#2025 - Requirements For Leases - Land Law

Requirements for Leases

Features of Leases

• Can all be sold or assigned to purchasers

  • Although will normally need consent of Landlord to do this

• Are normally an estate recognised by Law

  • They allow enjoyment of land for a fixed period of time

  • Two tenancies which are not estates though:

    • Tenancy at Will

    • Tenancy at Sufferance

Requirements of Leases

• Rent

  • Normally a feature, but a Lease can exist without rent.

    • Ashburn Anstalt v Arnold [1989]:

      • Fox LJ: Lord Templeman could not have meant that you needed rent as well as exclusive possession

        • Indeed, this would be contrary to LPA 1925 s.205(1)(xxvii) which states that lease can exist “whether or not rent”

  • Courts will also try to give effect to agreements where parties specify rent will be agreed in the future

    • Agreements to agree won’t stand

      • References to market value at different times will suffice

      • Or that rent will change from year to year will also be okay.

• Commencement

  • Leases must have a certain beginning (and a certain ending)

    • LPA s.149(3): Lease may either commence immediately or up to 21 years upon agreement as parties stipulate

      • s.205 (1) (xxvii): Leases that don’t commence immediately = “future estates”

      • BUT LRA 2002 s.4(1)(d) says that such leases need to be registered to bind purchasers of future leased land – they are not overriding interests.

    • However, contracts for leases are not covered by this statutory requirement

      • Thus, you can agree by contract in 2005 to grant a lease in the year 2030, to take effect in 2035

        • Cos only five years passes between the grant and commencement.

      • Smith: convenient result of this is that covenants to renew long leases are valid

        • As a covenant to renew a lease exceeding 21 years will invariably be exercised more than 21 years from date of covenant

• Length

  • While parties can agree on whatever length they wish for a lease

    • This must be certain and fixed at the time of commencement, although it need not be certain at grant

      • Law is concerned only with maximum duration, however

        • So lease can legitimately be terminated before this duration for forfeiture.

  • While Law will not strike down periodic tenancies for a lack of certainty (i.e. where L and T agree that T will take possession and pay rent for a week/month/year at a time, terminable by each party depending on notice) it will strike down anything else:

    • Prudential Assurance Co v London Residuary Body [1992]: N sold strip of land in front of shop to X which then leased it back to N until road widening project went forward. This never went forward and in 1988 LRB (successor to X) attempted to stop P, as successor in title, from using the land.

      • Lord Templeman (maj):

        • S.205(1)(xxvii) holds that terms of years absolute =

          • term of years either certain or liable to determination by notice, operation of law or on provision of redemption or any other event

            • term here does not fall within this definition

        • The possession and rent paying of the “tenant” under the void lease created an implied periodic yearly tenancy which can be ended by six months notice

          • But this cannot give effect to the term which only allows the landlord to give notice to quit on the road widening

            • This would contradict concept that a grant for an uncertain term does not create a lease.

      • Lord Browne Wilkinson (dis):

        • N’s successors in title will now be left with the freehold of some retail premises which don’t look out onto street

          • Bizarre outcome comes from ancient and technical rule of law who nobody has ever shown any point to.

• Exclusive Possession

  • Every lease must involve exclusive possession

    • Smith: other factors, such as term and rent, may disappear, as in tenancies at will or sufferance

    • But exclusive possession is so fundamental a requirement it is rarely challenged.

      • Street v Mountford [1985]: C agreed with M that M, in exchange for 37 a week, could have exclusive occupation of two rooms. The agreement described itself throughout as a license, and either party was entitled to terminate the agreement by giving 14 days notice.

        • Lord Templeman:

          • Fact that both parties appear to intend that they both should only have a personal right is irrelevant

            • If what you have both freely agreed satisfies the requirement of a lease by Law.

              • Then it is a lease no matter what you try and call it.

          • The manufacture of a five pronged instrument for manual digging results in a fork,

            • even if the manufacturer, unfamiliar with the English language,

              • insists what has been created is a spade.

Debate

• Was Prudential a harsh decision as stated by Lord Browne Wilkinson?

