A lease is an estate in the land which, therefore, gives a proprietary interest in the land.
A licence which only gives a personal right in the land.
Although the fact that licences only create personal interest, it has proved controverisal in the law today.
Keep in mind 2 vital consequences of the right being a lease and not licence:
1. It binds third parties. For example, purchaser of freehold.
2. The holder of a lease has security of tenure created by statute but a licence has not.
Landlord and Tenant: The parties to a lease are the landlord and the tenant. However, they are legally the lessor (landlord) and lessee (tenant)
THE ESSENTIAL CHARACTERISTIC OF A LEASE
Characteristics of a lease arise from the case, Street v Mountford,
X was given an exclusive possession of furnished rooms at a rent. She had signed a statement at the end of the agreement that this was not intended to give rise to a tenancy under the Rent Acts. It was held that she did have a tenancy.
It was held that: A lease must have 3 characteristics
1. exclusive possession
2. for a fixed or periodic term
3. at a rent
If so, there will be a tenancy, unless there are exceptional circumstances which make it a licence.
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The fact that the agreement is described as a licence does not prevent it from being a lease of the above characteristics are present. The only intention of the parties which relevent is the intention to grant exclusive possession.
In the case Antoniades v Villier,
It happened that a couple entered into separate but identical agreements under which they were given the right to occupy rooms and each had separate responsibility for payment of half the rent. The agreement provided that they were to use the rooms either in common with the owner or with other licensees permitted by him.
Despite the attempt to make this look like two separate licence agreecement, it was in fact a lease. A vital point here was that they had the choice of either 2 single beds or one double bed. They chose a double bed and so clearly they intended to occupy the rooms jointly.
In the meantime, in Aslan v Murphy,
A 'licence agreement' was held to be a lease. A key influence behind the decision was the nature of the accommodation. As a basement room 4ft3'' by 12ft6'', the ability of the licensor to introduce other to share with the occupant was clearly not operational.
Yet, contrast the two cases, Antoniades v Villier and Aslan v Murphy to the case AG Security v Vaughan,Where in AG Security,
A clause stating that a maximum of 3 other persons could be introduced to share the property with the licensee, was held to be real and reflect the reality of the arrangement. The court was influenced by the fact that:
1. Each occupant signed an agreement, which incorporated a clause that a maximum of 3 other people could be introduced to share house with them. This was realistic clause in relation to the shared occupation of four-bedroomed house.
2. This clause was actually exercised, indicating that it was not a mere pretence.
3. The occupants were strangers who arrived at the property willing, presumable, to share with other persons they did not know, unlike in Antoniades v Viller.
It is also worthwhile to consider whether the circumstances show that there was no intention to create the relationship of landlord and tenant. Heslop v Burns
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In Bruton v London,
A charitable trust held a licence from Lambeth Council to use a block of flats for the purpose of providing short term accommodation for the homeless. The trust then gave a licence to Mr Bruton, a homeless person to occupy a flat in return for weekly 'licence' fee. The HL felt that as Mr Bruton enjoyed exclusive possession for the term at a rent, in the absence of any exceptional circumstances, a lease had been created in his favour.
According to Lord Hoffmann, 'lease' and 'tenancy' are term used to describe a contractual relationship between parties who are landlord and tenant. Whilst, a lease will also often create a proprietary interest that is binding upon third parties, known as 'terms of years absolute', it was not as essential element of a contractual (non-proprietary) tenancy. To make it binding upon a third party, the original grantor would need to have an estate out of which to grant it.
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The rule that a lease must be form a term certain is illustrated by Prudential Assurance v London Residuary Body: lease granted until a road required for road widening invalid.
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Leases are classified by the length of time they last for:
1. Leases are for a fixed term
2. Periodic tenancies
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Tenancy at will: The tenant, with the owner's consent, occupies land at the will of the owner, who, therefore, may terminate it at any time. The tenant has no security of tenure and is really in no better position than a licensee except that as a tenant there is a right to exclusive possession.
