LEASES

Question 1

What is a lease?

Answer 1

• when one person with an estate in land (the Landlord) grants the temporary right to another person (the Tenant) to use and enjoy that land exclusively.
• The right may be granted for weeks, months or years. It may be in a residential or commercial context.
• proprietary right in the land (s1(1)(b) LPA 1925)
• terms of years absolute (s205(1)(xxvii) LPA 1925)

Question 2

Who is the lessee and who is the lessor?

Answer 2

The lessee = tenant

The lessor = landlord

Question 3

How is a licence different to a lease?

Answer 3

• A lease is proprietary right to land whereas a license is personal permission to be on someone’s land.
• A lease is capable of being enforced against third parties whereas a license can only be enforced against the grantor.
• With a lease, a tenant can sue a third party for nuisance or trespass whereas a license is not entitled to sue a third party for nuisance or trespass.
• A lease can also confer the right of security of tenure whereas a license has no security of tenure.
• A lease is enforceable in rem whereas a license is enforceable in personam.
• Tenants under leases receive various statutory protection whereas there is no statutory protection for licensees.

Question 4

What are the requirements for a lease to exist?

Answer 4

1. Certainty of Term (Street v Mountford)
2. Exclusive possession (Street v Mountford)
3. Correct formalities

Question 5

Is payment of rent essential for a lease?

Answer 5

No, it is talked about in Street v Mountford but s205(1)(xxvii) LPA 1925 states that it is not essential

Question 6

What does certainty of term mean?

Answer 6

• Certainty of term means that the tenancy must be granted for a certain duration.
• This can be shown in two ways, either by afixed term, or aperiodic term.

Question 7

When does a fixed term exist?

Answer 7

• A ‘fixed term’ exists where the maximum duration of the arrangement is known from the outset.

Question 8

If a fixed term lease is created, can one of the parties end the lease earlier?

Answer 8

No, neither party can unilaterally bring the lease to an end earlier unless there is a break clause present in the lease enabling them to do so.

Question 9

When does a periodic tenancy exist?

Answer 9

• A periodic tenancy is technically a lease for one period.
• It goes on extending itself automatically until either landlord or tenant give notice to terminate the tenancy.
• This is a notice to quit.
• The term of the periodic tenancy depends on the period by reference to which the rent is calculated, rather than the intervals at which it is payable (if the tenant agrees to pay £10,000 a year by four quarterly payments, the tenancy is a yearly tenancy not a quarterly tenancy because the rent is calculated annually.)

Question 10

How can a periodic term be created?

Answer 10

Expressly or impliedly

• An express periodic tenancy is where there is a written agreement documenting the agreement.
• An implied periodic tenancy is where there is nothing set out in writing, but the certain term arises by looking objectively at all relevant circumstances including payment and acceptance of rent on a periodic basis.

Question 11

What does exclusive possession mean?

Answer 11

• Exclusive possession means the right to exclude all others from the property, including the landlord.

Question 12

How will retention of a key impact exclusive possession?

Answer 12

• The fact that a landlord retains a key to the premises may make it appear as if the occupant does not have exclusive possession. However, it is the purpose for which the key is retained that matters.
• For example, if the key is used only in an emergency or by arrangement, then exclusive possession may still exist.
• If the access is restricted eg ‘to carry out repairs’ then this is seen as more of an acknowledgement of exclusive possession by the landlord, rather than something that will defeat it (Street v Mountford)
• InAslan v Murphy, the court held ‘there is no magic in the retention of a key’ ….. it will not determine the nature of arrangement either way.

Question 13

How will the landlord providing services impact exclusive possession?

Answer 13

• If the landlord provides attendance or services there is a licence not a tenancy (Marchant v Charters)
• Services would include cleaning, changing linen etc.
• The occupier is simply a lodger provided the services are actually carried out and a lodger will never enjoy exclusive possession of the premises (could be a sham?)

Question 14

How will a sharing clause impact exclusive possession?

Answer 14

• If a landlord reserves the right to share the property with the occupiers or reserves the right to introduce others to share, that may mean that there is no exclusive possession, as the occupier cannot exclude whoever the landlord is able to introduce.
• All of the circumstances must be looked at to see whether this is a genuine clause or simply a sham to defeat exclusive possession

Question 15

What should be considered when determining if a sharing clause is genuine or a sham?

Answer 15

• The size and nature of the accommodation– would it be realistic to introduce others into the accommodation given its size?
• Therelationshipbetween the occupiers (if there is more than one) – would it be appropriate to introduce another to share given the relationship between the occupiers?
• Thewording of the clause(i.e. how widely it is drafted, as the wider it is drafted, the more likely it is a sham clause.)
• Whether the clause has ever beenexercised– if it has not been exercised then this may indicate it is a sham clause.

Question 16

In terms of business tenancies, what could impact exclusive possession?

Answer 16

• courts are more prepared to accept the reality of the label ‘licence’ than they are in the residential context as there tends to be moreequality in bargaining power, with commercial leases often negotiated and parties legally represented.
• look at degree of physical control of the tenants (if a high degree of control then no exclusive possession)
• look at the right to relocate (if landlord can require the tenant to move somewhere else = no exclusive possession)

Question 17

What are some factors that may defeat a lease (other than the essential characteristics needed)?

Answer 17

• Where there is no intention to create legal relations, it will make it a licence. Examples include a family arrangement, act of friendship or generosity. This presumption can be rebutted if there is a degree of formality/ rent is paid.
• Where there is a service occupancy. This type of occupancy only arises where there is an employer/employee relationship between the landowner and the occupier. Where the occupier is required to live in the premises for the better performance of his duties as an employee, there is no tenancy, even though a rent may be paid.

Question 18

What are the formalities needed to create a lease?

Answer 18

• will depend on the length of the term of the lease.
• The general rule is to create a legal lease, a deed must be used (s 52 LPA 1925).
• The requirements of a valid deed are set out ins1 LP(MP)A 1989.
• if the term of the lease is over 7 years, the lease must also be registered in accordance with the s27(2)(b)(i)LRA 2002. This is a compulsory registration requirement. If not done a legal leasehold estate will not have been created (LRA 2002, s 27 (1))
• In order to create a legal lease of 7 years or less, the parties must enter into a deed (s52 LPA 1925).
• Does not have to be registered
• They still take effect as legal leases and will be binding on a new freehold estate owner as an overriding interest (sch3 para 1 LRA 2002)
• for short leases (3 years or less) if certain conditions are met, no formal requirements needed.
• s 54(2) LPA 1925 the following three conditions:

1) The lease takes effect in possession (i.e. the tenant takes the lease immediately).
2) The lease is granted at ‘best rent’ (which has been interpreted as meaning ‘market rent’).
3) The lease is not subject to a fine or premium (meaning there is no upfront payment for the grant of the lease, which you could commonly expect to see with very long leases).

Question 19

Which types of arrangements are likely to fall into the short lease exception?

Answer 19

• short fixed term leases (3 yrs or less)
• express periodic tenancies
• implied periodic tenancies