Leases: essential requirements Flashcards
When is a lease created?
Where one person with an estate in land (landlord) grants the temporary right to another eperson (tenant) to use and enjoy that land exclusively
Can also be called a ‘leasehold’ or ‘tenancy’
Can be for weeks, months or years and in residential or commercial context
Can more than one leasehold estate be carved out of the freehold estate?
Yes, will be different parts (e.g. block of flats)
Is a lease a proprietary right?
Yes, known technically as a ‘term of years absolute’
Right to possess!
How is a licence different from a lease?
Licence simply confers a personal permission (personal right) to be on someone else’s land
Cf lease; a proprietary right - can be enforced against third parties
What is the available remedy and enforcement for leases?
- Remedies: a lease can be enforced in rem; by recovery of possession (would not have to settle for damages)
- Enforcement: capable of binding third parties
How do the enforcement rules differ between licences and leases?
- Lease: enforceable in rem, can be enforced against TPs, and a tenant can sue a TP for trespass or nuisance
- Licence: enforceable in personam, can only be enforced against grantor, cannot sue a TP for trespass or nuisance
When deciding if an agreement creates a lease or licence, what will the court look at?
The substance
As opposed to the label i.e. an agreement called a ‘licence’ will not automatically be one
What 3 things are required for a lease to exist and what is the effect of them not being present?
Street v Mountford
- Certainty of term
- Exclusive possession
- The correct formalities
If not present = is only a licence
L e a se
L = length is certain (certainty of term)
E = exclusive possession
A = appropriate method (correct formalities)
Is payment of rent essential for there to be a lease?
No
What is meant by exclusive possession?
The right to exclude all others from the property including the landlord
What does certainty of term mean and in what 2 ways can it be shown?
The tenancy must be granted for certain duration
- Fixed term - duration of arrangement known at outset e.g. 5 years
- Periodic term - technically a lease for one period e.g. weekly, monthly, quarterly etc. until either party gives notice to quit
Must a periodic term be created expressly?
No, can be either…
- Expressly - written agreement documenting the agreement
- Impliedly - nothing in writing, but certain term arises by looking objectively at all relevant circumstances inc payment and acceptance of rent on periodic pasis (may negate non-certain term)
Implied means
E.g. Prudential Assurance - piece of land sold to Greater London Council and leased back to seller to continue until land required by council for widening purposes - was not a lease because of uncertain period at outset, but land was held under a yearly periodic tenancy that arose by virtue of the tenant’s possession and payment of rent by reference to a year - so a periodic tenancy of X amount of time can be implied meaning there is technically certain term
How is the term of an implied periodic tenancy decided?
Determined by reference to which rent is calculated e.g. agreed tenant will pay £12k a year, it will be an annual periodif tenancy (even if paid on quarterly or monthly basis)
What is meant by exclusive possession?
The right to exclude all others from property including landlord
What is the difference between exclusive possession and exclusive occupation?
- Exclusive occupation = a person occupies land themselves without others
- Exclusive possession = multiple occupiers can have exclusive possession together
What 2 things will be looked at to determine whether an occupier has exclusive possession?
- The substance of agreement
- The reality of the situation
What happens if a clause has been inserted into the lease only to make what would otherwise appear to be a lease appear like a licence, what happens?
Making it appear as a licence is its only purpose
The clause will be thrown out as a sham
What 3 situations indicate that an occupier does not have exclusive possession?
- Landlord retains a key and has a right of access
- Landlord provides services
- There is a sharing clause
Also consider control over premises
All can be subject to a sham clause
Will the retention of a key always invalidate exclusive possession?
No - key can be retained/used only for emergencies and repair and occupier still has exclusive possession
I.e. it’s about how much access is restricted
What happens if the landlord provides services?
E.g. cleaning, changing linen etc.
Occupier is only a lodger (provided services actually carried out) who will never enjoy exclusive possession
Will a sharing clause - in which landlord reserves the right to share property with occupiers/to introduce others to share - mean there is no exclusive possession?
