Leases

Question 1

What is a Lease?

Answer 1

A Proprietary Right to exclusively use and enjoy Land for a given period of time.

LPA 1925 — s. 1 (1)(b).

The technical term of a Lease is a ‘Term of Years Absolute’.

Question 2

What is a Licence?

Answer 2

A Personal Right to be on Land, justifying what would otherwise be Trespass.

Question 3

What are the Core Elements of a Lease?

Answer 3

• Certainty of Term.
• Exclusivity of Possession.
• Adherence to the Formalities of Creation.

Question 4

What constitutes a Certain Term?

Answer 4

• Fixed Term: The duration is set from the outset.
• Periodic Term: The duration is for an automatically-renewing period that ends if either party terminates.
  • This may be implied from the Landlord’s conduct, in which case, the period will be measured in line with how rent is calculated.

Termination of a Periodic Term does not take effect until the given period ends.

Question 5

What constitutes Exclusive Possession?

Answer 5

The right to exclude all others from the Property, including the Landlord.

Whether this is the case is a question of fact and contract.

For example, if the Landlord retains a key, but it is only intended for restricted use, like repairs or emergencies, Exclusive Possession is maintained.

However, if the Landlord provides regular attendance or services, that would defeat Exclusive Possession.

In a business context, degree of physical control over the Premises and commercial conduct tend to weigh the heaviest.

Question 6

In assessing whether a Sharing Clause defeats Exclusive Possession, what are the primary considerations?

Answer 6

• The Property’s size and nature.
• The relationship between Occupiers.
• The Clause’s scope, drafting, and history of use.

Question 7

What are the Requisites to hold a Lease in Joint Tenancy?

Answer 7

Unity of Title:

• Every Occupier’s interest starts at the same time.

Unity of Time:

• Every Occupier’s interest derives either from the same document or from separate, interdependent documents.

Unity of Interest:

• Every Occupier’s interest is for the same term, under the same conditions, and subject to joint liability for rent.

Unity of Possession:

• Every Occupier is entitled to the whole of the Premises and cannot exclude any other.

Failure to meet these requisites makes the Lease a Tenancy in Common, which effectively means each Tenant has an individual Lease with the Landlord.

Question 8

What are the Formalities for Creating a Legal Lease?

Answer 8

• It must be Registered.
• It is written in a valid Deed.
• It is for a Term of more than 7 Years.

Question 9

What are the Implications of a Lease being for a Term of 7 Years or Less?

Answer 9

• It is still a Legal Lease.
• It need not be Registered.
• It will Bind future Freehold Owners as an Overriding Interest.

Question 10

What are the Implications of a Lease being for a Term of 3 Years or Less?

Answer 10

• It is still a Legal Lease.
• It need not be Registered.
• It need not be in Writing if:
  • The Tenant takes possession immediately; and
  • The Lease is granted at Market Rent without an upfront premium.

Question 11

What is an Equitable Lease?

Answer 11

A failed Legal Lease that the Court will nonetheless recognise if:

• There is a valid Land Contract; and
• The remedy of Specific Performance is available.

Resultantly, the Tenant will have an Equitable Interest in the Land.

Question 12

What is a Repair Covenant?

Answer 12

An obligaton on the Tenant to maintain the Premises to the standard of a Reasonable Owner, having regard to:

• The age of the Premises.
• The Covenant’s express words.
• The type and character of the Premises.

Repair does not constitute renewal, and repair obligations can be limited by a schedule of condition.

Question 13

What are the Two Regimes for the Enforcement of Leasehold Covenants?

Answer 13

The Pre-1996 Regime:

• The liability of the Original Landlord and Tenant continues for the Lease’s full term.

The Post-1996 Regime:

• Generally, the Original Tenant will be automatically released from their obgliations upon valid Asisgnment.
• The same does not apply for the Original Landlord, who must apply for release from the current Tenant.
• If denied, the Original Landlord may apply to Court.
• Nonetheless, the benefit and burden of all non-personal Landlord and Tenant Covenants will automatically transfer to the appropriate Successors.

Question 14

What is a Tenant Default Notice?

Answer 14

• If a Landlord seeks to pursue a Former Tenant who remains liable for a Rent Covenant or other Fixed Charge;
• The Landlord must serve notice within 6 Months of the Charge becoming due;
• For if it does not, it will be precluded from Claiming.

Question 15

Are Guarantors and Former Tenants liable for Variations made after Assignment?

