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LEASES Obligations entered into by deed affecting the fee simple [Download as .doc, since contains comments] 1.

General Characteristics 1. Terminology leasehold = lease = term of years absolute (s 205(1)(xxvii) LPA) 2. Estate in land, legal and equitable the lease is capable of subsisting as a legal estate (s 1(1)(b) LPA), provided formality, definitional and registration requirements are met; otherwise the lease may take effect as an equitable lease: s 1(3) LPA a lease limited to begin at a future date = reversionary lease (must take effect within 21yrs of creation) more than two legal estates may exist concurrently: fee simple tenancy subtenancy 3. Lease as contract the lease is both an interest in property (legal estate or equitable interest) and also a contract between landlord and tenant consider the contractual origins of the lease (which is still technically personalty rather than realty a 'chattel real') frustration (National Carriers Ltd v Panalpina (1981)) although a finding of frustration would depend on severe circumstances termination for landlord's repudiatory conduct (Hussein v Mehlman (1991)) rescission for fraud (Killick v Roberts (1991)) implication of terms (Liverpool CC v Irwin (1977)) some statutory controls relating to unfair contract terms Bruton v London Quadrant Housing Trust (2000): a purely personal lease not creating any estate in land can exist where there is exclusive possession (agreement to grant exclusive possession of flat created a tenancy even though D (the landlord) had no legal estate but was merely a licensee from the freehold owner (the local authority) criticised by Bridge (2004); might this be explained by reference to the specific statutory context of the Landlord and Tenant Act 1985 (obligations to repair etc.)? Problem: generality of the decision, in particular of Lord Hoffmann's remarks but note that the effects of the Bruton lease will be limited in not exhibiting any third-party effects: Kay v Lambeth LBC (2006) 4. The essentials of a lease the three hallmarks or indicia: Street v Mountford (1985) per Lord Templeman: i. right to exclusive possession ii. for a term iii. at a rent this is not essential (see s 205(1)(xxvii) LPA, Ashburn Anstalt v Arnold (1989) unless exceptional circumstances negative the tenancy. 5. The right to exclusive possession the tenant is given the right to exclude all other persons, including the landlord in deciding whether a transaction creates a lease or a licence (important formerly for the applicability of the Rent Acts; third-party effects), the test has now come full circle: nineteenth century: exclusive possession = crucial issue 1950s et seq.: shift towards a more flexible test of parties' intentions to be inferred from all the circumstances (Lord Denning) Street v Mountford (1985) decisively rejected the flexible test; parties' intentions as to the nature of the agreement are irrelevant, the only relevant intention being that to grant exclusive possession
Facts: S gave right to M to occupy furnished rooms under a 'licence' agreement for 37pw; termination at two weeks' notice; a tenancy or a licence? (practical importance: applicability of the Rent Acts) Litigation: County Court: M = tenant; CA: M = licensee; Held: appeal allowed. M = tenant Lord Templeman set out the in rem nature of leases, and the non-proprietary nature of licences he set out the full ten-points agreement, being relied upon by both parties, in

lodger

particular: cl. 2 (nobody else allowed to occupy) and cl. 3 (owner retained right of entry) in a residential setting, occupier will be either a or a tenant
exclusive possession for a term at a rent, w/o provision of attendance or services S had to be a tenant

landlord provides attendance/ services requiring him to exercise unrestricted access to and use of the premises nb S had conceded that M was not a lodger

exclusive possession however, this is not the only indicium (exceptions, infra): service occupier (no) object of charity (no) mortgagee in possession (no) trespasser (no) fee simple holder (no) freedom of contract? Yes, but [t]he manufacture of a five-pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade exceptional circumstances: legal parties did not intend to enter into legal relationships at all: acts of friendship, family... other relationships (supra) no power to grant tenancy [but consider now Bruton] words are insufficient to create a licence when a lease was intended Although the Rent Acts must not be allowed to alter or influence the construction of an agreement, the courts should... be astute to detect and frustrate sham devices and artificial transactions [pretences per Lord Templeman in AG Sec v Vaughan (1990)] whose only object is to disguise the grant of a tenancy and to evade the Rent Acts.

