Leasehold Cases

Nature of a leaseO A lease is both a contract and an estate.O (i)  A lease is “a contract for the exclusive

possession and profit of land for some determinate period” (per Lord Templeman in Prudential Assurance v London Residuary Body [1992] 2 AC 286, [1992] 3 WLR 279; [1992] 3 All ER 504 HL

O (ii)  The estate created by the contract is called a “term”.

Law of Property Act 1925

O Reminder:  s.1 (1)  The only estates in land which are capable of subsisting or of being conveyed or created at law are—O (a) An estate in fee simple absolute in possession;O (b) A term of years absolute.

O Reminder:  s.205 (ix) “Land” includes land of any tenure . . .O NB (i)  a lease cannot be granted in perpetuityO       (ii)  LPA s.149(6):  a lease to someone “for life”

is converted into a term of 90 years determinable on the lessee’s death.

Creation of a leasehold interest - fomalities

O“parol” leases are effective to grant a term of three years or less

Ootherwise, leases must be by deed.

Oa “tenancy agreement” that is not a deed is construed as an agreement to create a lease. 

Land Registration Act 2002

O A term of years absolute is registrable as a separate title, provided that it is a term of more than seven years (or where an existing lease is sold, if the lease has more than seven years to run).

O Grades of leasehold title:O leasehold title absoluteO good leaseholdO leasehold possessory

Leasehold/Licence Distinction

OA lease creates an estate in land as well as personal rights between the lessor and lessee;  a licence createsonly personal rights between the licensor and the licensee.

OA licence confers a right on the licensee to do acts which would otherwise be unlawful.

Types of LicenceO Bare licence

O A licence not supported by a contractO e.g. going into a shopO A bare licence can be revoked at any time on

reasonable notice

O Contractual licenceO A licence granted under the terms of a contract

which restricts the licensor’s right to revoke itO e.g. going to the cinema, staying in a hotel

Types of Licence cont

OLicence coupled with an interest

O A licence coupled with a recognised interest in property

O e.g. a right to enter on another’s land to catch fish.

O A licence coupled with an interest is irrevocable.

The distinction between a lease and a licence to occupy

O In residential property, this is the distinction between a tenant and a lodger.

O General principle:  a person who has exclusive possession will be a tenant.

O Street v Mountford (1985)O AG Securities v Vaughan (1990)O Aslan v Murphy (1990)

Essential Requirements for a Lease

OStreet –v- Mountford [1985] A.C. 809

O “to constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of apremium or periodic payments”

CertaintyO A term which is certain:

O Certainty of commencementO Certainty of duration

O Lace –v- Chantler (1944) “for the duration of the war”O lease for the duration of the second world war was held void as

being of uncertain maximum duration. 

Parliament has pushed for certainty of duration in leases – Validation of War Time Leases Act 1944 was enacted to that converted all war time leases to a term of 10 years with a proviso that either landlord or tenant could terminate the lease once the war ended by giving a month’s notice. 

Certainty - cont - Prudential Assurance Co Ltd –v- London Residuary Body (1992) 

O An agreement made in 1930 provided that ‘the tenancy shall continue until .. the land is required by the Council for the purposes of the widening of Walworth Road.’ The landlords claimed that this purported lease was void because of the uncertainty of its term. 

O The House of Lords, with Lord Templeman giving the leading judgement, upheld the first instance decision that the lease was void.

Fixed Periodic and Tenancies - Javad –v- Mohammed Aqil (1991)

The defendant had paid a retainer and was in possession for a three month period, but the parties failed to agree terms while negotiating for a tenancy. It was held that the only sensible inference was a tenancy at will, there being no conclusion to the intention to create a legal relationship

Fixed and Periodic Tenancies cont

OFixed and Periodic Tenancies

O Prudential Assurance Co. Ltd –v- London Residuary Body

O A periodic tenancy is a lease for a period which goes on renewing itself automatically.

Special CasesO Leases for life or until marriage are

converted into 90 year fixed terms, (s.149 LPA 1925)

O Perpetually renewable leases are converted into 2,000 year fixed terms (s.145 LPA 1922)

Payment of Rent - What is rent? Ashburn Anstalt –v- Arnold (1989)

O Establishes that in English law rent is not required for the creation of a tenancy

O A lease can still arise where there is exclusive possession for a term but without rent.

