the amounts stated in the advertisement.
L must give written receipt to the person paying rent.
rent accrues day to day. L may not require payment of rent more than 2 weeks in advance
what are T’s entitlements under RTA 1986
L must take all reasonable steps to ensure that there is no legal impediment to occupation of premises at commencement of tenancy (36)
T is entitled to vacant possession of the premises (37)
T is entitled to quiet enjoyment of the premises without interruption by L; L may not cause or permit interference with the reasonable peace, comfort or privacy of T in the use of the premises
what are the requirements for rent under RTA 1986
rent increases - L must give T notice in writing of the increase, specifying the amount and date on which it is payable (not less than 60 days after date of notice). rent must not be increased within 12 months after date of commencement of tenancy or within 12 months after the date the last increase took effect. L and T may agree to increase rent if L has made substantial improvements to premises that increase their value and are of material benefit to T, or if L has increased/improves facilities/services provided to T
what is T’s right to sublet/part with possession under RTA 1986
Tenancy agreement may prohibit T from subletting or parting with possession (44)
in absence of such a provision, T may sublet or otherwise part with possession at any time, with L’s prior written consent and subject to any reasonable conditions. L must not withhold consent unreasonably or attach any unreasonable conditions
what are T’s entitlements under RTA 1986
L must take all reasonable steps to ensure that there is no legal impediment to occupation of premises at commencement of tenancy (36)
T is entitled to vacant possession of the premises (37)
what is T’s right to assign under the RTA 1986
a provision in a tenancy agreement that prohibits T from assigning the tenancy is of no effect (43A)
T may assign tenancy at any time with L’s prior written consent and in accordance with any reasonable conditions (43B). L must not withhold consent unreasonably or attach any unreasonable conditions.
T who assigns tenancy ceases to be responsible to L on date when assignment takes effect, but remains liable for acts/omissions from before date of assignment (43C)
what are the landlords responsibilities under s 45 RTA 1986 and other provisions
to provide the premises in a reasonable state of cleanliness
to provide and maintain the premises in a reasonable state of repair (having regard to the age and character of the premises)
comply with smoke alarm requirements, healthy homes and buildings, health and safety standards, contaminants requirements
compensate the tenant for reasonable expenses incurred in repairing the premises
providing and maintaining locks etc as necessary to ensure premises are reasonably secure (46)
give the tenant written notice (as soon as practicable) if the property has been put on the market (47)
provide adequate means of water collection (if no reticulated water supply) (45)
not interfere with the supply of gas, electricity, water, phone or other services (45)
permit and facilitate the installation of a fibre internet connection (45B)
what is the landlords right of entry under s 48 RTA 1986
L may not enter premises except:
with T’s consent given freely at or immediately before time of entry
in case of emergency
for purpose of inspection (8am-7pm); notice given 48 hours to 14 days prior
for purpose of determining whether T has satisfactorily completed any required work
for purpose of carrying out necessary repairs
for purpose of complying with statutory requirements (smoke alarms, healthy homes standards etc)
pursuant to an order of the Tribunal
what is T’s right to sublet/part with possession under RTA 1986
Tenancy agreement may prohibit T from subletting or parting with possession (44)
in absence of such a provision, T may sublet or otherwise part with possession at any time, with L’s prior written consent and subject to any reasonable conditions. L must not withhold consent unreasonably or attach any unreasonable conditions
what are the tenants responsibilities under RTA 1986 s 40
pay rent when due
ensure premises are occupied principally for residential purposes
keep premises reasonably clean and tidy
comply with smoke alarm requirements
notify L of any damage or need of repairs (ASAP after discovery)
on termination:
quit premises
remove goods
leave premises in reasonably clean and tidy condition
remove rubbish
return keys etc to the landlord
leave the landlord’s chattels on the premises
what is the tenant prohibited from doing under s 40 RTA 1986
intentionally/carelessly damaging (or permitting another person to damage) the premises
use the premises (or permitting premises to be used) for any unlawful purpose
causing/permitting interference with quiet enjoyment of the landlords other tenants
causing/permitting any interference with the means of fire escape
T must ensure no more than the maximum number of persons reside at the premises if specified in a tenancy agreement and they are responsible for any act/omission done by anyone other than the landlord or the landlords agent on the premises
what are the landlords responsibilities under s 45 RTA 1986 and other provisions
to provide the premises in a reasonable state of cleanliness
to provide and maintain the premises in a reasonable state of repair (having regard to the age and character of the premises)
comply with smoke alarm requirements, healthy homes and buildings, health and safety standards, contaminants requirements
compensate the tenant for reasonable expenses incurred in repairing the premises
providing and maintaining locks etc as necessary to ensure premises are reasonably secure (46)
give the tenant written notice (as soon as practicable) if the property has been put on the market (47)
provide adequate means of water collection (if no reticulated water supply) (45)
not interfere with the supply of gas, electricity, water, phone or other services (45)
permit and facilitate the installation of a fibre internet connection (45B)
what is the landlords right of entry under s 48 RTA 1986
L may not enter premises except:
with T’s consent given freely at or immediately before time of entry
in case of emergency
for purpose of inspection (8am-7pm); notice given 48 hours to 14 days prior
for purpose of determining whether T has satisfactorily completed any required work
for purpose of carrying out necessary repairs
for purpose of complying with statutory requirements (smoke alarms, healthy homes standards etc)
pursuant to an order of the Tribunal
what are the possible scenarios for when a tenancy is terminated
for a periodic tenancy, by giving notice as appropriate (63-90 days, s 51)
when a sole tenant dies (s 50A)
where T acquires L’s interest on the premises
where mortgagee or other person becomes entitled (as against L) to possession (s58)
where T surrenders the tenancy or delivers up vacant possession with L’s written consent
where premises are destroyed or breach renders them uninhabitable (s 59)
by disclaimer
by order of the Tribunal (e.g. non-payment of rent/abandonment; ant-social behaviour
how are fixed term tenancies terminated
on expiry of the term. if T remains in possession, fixed term tenancy of >90 days becomes a periodic tenancy with the same terms unless under s 60A the parties renew/extend the existing agreement or before expiry the parties agree to not continue the tenancy
what is the compositional makeup of the tenancy tribunal
membership, under s 67 is 1 principal tenancy adjudicator, 1 deputy principal tenancy adjudicator and tenancy adjudicators as required
qualifications under s 67 - practicing certificate as barrister/solicitor of the HC of NZ or an equivalent certification from another Commonwealth country or common law country or state
the term (s 68) is up to 5 years and tenancy adjudicators may be reappointed
what is the jurisdiction of the tenancy tribunal
the tribunal has jurisdiction to adjudicate any dispute that (s 77):
exists between L and T or between L and T’s guarantor or that relates to any tenancy to which RTA 1986 applies
determine questions relating to:
nature of the premises and existence of a tenancy agreement
market rent
notice to terminate
possession
tenancy agreement terms
payment owing to L (rent in arrears)
breaches
subletting
unlawful acts
what happened in Parbhu v Want
Parbhu and Pastel (trustees) owned a commercial building in Lower Hutt. Resource consent was granted to add residence for an on-site caretaker on the condition that it only be used by the caretaker. the trustees later entered into a fixed term tenancy with Want, who was not the caretaker.
the issue in this case was whether the Tenancy Tribunal had jurisdiction to hear claims related to the tenancy, if the tenancy itself was illegal. the HC held yes - Parliament intended that the Tribunal have full jurisdiction to deal with all cases involving residential occupation, and the ability to grant appropriate remedies