1. Exclusive possession 1. Tenant or lodger under a tenancy, the landlord may still reserve the right to enter and view the state of the premises, and to repair and maintain if the landlord provides attendance or services requiring him to exercise unrestricted access to and use of the premises, the occupier of residential accommodation for a term at a rent will probably be a lodger (licensee) 2. Business tenant or licensee Street v Mountford (1985) applied to business tenancies even in the absence of rent: Ashburn Anstalt v Arnold (1989) Dresden Est v Collison (1987) per Glidewell J: the three Street indicia are less likely to be relevant in a commercial setting but it is now clear that Street is the leading authority (in practice, results may however be different) IDC Group Ltd v Clark (1992): agreement for occupation of business premises made by deed, drawn up by legal professionals and described as a licence, was indeed a licence (and not an easement although nb that the legal requirements for an easement were satisfied) 2. Sham or genuine, multiple occupation Street v Mountford strongly disapproved of Somma v Hazelhurst (1978), holding that there had in fact been a sham (and thus a wrong decision) Somma v Hazelhurst was finally overruled by HL in AG Sec v Vaughan, Antoniades v Villiers (1990) AG Sec v Vaughan four men signed different agreements termed licences (and denying exclusive possession; requiring potential sharing and introducing some sort of 'pecking order') on different dates with different amounts of payment

HL reversed CA, holding that the occupiers were individual licensees rather than joint tenants, the differences of date and payment making it impossible for the four unities (of possession, interest, time and title) to exist; per Lord Bridge: a sensible, non-artificial arrangement to provide accommodation for a shifting population of individuals see also Stribling v Wickham (1989), in which the same decision was reached on similar facts although involving three friends (rather than four strangers) Antoniades v Villiers (cf. Somma v Hazelhurst) two separate agreements entered into by a man and a woman in a relationship, choosing a double bed; they were to use the flat in common with the owner or other licencees permitted by him HL reversed CA, holding that the occupiers were joint tenants: there was a pretence (preferred by Lord Templeman to his earlier expression of sham devices and artificial transactions in Street v Mountford); Somma was finally overruled: the two agreements were interdependent and had to be read together Lord Templeman: surrounding circumstances should be considered, including the relationship between prospective occupiers, nature and extent of accommodation etc.

a return to the flexible approach? Mikeover v Brady (1989, prior to AG Sec): the facts were similar to Antoniades (two separate licences, albeit without the right to put others in; the flat was small and effectively suitable only to close friends or couples; yet the CA held that there was a licence rather than a lease because there was no unity of interest: the absence of a joint obligation to pay rent was fatal to unity of interest and in turn this was fatal to a joint tenancy (sed qaere why an (equitable: s 1(6) LPA) tenancy in common could not be found...) Lord Oliver in Antoniades had criticised the the CA for arguing that separate obligations to pay rent were inconsistent with a joint tenancy; the documents would constitute a sham although the authorities are scarcely overwhelming, the requirement of joint liability for rent seems to be settled below the HL 3. Licensee or sub-tenant? Monmouth BC v Marlog (1994): courts will be slow to infer a common intention that the one who is not the tenant will be the subtenant of the one who is (particularly where there is no written agreement) 4. Exceptional circumstances: Lord Templeman in Street v Mountford (supra) the circumstances show that there was no intention to create legal relationships the occupancy is within a number of special categories the owner has no power to grant a tenancy (but consider Bruton) these result in licences rather than tenancies at will (sed quaere) 6. The term no time limit, but a lease cannot exist in perpetuity a lease may be limited to certain hours of the day, or be for a discontinuous period (eg. time-sharing of holiday homes) 1. Term must be certain; commencement period term must have certain beginning and ending, although the immediate date of commencement need not be fixed, eg. occurrence of an uncertain event 2. Reversionary leases lease in possession: term beginning from date of lease (or in the past) reversionary lease: term limited to commence at some future date at common law, there was no restriction, but see now s 149(3) LPA: reversionary lease to take effect more than 21yrs from the date of the lease is void contract to create such a term is equally nullified 3. Perpetually renewable leases and other renewal clauses perpetually renewable leases were inconvenient and modified by s 145, Sch. 15 para 1