Tenant at sufferance: The tenant, after the expiry of the lease, continues in possession without the consent of the landlord. A tenant at sufferance has no real tenancy and cannot even sue another for trespass.
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It is also vital to remember periodic tenancies: They arise from payment of rent at period intervals.
There are 2 types(Note that if they are not more than 3 yrs, could be legal):
1. Express periodic tenancies- where a tenancy is granted but the precise length of it is not declare.
2. Implied periodic tenancies.
EXAMPLE:
Jacey grants by written agreement to let flat to Casper. The agreement is signed by Casper but not by Jacey. However, Casper goes into possession and pays rent monthly.
This is not a legal lease as it is not by deed nor it us a valid equitable lease as it does not satisfy the requirements of s2 of LP(MP)A 19989.
Casper may claim a monthly periodic tenancy based on payment of rent.
Another example of a periodic tenancy is where there is no agreement at all and the 'tenant' is just allowed into possession and then pays rent at regular intervals. The payment of rent converts what is just a tenancy at will into a periodic tenancy.
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TYPES OF LEASES
1. Legal leases- A lease will be legal if created by deed, but there is an important exception:
s54(2) LPA 1925,
A lease not exceeding 3 years can be legal without any formalities (even oral) if:
i. in possession
ii. best rent- commercial rent
iii. no fine- no premium
2. Equitable leases- A lease can be equitable under the principle in Walsh v Lonsdale as an agreement for a lease but it must satisfy the three requirements fir a valid agreement set out in s2 LP(MP)A 1989.In Walsh v Lonsdale,
A lease was granted by not by deed. Thus it was only equitable- an agreement for a lease can be enforced by equity on the bases of the maxim that 'equity looks on that as done which ought to be done.' Eg, if a person has agreed to grant a lease then he ought to do so and, as far as possible, equity will assume that he has done so. An agreement for a lease can create a valid equitable lease.
WHEN TRYING TO APPROACH TO LEASES QUESTIONS, TRY THIS:
LEASE----- Less than 3 yrs, it can be legal providing s54(2)LPA 1925
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More than 3 years, depend if they have deed.
If there is a deed--- then it is legal.
If there is no deed--- can be equitable providing s2 LP(MP)A1989
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If tenant pays the rent regularly, he can have a periodic tenancy, which is legal and is likely to be overriding if less then 7 years.
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COMPARISON BETWEEN LEGAL AND EQUITABLE LEASES
LEGAL LEASES:
1. Created by deed except for leases not exceeding for 3 years
2. Not granted at the discretion of courts
3. Tenant under legal leases can claim implied easements under s62(1) LPA 1925
EQUITABLE LEASES:
1. Created by agreement which stated by s54(2)LP(MP)A1989
2. Granted by the discretion of court- equitable remedies are discretionary
3. Tenant under an equitable lease cannot claim for an easements- equitable lease is not a conveyance.
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In addition, there are different rules on whether legal and equitable leases can bind third parties.
LEASES AND THIR PARTIES
Summary: Registered and Unregistered Land
REGISTERED LAND:
1. Legal leases for over 7 years are registrable dispositions.
2. Legal leases for less than 7 years are overriding interests.
3. Equitable leases should be rejected as estate contracts but, if they are not and if the leaseholder is in occupation, they may have an overriding interests under Sch3 Para 2 LRA 2002.
UNREGISTERED LAND:
1. Legal leases are binding on all third parties
2. Equitable leases need to be protected on the register of land charges as estate contracts: Class C(iv)
Tips:
i. What formalities are needed- vital length is not exceeding 3 years.
ii. If the lease is legal, does it need to subsequently registered? Vital length is not exceeding 7 years.