Exclusive Possession - Street v Mountford 1985

O The issue in this case was whether the tenant of a domestic property had a lease or merely a licence. If he had a lease, he was protected from eviction under the Rent Acts. Needless to say, the landlord would have preferred that his occupancy was seen as a licence, as this protection from eviction would not apply. Lord Templeman defined a lease simply as 'exclusive possession for a time at a rent'. The earlier considerations of intention and form were essentially set aside. Accordingly, the tenant had a lease.

O Lord Templeman also pointed out something that should have been obvious: apart from a few exceptional cases, unless a person is a leasee, he is a lodger. There are no intermediate categories of occupancy. 

O The test is therefore one of substance not form.

Lodgers - Marchant v Charters

O It was held that the grantee was not a lodger but the occupier of a service flat (and therefore under a licence only), since his landlady performed duties such as daily cleaning and changing of bed linen. 

Owner's Retention of Keys - Aslan –v- Murphy (1990)

O the occupier of a basement room entitled only to occupy with a one and a half hour gap in the morning to noon and doing so in common with "the Licensor and such other Licensees or invitees as the Licensor may permit from time to time" and on condition that "the Licensor is not willing to grant the Licensee exclusive possession". It was held on appeal that the licensee was a tenant and that the sharing provision was unrealistic and a patent pretence.

Acts of generosity or friendship Rhodes –v- Dalby 1971

O FACTS: Two men were long-standing friends. One owned a bungalow, but was going abroad for two years. The two men signed a document described as ‘a gentleman’s  agreement’ not intended to create legal relations. Under that agreement the friend  staying in this country took possession of the bungalow during the two year absence.He agreed to pay a quite high ‘rent’ for being able to live in the bungalow.  

O HELD: The arrangement was a licence.

Service occupancy  - Crane –v- Morris 1965

O FACTS: The defendant was employed as  a  farm worker and granted exclusive possession of a cottage on the farm upon condition that he remained in the employ of the plaintiff. The defendant did not pay rent. When the defendant left the plaintiff’s employment and took up work in a factory, the plaintiff brought an action to regain possession of the premises.  

O HELD: The defendant was a mere licensee, not a service tenant

Essential Requirements of a Lease

OThe flat sharing cases:

O Antoniades –v- Villiers (1990)O Co-habiting couple signed separate identical agreements on

the same day allowing them to share a small flat. An “air of total unreality” about the documents being read as separate and individual licences. There was a lease arrangement.

O AG Securities –v- Vaughan   (1990)O Four occupiers signed separate agreements on different

dates for a different period and at a different rent. There was a licence arrangement.

Legal v Equitable Leases

O Formalities in creating a legal lease:

O Up to three years – created orally;O Over three years and up to seven years – deed,

no registration;O Over seven years – deed and completion by

registration

O Agreements for LeaseO Enforceable in equity

Equitable Leases - Walsh v Lonsdale 1882

O FACTS: A landlord and tenant had entered into a contract for a seven year lease and the tenant  had gone into possession, but the parties had forgotten to execute the formal deed needed for a valid legal lease. The rent clause in the contract provided that under the lease the rent should be per year payable in advance at the beginning of each year (the precise figure would depend upon the number of looms run by the tenant for his business). Despite the absence of a deed granting a legal lease, the landlord demanded the rent in advance in  accordance with the  contractual term. Indeed, he attempted to recover the rent due by exercising his right of distress. The tenant claimed that as there was no deed and therefore no proper lease, any rent  should be payable in arrear. He therefore claimed an injunction against the action for distress. 

O HELD: The landlord could claim rent in advance. The contract had created an equitable lease enforceable between the parties. The terms of this  lease would correspond to the terms of the contract.  

Legal v Equitable Leases 2

O Equitable Leases;

O Walsh –v- Lonsdale

O Equitable leases of unregistered land are capable of registration as C(iv) Land Charges

O Equitable leases of registered land are registrable as notices, (if not registered might be treated as overriding interests under Sched.3 para. 2 LRA 2002 if in actual occupation.

Determination of leasesO by expiryO by notice to quit (where permitted by the

lease, may be given by either the landlord or the tenant)

O by forfeitureO by surrender (but requires consent of lessor)O by merger into freeholdO by disclaimer (on insolvency of tenant)