Leases-essential requirements

Question 1

What is a lease?

Answer 1

A lease is a recognised proprietary right in the land LPA 1925, s1(1)(b)), known technically as a ‘term of years absolute’.

Question 2

What are the main differences between a lease and a licence?

Answer 2

-Lease is a proprietary right, licence is a personal right

-Lease is capable of being enforced against third parties, licence only against the grantor

-Security of tenure with leases, not with licences

-Statutory protection for leases, not for licences

Question 3

What is the approach set out in Street v Mountford (1985) when considering whether an agreement is a lease or a licence?

Answer 3

To consider the substance of the agreement, rather than the label. Just because the agreement is labelled as a lease does not mean it is one.

Question 4

What are the three essential requirements of a lease?

Answer 4

1. Certainty of term
2. Exclusive possession
3. Correct formalities

Question 5

Is payment of rent an essential requirement of a lease?

Answer 5

Payment of rent is not essential as confirmed in Ashburn Anstalt v Arnold (1989).

Question 6

What does certainty of term mean and how can it be evidenced?

Answer 6

It means there must be a certain duration to the agreement-it must be clear when the arrangement will end.

It can be evidenced by a fixed term or periodic term.

Question 7

When does a fixed term exist?

Answer 7

This exists where the maximum duration of the arrangement is known from the outset.

Once created, neither party can unilaterally bring the lease to an end earlier unless there is a break clause.

Question 8

What is a periodic term and how may one be created?

Answer 8

This is technically a lease for one period. In practice, this is generally weekly, monthly, quarterly or yearly.

A periodic term may be created expressly or impliedly.

Question 9

What is an express periodic tenancy?

Answer 9

This is where there is a written agreement documenting the agreement.

Question 10

What is an implied periodic tenancy?

Answer 10

This 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

How is the term of a periodic tenancy calculated?

Answer 11

The term of the period tenancy depends upon the period by reference to which the rent is calculated, rather than the intervals at which it is payable.

If a tenant agrees to pay £10,000 a year by four quarterly payments, the tenancy is a yearly tenancy because the rent is calculated annually.

Question 12

What are the three factors that may defeat exclusive possession?

Answer 12

1. Retention of a key
2. Landlord provides services
3. Sharing clauses

Question 13

Does the retention of a key by the landlord defeat exclusive possession?

Answer 13

It is the purpose for which the key is retained that matters. If the key is only used in an emergency or by arrangement, then exclusive possession may still exist.

The Courts will look at whether any right of access the landlord has is restricted or unrestricted.

Question 14

If the landlord provides attendance/services, does this defeat exclusive possession?

Answer 14

Yes, there will be a licence not a tenancy.

Services would include cleaning, changing linen etc. The occupier is simply a lodger and a lodger will never enjoy exclusive possession.

Question 15

Will a sharing clause defeat exclusive possession?

Answer 15

All of the circumstances must be looked at to see whether the clause is genuine or simply a sham to defeat exclusive possession.

Question 16

Describe the case of A G Securities v Vaughan (1990) in relation to sharing clauses.

Answer 16

FACTS: the occupants lived in a large flat with four bedrooms who at first did not know each other. They all signed separate agreements setting out the terms of their occupancy and the landowner reserved a right to introduce others to share the flat up to a maximum of four people.

HELD: the sharing clause was a sensible and realistic one to provide accommodation for a shifting population of individuals who were genuinely prepared to share the flat with others therefore the occupiers did not have exclusive possession of the flat.

Question 17

Describe the case of Antoniades v Villiers (1990) in relation to sharing clauses.

Answer 17

FACTS: the accommodation comprised a small attic flat. The occupiers, a couple, signed separate agreements and asked for a double bed to be provided. The agreements reserved a right for the landowner to introduce others to share and himself to share.
They also contained acknowledgments that the occupants did not have exclusive possession and that the agreements constituted a licence.

HELD: it could not realistically have been contemplated that the landlord would either himself use or occupy any part of the flat or put some other person in to share accommodation specifically adapted for a couple. The clause was a sham.

Question 18

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

Answer 18

Size and nature of the accommodation-would it be realistic to introduce others?

Relationship between the occupiers-would it be appropriate to introduce others?

Wording of the clause-the wider it is drafted, the more likely it is a sham.

Whether the clause has ever been exercised-if not, it is likely a sham clause.

Question 19

Will the Courts tend to accept the label of ‘licence’ in business tenancies?

Answer 19

Yes, as there tends to be more equality in bargaining power in commercial leases.

Question 20

What four unities must be shown to demonstrate a joint tenancy?

Answer 20

Unity of possession-no one has exclusive use of any part

Unity of title-derive interest from same document/interdependent documents

Unity of interest-must hold interest for same term

Unity of time-interests must start at the same time

Question 21

If all four unities do not exist, what is the effect?

Answer 21

If all four unities do not exist, a joint tenancy cannot exist.

If neither a joint tenancy nor an individual tenancy exists then the occupants can only be individual licensees sharing with each other.

Question 22

What factors may defeat an agreement from being a lease?

Answer 22

-No intention to create legal relations

-Service occupancy

Question 22

Is an intention to create legal relations presumed where there is a family arrangement, act or friendship or generosity?

Answer 22

It can be presumed that there is a lack of such intention.

A family relationship does not automatically mean there is no intention to create legal relations.

If there is a degree of formality to the agreement and/or a market rent is paid then this would evidence an intention to create legal relations.

Question 23

What is a service occupancy and provide an example?

Answer 23

This will exist where there is an employer/employee relationship between the parties and 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.

Examples include a caretaker’s flat, gamekeeper’s cottage and domestic staff accommodation.

Question 24

What is the key question to consider when determining whether an employee’s service occupancy will defeat a lease?

Answer 24

The key question to consider is whether the employee is in occupation for ‘the better performance of their job role’.

Question 25

What are the formalities for leases over 7 years?

Answer 25

To create a legal lease, a deed must be used.

The requirements of a valid deed are set out in LP(MP)A 1989, s1.

The lease must also be registered-this is a compulsory registration requirement. If not done, a legal leasehold estate will not have been created (LRA 2002, s27(1)).

Question 26

What are the formalities for leases of 7 years or less?

Answer 26

The lease must be created by deed but does not need to be registered. Such leases still take effect as legal leases and will be binding on a new freehold estate owner as an overriding interest (LRA 2002, sched 3 para 1).

Question 27

What conditions need to be satisfied for the short lease exception?

Answer 27

LPA 1925, s54(2) states that a lease with a term of 3 years or less need not be created by deed provided the following three conditions are all met:

1. The lease takes effect in possession
2. The lease is granted at market rent
3. The lease is not subject to a fine or premium

Question 28

When will an equitable lease be recognised on the same terms as a defective legal lease?

Answer 28

-There is a document that complies with LP(MP)A 1989, s2; and

-The remedy of specific performance is available