Answer 15

Yes, but only if the Variations could have been reasonably anticipated at the time.

Question 16

What is an Overriding Lease?

Answer 16

• A Lease granted to the Former Tenant, allowing them to become the Immediate Landlord of the defaulting Current Tenant;
• For the remainder of the Original Lease, plus 3 Days, and on the same terms;
• If the Landlord asks the Former Tenant to pay rent or other fixed charges in lieu of the Current Tenant and the Former Tenant requests this arrangement.

Question 17

What are the Remedies available to Landlords?

Answer 17

Breach of Rent Covenant:

• Forfeiture.
• Commercial Rent Arrears Recovery.
• Action for Debt, up to 6 Years’ arrears.

Breach of Non-Rent Covenant:

• Damages.
• Injuction.
• Forfeiture.
• Specific Performance.

Commercial Rent Arrears Recovery, which allows the Landlord to seize goods in lieu of payment, can only be used if:

• The Lease has not been forfeited.
• The Premises is purely commercial; and
• A minimum of seven days’ principal rent is owed.

Question 18

How can a Lease be Terminated?

Answer 18

Merger:

• The Tenant and Landlord become the same party.

Forfeiture:

• The Landlord permanently ends the lease for breach of covenant.
• If a Headlease is forfeit, all Subleases will end.

Surrender:

• The returning of the Lease to the Landlord by the Tenant, with the former’s consent, by Deed.

Break Clause:

• Either party may serve notice on the other to prematurely terminate a Fixed-Term Lease.

Notice to Quit:

• Either party may serve notice on the other to terminate a Periodic Lease.
• 6 Months’ notice for Annual Periods, a Full Term in all other cases.

Effluxion of Time:

• The Lease’s Term and the Tenant’s Security of Tenure (if applicable) conclude.

A Subtenant has the right to apply for Relief from Forfeiture, andt the Court can vest the Headlease in the Subtenant on such terms as it sees fit, but cannot grant a Lease for any longer than the origianl term.

Security of Tenure is a grace period allowing the Tenant to remain on the Premises while they either negotiate a renewal or find new accommodation.

Question 19

Is the Right of Forfeiture Implied into a Legal Lease?

Answer 19

No. Express provision is necessary.

Question 20

Is the Right of Forfeiture be Implied into an Equitable Lease?

Answer 20

Yes, particularly as a consequence of rent default.

Question 21

How is Forfeiture exercised?

Answer 21

• Court Order; or
• Peaceable Re-Entry, which entails changing the locks and posting an unequivocal notice of forfeiture.

If the Property is at all residential, a Court Order is mandatory.

Question 22

When will a Landlord be deemed to have Waived the Right to Forfeiture?

Answer 22

• They are aware the right is exercisable; and
• They perform an unequivocal act, intentionally or otherwise, that recognises the Lease’s continued existence.

If the breach is continuous, Waiver only lasts until the day after the breach persists. If the breach is intermittent, which rent default is considered as , Waiver is permanent.

Question 23

In case of a Rent Default, what must a Landlord do ensure the Right to Forfeiture is not waived?

Answer 23

Issue a formal demand for the exact amount due the day it becomes payable, at the Premises, between sunrise and sunset unless:

• The Lease expressly waives this requirement; or
• 6 Months’ rent is in arrears and there are insufficient distrainable goods on the Premises to satisfy it.

Question 24

When will the Court grant an Application from a Residential Tenant for Relief from Forfeiture for Rent Default?

Answer 24

Before the Order:

• The Tenant pays into Court all arrears and costs pre-trial, staying all further proceedings.

During Trial or After the Order:

• The Tenant pays into Court all arrears and costs; and
• The Property has not yet been let to a new Tenant.

An Application must be made within 6 Months of Re-Entry.

Question 25

When will the Court grant an Application from a Commercial Tenant for Relief from Forfeiture for Rent Default?

Answer 25

• The rent and Landlord’s costs are paid; and
• It is just and equitable to grant relief.

Question 26

In case of a Non-Rent Breach, what must a Landlord do ensure the Right to Forfeiture is not waived?

Answer 26

Issue a Notice, specifying:

• The Covenant breached;
• If remediable, what must be done and by when;
• If not remediable, sufficient time for the Tenant to consider its position; and
• How much compensation is payable, if necessary.

For remediable breaches, the standard is three months. For non-remediable breaches, it is two weeks.