Maybe - but must be determined whether it is a genuine clause or a sham to defeat exclusive possession
Genuine = no exclusive possession
What circumstances are considered in determining whether the sharing clause is genuine or a sham?
Applies to other clauses too e.g. control
- Size and nature of accomodation - realistic to introduce others?
- Relationship between occupeirs - would it be appropriate to share given relationship between occupiers?
- Wording of clause - more widely means more likely to be a sham
- If clause has ever been exercised - if not = probably a sham
A G Securities - TDLR: sensible arrangement in a large flat where landlord can make sure someone always in occupation large flat with 4 bedrooms, all occupants did not know each other and signed separate agreements - landowner reserved right to introduce others to share the flat up to a maximum of 4 = court held this was a sensible arrangement to provide accomodation for shifting population of individuals who were genuinely prepreared to share flat = occupiers did not have exclusive possession
Antoniades - TLDR: a couple sharing a one bedroom flat and landord has a right to introduce others to share the occupation small attic flat with bedroom occupied by couple who had signed separate but identical agreements, contained a right for landlord to introduce others to share and to share premises himself and acknowledgements that agreements constituted a licence not a lease - court held it could not realistically have been contemplated that landlord would use it himself or introduce others = sham
Must a business also show it has a certain term and exclusive possession to establish it has a lease and not a licence?
Yes
This will reflect security of tenure!
But courts more willing to accept the reality of the ‘licence’ label due to more equal bargaining power
How does control relate to exclusive possesison?
The greater control another party has over premises, the less likely it is there will be exclusive possession
Esso Petroleum - degree of control exercised by Esso was inconsistent with exclusive right to possession of service station - could make alterations, install car wash and change layout of shop = degree of physical control over premises and conduct of business at service station significant
What is the effect of a clause which provides a right of the landlord to relocate/move tenant to alternative premises?
Will not be a lease
But must consider whether sham or not
Can two or more people who share occupation of premises still have exclusive possession if they cannot exclude each other?
Yes, if it can be shown they have a joint tenancy
Will there be a lease arrangement if occupiers together have the right to exclude all others (inc landowner)?
Prima facie yes - question becomes whether they have one single lease (joint tenancy) or several individual leases
Recall - where there is a joint tenancy, all co-owners deemed to constitute one single entity and own/lease the property as one collective entity
What must joint tenants hold as a singel entity?
The four unities: possession, interest, time and title
How will multiple occupiers have unity of possession?
If all are entitled to occupy whole premises; no one has exclusive use of any part
If not entitled to enter into each others rooms - e.g. lock and key - no unity of possession!
What if occupiers show they each have possession of a part of property?
I.e. do not have unity of possession
Possible they will have individual leases on their own part
How will multiple occupiers have unity of interest?
They have a leasehold interest for the same term under same conditions and are jointly liable for rent
Same conditions can be across two or more documents read together
What does it mean to be jointly liable for rent in a lease with multiple occupiers?
If one occupier left, the remaining occupier(s) would be liable for whole rent payment instead of a share of it
How will multiple occupiers have unity of time?
All occupiers’ interests must start at same time
How will multiple occupiers have unity of title?
All occupiers’ interests must derive from same document or from identical documents which are interdependent
Interdependent = one party would not sign if the other party hadn’t
What happens if it is found that occupants do not have all 4 unities?
They cannot have a joint tenancy
What happens if neither a joint tenancy nor several individual tenancies exists?
Occupants can only be individual licensees sharing with each other
What happens if co-owners sign separate documents?
If they are interdependent on each other and identical, there will be both unity of interest and unity of title
Consider the reality of the situations
E.g. Antoniadies - a couple living together
What will happen if the occupiers of a leasehold do not have the four unities? Will there be no leases at all?
They will not have a joint tenancy so cannot hold a lease together, but if they can individually show exclusive possession of part of the property they may have individual leases of their own part
What are the two situations in which an arrangement, despite having a certain term and exclusive possession, may still not be a lease?