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PARTIES TO A LEASE
Sale of freehold reversion
Lessor 1......................................................................................................... Lessor 2
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| Assignment of lease
Lessee 1...................................................................................................... Lessee 2
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Sub-lessee
Definition:
Lessor- grantor of the lease
Lessee- grantee of the lease
Headlease- lease granted by the lessor to the lessee as distinct from a sub-lease.
Freehold reversion- the rights retained by the lessor on the grant of a lease.
Assignment- dispossition of the lessee's interest to the assignee who then takes over the assignor's interest in the land.
Underlease/ sub-lease- creation of a subsidiary estate out of the lessee's estate.
Tips:
When dealing with leases problem, we must ask 2 questions:
1. Is the lease legal or equitable?
2. What date was granted? If it was after 1/1/1996, the answer will be different from the one if it was before 1/1/1996 as Landlord and Tenant (Covenants) Act 1995 apples.
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ASSIGNMENT OF LEASES
S19(1) Landlord and Tenant Act 1927,
The landlord must not withhold consent unreasonably.
In the case International Drilling Fluids Ltd v Louisville
It was held that the landlord is entitled to be protected from having the premises used or occupied in an undesirable way by an undesirable asignee (or tenant), but consent to an assignment cannot be refused on grounds which have nothing to do with the relationship of landlord and tenant. So, personal dislike would not be enough.
s1(3) and (6) Landlord and Tenant Act 1988,
s1(3): If the tenant asks for consent in writing, the landlord must give or refuse consent in writing and must do this in a reasonable time.
s1(6): it is for the landlord to prove that:
i. a refusal of consent was reasonable
ii. consent was given or withheld in a reasonable time
iii. if conditions were imposed, that they were reasonable.
Examples of where a refusal of consent would be reasonable:
1. Where the landlord reasonable believes that a proposed assignment would lead to a breach of covenant in the lease.
2. The assignee tenant's references were unsatisfactory.
3. The financial standing of the assignee is unsatisfactory.
In Kened Ltd and Den Norske Bank plc v Connie Investments Ltd, Millett Lord Justice said that the essential question is: Has it been shown that no reasonable landlord would have withheld consent?
* Note that this point in relation to leases granted on or after 1.1.1996.
s19(1A), Landlord and Tenant Act 1927, (added by s22, Landlord and Tenant (Covenants) Act 1995)
Landlord and tenant of non-residential lease may agree in the lease what circumstances will justify the landlord in withholding consent.
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COVENANTS IN LEASES
Distinguish between:
i. Express covenants- actually contained in the lease
ii. Implied covenants- implied by law
Tips: Typical examples of covenants in an exam question are: repairing, payment of rent, that the tenant will only use the premises for certain purposes. (Normally express covenants)
Implied covenants are implied in the lease unless excluded- good ones to remember are:
1. Tenant's covenant to repair: If the premises are in disrepair at the start of the lease then if the tenant covenants to 'keep them in repair' this means that he must put them in repair at his expenses. Payne v Haine
2. Landlord's covenant for quiet enjoyment: For example that the tenant will not be disturbed by third-party rights and acts of the landlord which disturb possession, such as burst water pipes causing water to flow into the premises. If this covenants is broken, there could also be liability of s1(3) of Protection from Eviction Act 1977- unlawful harrassment.
Noise: Kekewich LJ in Jenkins v Jackson, who observed that this covenant does not mean 'undisturbed by noise'. Mention judgement in Southwark LBC v Mills, where the covenant was not broken by failure of the landlord to provide soundproofing in flats.
3. Landlord's covenants not to derogate from his grant: For example, not frustrate the purposes for which the premises were let such as interfere with a right to light. The covenant does not prevent the landlord setting up a competing business. Port v Griffith, (apply if the premises were to be let for a highly specialized purpose).