LPA 1922 to the effect that leases with covenants providing in effect for perpetual renewal, operate as 2,000yr leases whilst the courts presume that the renewed lease will not include a renewal clause, so that the maximum length is two terms, great care in drafting renewal clauses is required, so as to avoid a clause not intended to make a lease perpetually renewable being converted into a 2,000yr lease (unless determined earlier by tenant), although the courts lean against a construction of perpetual renewal 4. Leases for life or until marriage s 149(6) LPA: a lease made for life/lives; for any term of years determinable with a life or lives or for any term of years determinable on tenant's marriage is now taken as a lease for 90yrs, termination being possible upon death or marriage subject to a month's written notice the statutory policy is unclear 5. Ending of period date of termination should be expressed specifically if made to depend on some uncertain event, it must occur before not after the lease takes effect: Prudential Assurance v London Residuary Body (1992) (lease on terms that it shall continue until required by the local authority for the purpose of widening the road was void for uncertainty periodic tenancy implied) 2. Tenancies at will and at sufferance, periodic tenancies, tenancies by estoppel (in addition to leases for a fixed period of time) 1. Tenancy at will A occupies B's land with consent, on the understanding that both A and B may terminate the tenancy at any moment (this mutuality may be implied where not express); rent may be payable this is not a leasehold estate stricto sensu (but it does give right to emblements) express creation or by implication the scope of implication is restricted, since the tenancy at will's one legal purpose is the protection of occupier's interests during a period of transition: holding over after expiry of lease with landlord's consent entry into possession under contract for lease/void lease entry into possession by purchaser prior to completion entry into possession of prospective tenant during negotiations where rent and exclusive possession are present, courts are now inclined towards finding a periodic tenancy (ie. a genuine lease) rather than a tenancy at will 2. Tenancy at sufferance this arises where the tenant used to have a lease but continued in possession (wrongfully), after its expiry: holding over after expiry of the lease without landlord's consent (but equally not subject to his objecting) penalties attaching under Landlord and Tenant Act 1730 3. Tenancy from year to year and other periodic tenancies 1. Nature unless determined by a proper notice to quit, it may last indefinitely certainty of duration required (see Prudential Assurance v London Residuary Body (1992): although originally indeterminate, the term must be determinable by either party, per Lord Templeman 2. Creation 1. Express 2. Implied (ie. by operation of law) this arises where a person is in possession of land with owner's permission, not as a licensee nor for an agreed period, and rent measured by reference to a year (or other period) is paid and accepted; two cases may arise 1. Where a tenant at will pays a yearly rent long-standing presumption that payment of rent is evidence of an intention to establish a yearly tenancy (or other periodic tenancy it depends on the reference point rather than the intervals of making payment) rebuttal by contrary evidence is possible: Javad v Aqil (1991):

prospective tenant let into possession of commercial premises during negotiations; no periodic tenancy since this could not have been intended by the parties (Nicholls LJ); this was thus a tenancy at will instead 2. Where a tenant at sufferance pays a yearly rent where there is evidence of subsequent consent to holding over, eg. payment of rent on a yearly basis 3. Terms of tenancy from year to year in the case of implication, where there is some instrument of agreement (former or failed lease, contract), the tenant holds the land subject to all the terms and conditions of the instrument, unless inconsistent with the general nature of yearly tenancies 4. Tenancy by estoppel 1. Doctrine Bruton v London and Quadrant Housing Trust (2000)*: if A purports to grant a lease of land to B, having no estate in the land, both grantor and grantee may be estopped from denying the existence of the tenancy as between them all the elements of a real title as against the person estopped, but no estate is conferred (A and B's successors in title are, unlike strangers, bound) no estoppel where lessor has a legal estate in the land less in extent than that which he purports to lease tenant will acquire this very interest doctrine applies to all types of tenancy 2. Feeding the estoppel where landlord later acquires the legal estate, the tenant is also clothed with a legal estate 3. Creation of a lease 1. Contract for a lease in most cases, the transaction is effected either by a contract for a lease (if under 3yrs in duration), or by a lease, but rarely by a combination of both (contrast freeholds) contract for lease requires: final agreement on the terms (parties, property, consideration/rent, commencement, term, etc.) formality requirements: s 2 LP(MP)A 1989 whether a contract operates as a lease or as 'only' a contract depends on parties' intentions to be gathered from all the circumstances 2. Lease at law: formalities (depend on the length of the term and whether title to the estate is registered or not), satisfaction of definition in s 205(1)(xxvii) LPA in equity: where formalities have not been complied with (a contract for a lease which is not a conveyance for the purposes of the LPA: Borman v Griffith (1930)**) may give rise to an equitable term of years: if the contract is capable of specific performance, the tenant will hold under the same terms in equity as if a lease had actually been grated; so as between the parties the rights and duties of that relationship will be the same as if the lease had been granted: Walsh v Lonsdale (1882). 1. Formalities necessary to create a legal lease under LPA 1. Lease of 3yrs' duration or less s 54(2) LPA a mere oral lease suffices to create a legal term of years if: it is to take effect in possession, it reserves the best rent reasonably obtainable, and it does not last longer than three years (including the period in periodic tenancies) 2. Lease in excess of 3yrs' duration ss 54(1), 52(1),(2)(d): deed required in effect re-enacting s 1, State of Frauds 1677; s 3 RPA 1845 2. Effect of a lease exceeding 3yrs that is not made in accordance with the LPA formality requirements
* Per Lord Hoffmann: [I]t is not the estoppel which creates the tenancy, but the tenancy which creates the estoppel. * * Certain easements implied into legal easements will not be implied into equitable easements under s 62 LPA: see reading on Easements.