  • Wilde: Compare to Periodic Tenances

    • With periodic tenancies certainty achieved because the term is fixed as ending after a year, but being automatically renewable unless consent withheld

      • If we added in a restriction “until it is needed for road widening” then this would still satisfy the certainty requirements

        • You would still have a yearly periodic tenancy renewable each year

          • Just one party would have its right to withhold consent limited.

    • So why can we be restricted from withholding consent for a term of 5 years with an annual periodic tenancy but not one year?

      • Moi: 2 examples are entirely different

        • 5 year term can be cut short by the restriction (need for road widening) but renewal is limited to 5 times so can be ended on 6^th occasion.

        • Year long periodic tenancy will continue until the event occurs, and will keep renewing perpetually.

          • It’s the fact that there is no upper limit on the number of times it can be renewed that is the problem – its length is uncertain.

  • Smith: Nature of leasehold different from freehold

    • Nature of freehold estate is to last for an indeterminate length of time (e.g. for life per life estate, forever per fee simple absolute...)

      • Nature of leases is entirely different – it is for a specific length of time

        • Would be unable to distinguish between lease and freehold if allowed to last for some unforeseeable time.

  • P Smith: Need to avoid perpetual leases

    • Allowing uncertain events without limit leads to the potential for perpetual leases

      • which is worse than infringing on the parties’ power to contract as they wish

    • McFarlane: Reason for the rule may be that the problem is not that the parties will be unable to tell if the specified event will occur

      • But that rather A will not know if and when he can ever regain his property right

      • Smith: arguments are a little paternalistic in favour of Landlords, mind.

    • Sparkes: Courts are being asked to end an agreement which has no end – the difficulty is in distinguishing which type of case is just

      • Allowing leases with uncertain limits will involve unjust results

        • With land given unintentionally away forever

      • But so will insistence on a certain term before conceding proprietary status

        • But to relax requirement of certainty would be to allow the creation by accident of an encumbrance against property of indefinite duration at what may become a derisory rent.

  • Sparkes: Easy to avoid problem

    • Original owners chose to use a lease which was an inappropriate form to secure their intentions

      • commercial parties, properly advised, should not complain about the results of the disagreement.

        • Should be no tears for commercial organisation which gets caught out by easily avoided risks.

• Exclusive Possession: Reason for Street v Mountford

  • Smith: Real reason for decision might have been to stop Landlords bargaining out of Rents Act.

    • Cos need not be the case that exclusive possession must be determinative of a lease

      • If parties have agreed a personal right, why should the court make it into a property right?

      • IDC Group Ltd v Clark: held that parties free to create license rather than easement where easement requirements satisfied

        • Smith: Lord Templeman claimed that confusion would otherwise result between licenses and leases if court followed label parties had given to arrangement.

          • But no such confusion recognised by the courts with easements and licenses.

  • Hill: Protection of consumers?

    • Hill: rents and tenancies often involve consumers, particularly in the private market

      • Thus, “freedom to contract” tends to be unsuitable for these cases owing to the inequality in bargaining position.

        • Ergo, best to look at license/lease distinction from consumer model, not from Land Law perspective.

  • McFarlane: Sake of certainty

    • McFarlane: Law often ignores “intention” of the parties for sake of certainty of certain concepts in all Law, not just land.

      • If X and Y make a oral promise that X will give Y 100 and call it a “contract”

        • Law will not enforce it as a contract b/c no consideration – it ain’t a contract by law.

A Landlord’s guide to avoid being pillered for exclusive possession (and therefore everything that comes with a lease)

• Take an actual lodger

  • Street v Mountford [1985]:

    • Lord Templeman:

      • In the case of residential accommodation you get either tenants (exclusive possession) or lodgers (not so)

        • An occupier is a lodger if the landlord provides attendance or services

          • which require the Landlord or his servants unrestricted access to and use of the premises

  • But don’t take the mick with shams and pretences

    • Aslan v Murphy [1990]: L required X to vacate room each day for 90 mins so that L could clean room using key retained. L said X was lodger, not tenant.

      • Lord Donaldson:

        • Court has to keep eye out for unrealistic clauses which are mere pretences – such as the agreement for D to vacate for 90 mins each...