4. Tenant's covenant not to commit waste: Tenant must take proper care of the place. Denning LJ in Warren v Keen
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LIABILITY OF THE ORIGINAL LANDLORD AND TENANT ON THE COVENANTS
The original landlord and tenant are of course liable on the covenants while they are the actual landlord and tenant. When the freehold and the leasehold are assigned they may continue to be liable. This depends on whether the Landlord and Tenant (Covenants) Act 1995 applies. The Act applies to all leases granted on or after 1.1.1996 which by s1(1) are referred to as 'new tenancies'. Pre-1.1.1996 tenancies are referred to as 'other tenancies'
Note that by s28(1) a 'new tenancy' includes an agreement for a tenancy. For example, an equitable lease.
If the legal lease was granted before 1.1.1996, both landlord and tenant remain liable on the covenants for the whole term of the lease even if they are no longer parties. For example, the tenant has assigned the lease and the landlord has sold the freehold reversion. But note s.17 Landlord and Tenants (Covenants) Act 1995.
If the lease was granted on after 1.1.1996, then the Landlord and Tenant (Covenants) Act 1995 applies to legal and equitable leases.
s5 L and T(C)A1995,
The tenant on assigning the lease is released from his covenants and ceases to entitled to the benefit of the landlord covenants. However, the landlord may, as condition of agreeing to the assignment, require the tenant to enter into an authorized guarantee agreement (AGA) (s16) guaranteeing that the incoming tenant will perform the covenants.
EXAMPLE:
When the landlord gives consent to the assignment from T1 to T2, he can require T1 to enter an AGA under which T1 guarantees T2's liabilities under the lease. When T2 assigns to T3, the landlord may require T2 to enter into an AGA, but when the assignment is complete, T1's liability ends.
s6 L and T(C)A 1995
The landlord may, on spelling the freehold reversion, be released from liability on his covenants. The procedure is set out in s8.
Note: The date for deciding if the Landlord and Tenant (Covenants) Act 1995 applies is the date of assignment of the lease. It is not. It is the date when the lease was originally granted.
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LIABILITY OF THE ASSIGNEE LANDLORD AND TENANT ON THE COVENANTS
Once again, it is necessary to distinguish between pre-1.1.1996 and post-1.1.1996 leases:
Landlord 1............................................................................................ Landlord 2
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Tenant.................................................................................................. Tenant 2
PRE-1.1.1996
In this situation, the distinction between legal and equitable leases is important as covenants only run in legal leases.
Tenant 2 is liable on the covenants, provided that 2 tests are satisfied:
1. There is 'privity of estate' between the landlord and the tenant. This originally meant the parties holding the legal estate created by the original lease. For example, the original landlord and tenant. However, this principle has now been extended to assignee tenants (by common law) and assignee landlords (s.141 LPA 1925)
2. The covenants 'touch and concern the land' (Spencer's Case). For example, covenants to pay the rent, user covenants, but not a covenant giving the tenant the right to purchase the freehold nor personal covenants.
In Thomas v Hayward,
The landlord of a public house covenanted that he would not open another 'beer or spirit house' within half a mile of the premises. This did not bind an assignee tenant as it did not refer to anything to be done or not done on the premises.
Landlord 2 is liable for T2 under s142 PLA 1925 and can enforce covenants which 'have reference to the subject matter of the lease'. This term means fundamentally the same as the common law term 'touch and concern' and is also a useful guide in cases involving tenant's covenants.
POST-1.1.1996
The rules apply to both legal and equitable leases as we saw above.
s3 L and T(C)A 1995
'The benefit of all landlord and tenant covenants of a tenancy... shall in accordance with this section pass on an assignment of the whole or any part of the premises or of the reversion of them.'
Both incoming landlords and tenants are bound by covenants unless they are not landlord and tenant covenants. For example, they are 'personal in character'. This is very similar to the okd 'touch and concern test'.
Note that a question may involve breach by, for instance, a landlord of a covenant to repair and a refusal of the tenant in consequences to pay rent. Breach by one party does not excuse breach by the other and so the tenant is still liable to pay rent.
