#4649 - Leasehold - GDL Land Law

• One person with an estate in land (Landlord) grants the temporary right to another person (Tenant), giving him exclusive use of his land for a period of time

• Must be for a lesser term than the Landlord has the land

• Grants right to exclude all other people from the land (incl. Landlord)

• Different from licence (personal right of occupation – no legal estate in the land)

Terminology

• The Term of Years Absolute

• Sweet & Maxwell – ‘the grant of a right to the exclusive possession of land for a determinate term less than that which the grantor has himself in the land’

• Landlord grants lease (his estate is the freehold reversion)

• Lease is granted to the tenant: who can create a ‘sub-lease’

Essential Characteristics of a lease

2 basic requirements:

1. Certainty of term

2. Exclusive possession

Certainty of term

1. Fixed Term

   • Maximum duration of the arrangement known from the outset – neither party can unilaterally bring the lease to an end unless there is a break in the clause

   • A lease “for the duration of the war” cannot create a legal estate (Lace v Chantler)

   • Prudential Assurance Co. Ltd v LRR: overruled decision in Ashburn v Arnold that the ability of either side to bring arrangement to an end meant that the terms were not uncertain

2. Periodic Term

   • Where the length of the term is not fixed in advance – can still be a “certain term”

   • Arrangement runs from period to period – automatically renewed unless and until either party serves notice upon the other that the arrangement is coming to an end – ‘notice to quit’

May be created:

1. Expressly – written agreement

2. Impliedly – not In writing but arises simply by payment and acceptance of rent on a periodic basis – Prudential Assurance

• The ‘term’ depends upon the period by reference to which the rent is calculated – not the intervals at which it is payable – Ladies’ Hosiery and Underwear Ltd v Parker

• Rent commonly paid on the ‘usual quarter days’ – 25 March, 24 June, 29 Sept and 25 Dec

Problems with Certainty of Term

Tenancy at Will: Tenant occupied land with Landlord’s consent on understanding that either party may terminate tenancy at any time: no estate

• Although, if the tenant starts to pay rent by reference to a period, a common law periodic tenancy is created

Tenancy at Sufferance: Arises where a tenant holds over – remains in possession without the consent of the landlord after tenancy comes to an end: no trespass as original entry was lawful

Tenancy for life: Automatically converted into a tenancy for a fixed term of 90 years

• Berrisford v Mexfield Housing Cooperative: SC criticised current law on certainty of term – requirement of certainty of term for the creation of a valid lease outdated – but they didn’t remove requirement

Exclusive Possession

• Right to exclude all others from the property, including landlord

Formalities to create a Legal lease

• Depends on the length of the term of the lease

Lease created for a period exceeding seven years

• must be by deed (s52 LPA 1925)

• requirements for a valid deed (s1 LP (MP) A 1989)

• s. 1 Law of Property (Miscellaneous Provisions) Act 1989 – formal requirements for a valid deed:

  • makes it clear on the fact that it is intended to be a deed

  • validly executed as a deed (signed, attested, delivered)

• Registered land: Must be substantively registered (s27 (2)(b)(i) LRA 2002): so there will be (1) a register of the title to the freehold estate and (2) a register of the title to the leasehold estate

• Unregistered: will also require substantive registration to make it legal (s4(1)(c) LRA 2002) – but this will not trigger need to register the freehold estate as well – registered lease can exist over unregistered freehold estate

Leases exceeding three, but not exceeding seven years

• Must be created by deed to be legal

• But they do not need to be substantively registered

• so lease for less than 7 years not mentioned on the register – example of ‘unregistered interest which override registered dispositions’ – so would bind a new estate owner

Short leases – i.e. a term not exceeding three years

• some have no formal requirements – but still exist as legal leases

  • need not be in writing – s54(2) LPA 1925

1. Short fixed term leases (with max term of 3 years or less)

2. Express periodic tenancies (where there is a tenancy agreement)

3. Implied periodic tenancies

   • NB – periodic tenancies only fall under this if each individual period of the tenancy is for 3 years or less

• Example of a short lease which didn’t comply with requirements of s54(2)LPA 1925 = Fitzkriston LLP v Panayi

• Don’t need to be registered to exist as legal leases – so do not have their own registered leasehold title – will only be registered in respect of the freehold estate – lease won’t appear anywhere on the freehold register

• They will take effect as overriding interests on any 1^st registration/registered disposition of the property

Non-compliance with Formalities

Two possible outcomes:

1. Possible Periodic Tenancy

   • Prudential Assurance v London Residuary: common law recognised periodic tenancy

   • Javad v Aqil: Nicholas LJ declined to recognise a tenancy as there was no intention to create legal relations: possession was granted on the basis that a lease would be agreed and was not a tenancy in and of itself: distinction between tenancy at will and periodic tenancy

2. Possible Equitable Lease

   • If the parties have tried to create a legal lease but have failed to comply with formalities – equity will only step in and recognise equitable lease where there exists a document which constitutes a valid contract to create a lease

   • Can also assist a short lease (not more than 3 years)

Formalities to transfer a legal lease

Called assignment

Must be:

1. Completed by deed, regardless of the duration of the lease itself or how long there is still to run – document must comply with LP(MP)A 1989

2. If the lease has already been registered, the assignment must also be registered in accordance with s27(2)(a) LRA 2002

3. If it hasn’t been registered but has more than 7 years left to run (if it was created before LRA 2002) – then gives rise to compulsory first registration of the leasehold estate

• A contract to transfer a legal lease must comply with s2 LP(MP)A 1989 – transferee, at the contract state, holds an equitable lease (provided specific performance is available on the valid contract as per Walsh v Londsdale)

Equitable Leases

Can arise in 3 ways:

1. If the parties have tried to create a legal lease but have failed to comply with formalities

2. If there has been a mere agreement to grant a lease – agreement that it will be granted in the future (need to comply with s2 LP(MP)A 1989

3. If the person granting the lease only holds an equitable estate in land then he can only grant an equitable estate – cannot grant more than he has

   • Officially the formal requirements are in s53(1)(a) LPA but for practical purposes - s2 LP(MP)A 1989

• Contracts must conform with general law of contract as well as s2LP(MP)A

• Provided grant of lease satisfies s2LP(MP)A 1989 – equity will treat it as an agreement for the grant and will usually allow specific performance for the execution of a proper legal lease – ‘equity looks upon that as done which ought to be done’

• Lease of 3 years or less can be created without compliance with these formalities, under s2(5) LP(MP)A 1989

Protection of an equitable lease vs. a new landlord

• Unlike a legal estate, a properly created equitable lease is not automatically binding on a new freehold owner

• Equitable tenant should protect his interest under the Land Registration Act 2002 by entering a notice on the charges register: s32 LRA 2002

• Where the land is unregistered – equitable tenant should protect his interest by...