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