REMEMBER:
Make sure that the liability of sub-tenants on a covenant in a lease. Remember these three points:
1. There is no privity of estate between the landlord under the headlease and the subtenant. For example, the landlord is not a party to the sub-lease. This means that the landlord and the subtenant cannot directly enforce covenants against each other.
2. The landlord can, as an exception to the above rule, enforce a restrictive covenant which is negative by an injunction against subtenant.
3. The landlord can sue the tenant under the headlease for a breach for a breach of covenant committed by the subtenant and so claim to forfeit the lease.
EXAMPLE:
There are 2 covenants in a lease:
a. to repair the premises
b. not to use the premises for any purpose other than a high-class grocer's shop.
T has sub-let to St. L can enforce covenant (b) against St but can only enforce covenant (a) against T.
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REMEDIES FOR BREACH OF COVENANTS
TENANT'S REMEDIES:
1. Damages- for breach of covenant by the landlord to repair
2. Repudiation of the lease. Possibly linked to a claim for damages
3. Specific performance. Granted in respect of an obligation to employ a resident porter at a block of flats.
4. Appointment of a receiver. To make repairs.
LANDLORD'S REMEDIES:
A. FOR BREACH OF COVENANT TO PAY RENT:
1. Action for arrears for rent. Limited to 6 years' arrears. s.19 Limitation Act 1980.
2. Forfeiture proceedings. This is the remedy which an exam
Note: The remedy for distress was abolished by the Tribunals, Courts and Enforcement Act 2007. There is a replacement remedy for commercial leases.
B. FOR BREACHED OF ALL OTHER COVENANTS
1. Damages- For breach of the tenant's covenant to repair.
2. Injunction- To prevent breaches of covenants.
3. Forfeiture.
The main case to mention here is Expert Clothing Service and Sales v Hillgate House Ltd
FORFEITURE FOR NON-PAYMENT OF RENT
Does the lease contain a forfeiture clause allowing the landlord
a right of re-entry and forfeiture or the lease if any of the covenants are broken?
(The clause usually provides that the rent must be at least 21 days in arrear.)
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NO YES| |
Cannot forfeit the lease Can forfeit the lease
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Does the landlord need to make
a normal demand for rent
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Not if more than half
a year's rent due.
(In any case the lease
generally provides that
a formal demand for rent
is not required.)
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Has the landlord waived
the right to forfeit
(eg. accepts rent
knowing of the breach
of covenant?)
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YES NO| |
Cannot forfeit the lease Can forfeit the lease
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Tenant may claim relief from
forfeiture by paying into
court all arrears of rent
and costs. if so, all proceedings
are stayed and the tenant
regains possession. Even if the
tenant does not do this
she may still claim relief
within 6 months of
execution of judgement.
FORFEITURE FOR OTHER BREACHES
Does the lease cpntain a forfeiture clause allowing the landlord
right of re-entry and forfeiture of the lease if any of the
covenants are broken?
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NO YES
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Has the landlord waived
the right to forfeit?
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YES NO
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Cannot forfeit the lease Can forfeit the lease
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Landlord must serve a notice:
1. Specifies the breach
2. Requires it to be remedied if it is capable of remedy
3. Requires the tenant to pay compensations
(s146(1)LAP1925)
Brilliant! You answered my land law hypothetical problem. Obviously, the examiners/markers would expect a bright student to know and apply all relevant caselaw and statutes as the facts appear. It is also wise to figure out as a complimentary bonus for marks, a well written, structured substantial argument for reform and give a brief critique of any deficiency in the law...thanks for this...'Samantha'!;
ReplyDeleteDo you have anything on EU HYPOTHETICAL PROBLEMS...I need to understand the relevant case law and application of EU principles for a 6000-8000 word answer...believe this! THIS IS NOT A PROJECT...REALLY IN THE SENSE OF THE WORD...ITS A series of LONG HYPOTHETICAL LEGAL PROBLEMS...!!!! Thanks for your info..helpful indeed..