1. Effect at common law if the tenant entered into possession and pays an annual rent, he will become a yearly tenant, even where the tenancy would have exceeded three years and was not made by deed or writing but as has been seen, the courts are now less inclined towards finding periodic tenancies 2. Effect in equity a very different view abortive lease must be regarded as a contract for a lease, provided that the constituents of a specifically enforceable contract were present prospective tenant immediately acquires an equitable interest in the land (an equitable right to the legal estate) 3. Doctrine of Walsh v Lonsdale 1. The doctrine rules of equity prevail: s 49(1), SCA 1981 (prior to the Judicature Acts 1873-5, there were two separate interests: the periodic tenancy at common law and the equitable interest) Walsh v Lonsdale (1882) Facts: there was an agreement for a seven-year lease of mills; tenant was let into possession, paying quarterly rent; no deed was executed; tenant inter alia sought specific performance when landlord started to interfere, arguing that he was a yearly tenant Held: the argument did not prevail: a tenant who holds under a contract for a lease of which specific performance will be decreed occupies the same position vis-a-vis the landlord, as regards both rights and liabilities, as he would occupy if a formal lease had been executed as a deed. There are not two estates as there were formerly [ie. prior to the Judicature Acts] one estate at common law by reason of the payment of the rent from year to year, and an estate in equity under the agreement. There is only one court, and the equity rules prevail in it. The tenant holds under an agreement for a lease. He holds, therefore, under the same terms in equity as if a lease had been granted, it being a case in which both parties admit that relief is capable of being given by specific performance. That being so, he cannot complain of the exercise by the landlord of the same rights as the landlord would have if a lease had been granted. On the other hand, he is protected in the same way as if a lease had been granted..., per Sir George Jessel MR. Note, however, that notwithstanding the foregoing passage a tenant can choose to rely on the legal periodic tenancy if he so chooses (eg. where a purchaser is bound by the legal tenancy but takes free of the equitable lease). 2. Application of the doctrine extension in Barton Mill (1977) to a situation 'once removed': V had entered into a contract to sell the fee simple to P, who in turn agreed to grant a lease to T. T was treated as a lessee in equity by double application of the doctrine 4. A contract for a lease is not equal to a lease limitations of the doctrine in Walsh v Lonsdale 1. Specific performance doctrine excluded if the contract is one of which equity will not grant specific performance (criticised by Gardner (1987)*), eg. where there has been a prior breach of covenant (Coatsworth v Johnson (1886): plaintiff thus treated as tenant at will at common law (because no rent had been paid or been due)) 2. Conveyance s 205(1)(ii) LPA: 'conveyance' does not include a contract for a lease privileges under s 62 LPA cannot be claimed (eg. relating to easements, supra) 3. Third parties the potency of the contract creating the equitable estate as against third parties is less than that of a legal lease a distinction hinges on whether land was registered or unregistered at the time the estate was purchased by the third party 1. Unregistered land a contract for a lease ('estate contract: s 2(3)(iv) LPA) is enforceable
*
Gardner is critical of the continued stress on S.P., arguing that recognition of agreements for leases should be no more discretionary than other proprietary interests and that the movement is towards applying common rules to legal and equitable leases.

against a purchaser for money or money's worth of the legal estate if registered as a land charge under LCA 1972 (notice no longer applicable) 2. Registered land under the LRA, the purchaser from the landlord will be bound by a legal lease (either because registered with an individual title or as an overriding interest under Sch. 3 para 1) purchaser for value will take free of an equitable lease unless protected by a notice or it takes effect as an overriding interest by virtue of the tenant being in discoverable actual occupation under LRA Sch. 3 para 2. 5. Registered land; formalities necessary to create a legal lease under LRA 2002 1. The requirement of registration where registration is required but the lease does not comply with the requirements of LRA, the lease cannot create a legal estate under s 27(2)(b) LRA, the grant of a term of years out of a registered estate is required to be completed by registration if it is: for a term of more than 7yrs from the date of the grant or to take effect in possession after the end of a period of 3 months beginning with the date of the grant or one with a discontinuous right to possession (eg. time-sharing) in some other, less important circumstances thus, if the requirements of LRA are not met, the lease does not take effect at law; if it is to bind a purchaser from the landlord, it requires protection by notice on the register (s 29) unless it is an overriding interest by virtue of the tenant being in discoverable actual occupation 2. Requirements as to form and content under land registration legislation in cases of noncompliance, the land registry will reject the application for registration as defective.