- Where there is no intention to create legal relations
- Where there is a service occupancy
Will then potentially only be a licence
What might show there is a lack of intention to create legal relations and what is the effect of this?
Where there is a:
- Famiy arrangement; or
- Act of friendship or generosity
it can be presumed there is a lack of intention and the arrangement will simply be a licence
Will a family relationship between the parties mean there will always definitely not be an intention to create legal relations?
No - if there is a degree of formality and/or market rent is paid, this would be evidence of an intention to create legal relations
When will a service occupancy arise and what is the effect?
Where the occupier is required to live in premises for better performance of duties as an employee, there will be no tenancy
E.g. caretaker’s flat, gamekeeper’s cottage, domestic staff accom
If rent is paid for a service occupancy, will this create a tenancy?
No
Will a mere ‘perk of the job’ evidence a service occupancy (and so no lease)?
No - this will make a lease - the question is whether the employee is in occupation for better performance of their job
Royal Philanthropic - a teacher occupying a house near the school at which he taught claimed he had a lease which the court agreed - no service occupancy because occupation did not enable him to better perform duties but was simply a perk of job
What is used to create a legal lease?
Create, not transfer
A deed
Always for terms exceeding 3 years (see exception)
Do all leases need to be registered? What happens if they are not?
- Over 7 years = must be registered and if not no leasehold estate will have been created
- 7 years or under = does not need to be registered but will still take effect as legal lease and be an overriding interest on any new freehold estate owner
Both must be granted by deed
If the lease is registered (is over 7 years), what must also be registered?
The deed!
What is the exception to a lease granted by deed?
I.e. when is a deed not needed to create a lease?
A lease with a term of three years or less i.e. a parol lease
What are the three conditions to be a parol lease?
Three conditions met:
1. Lease takes effect in possession (tenant takes lease immediately)
2. Lease is granted at ‘best rent’ (market rent)
3. Lease is not subject to a fine or premium (no uprfront payment as would be in a normal long lease)
Need not be registered as under 7 years
P ar ol
P = possession taken immediately
Ar = at market rent
O = omitting a fine/premium
Will only short fixed term (3 years<) leases fall within short lease exception?
No, will include:
- Short fixed term leases with 3 years or less e.g. tenant rents flat for agreed fixed term of 2 years
But also:
- Express periodic tenancy where there is a tenancy agreement e.g. tenant rents flat on a rolling monthly basis paying agreed monthly rent with written agreement that does not need comply with any formalities
- Implied periodic tenancies where occupier in possession and paying rent at regular intervals e.g. tenant in occupation of premises paying agreed rent on monthly basis but this arrangement is not documented
Periodic tenancies only fall within ambit if each individual period of tenancy is for 3 years or less (likely to be the case)
Would a deed need to be used to transfer a lease that was not created by a deed?
Yes!
When will an equitable lease be created?
- Deliberately if parties choose to enter into a contract for lease
- Parties try to create a legal lease but fail (i.e. invalid deed, do not register)
Estate contract - grants equitable lease to land
Subject to equitable maxims e.g. if tenant does not have clean hands (in breach of arrangement) equitable lease will not be recognised
What is needed for the court to recognise the tenant as having an equitable lease on the same terms as the defective legal lease?
- Document complies with LPA 1989 s2 (in writing, contains all terms, signed by both parties)
- Remedy of specific performance is available
What happens when there is a conflict between common law and equity?
I.e. there is both an implied legal lease and equitable lease
Equity will prevail
Walsh v Lonsdale - on the facts there could be an implied annual periodic tenancy and an equitable seven year lease - court held there was only one lease; the equitable lease on terms of the agreement for lease (no deed had been executed as required but had validly agreed a 7 year lease in return for annual payment of rent
How does enforcement work for
1. Registered lease
2. Unregistered lease
3. Equitable lease
- Registered lease is enforceable
- Unregistered lease is an overriding interest
- Equitable lease should be protected by notice on charges register - but will be an overriding interest if not registered and owner in actual occupation
