Introduction

 If buying a freehold is not an option, taking a lease of property presents a solution.

 Leases have the advantage of being a very flexible. The tenant of domestic accommodation
is almost always protected from eviction and the tenant has a legal estate that allows him to
prevent anyone, including the landlord, from entering without his permission.
 However, the landlord is usually in a stronger position and can argue that there is a license
rather than a lease knowing that a license generally gives less protection to a licensee.

What is a lease?

 Section 1(1)(b) LPA 1925:

o A lease or ‘a term of years absolute’ is a legal estate and is also a proprietary estate
in land.
o It is singled out as one of two legal estates recognized by the law.
 The lease will not take effect in law until has been properly registered. Failure to do so will
result in the lease losing its status as a legal estate and it will only qualify as a mere contract
to grant a legal lease.
o EXCEPTION TO NOTE: if the lease is less than 7 years, it doesn’t require registration.
 Essentially, to own a leasehold is to own a property in a defined period of time. Hence,
leasehold can be carved out of a fee simple or a longer leasehold
 Definition for a lease as defined by Statute (S1 LPA 25) is:
o A term of years absolute
o A lease has always been difficult to define and there is no adequate statutory
definition even today.
 While Lord Templeman provided a more thorough common law exposition of what
constitute a lease in Street v Mountford [1985] (fundamental case). He suggested that there
are 3 characteristics of a lease:
 o Exclusive possession (important)
o Determinate term (important)
o Payment (not so important)
 there needs to be a rent to establish legal relations
 there must be intention to create legal relations. Not necessarily monetary
 Before we continue, it must be remembered that since S1 LPA 25 identifies that a leasehold
is capable of being one of the only 2 possible legal estate, the owner of a lease (lessee) owns
an interest in land
 Hence, a lease must be distinguished from a license to stay, which does not create an
interest in the land (NOTE Bruton v Quadrant Housing Trust [1999] – a lease need not
always give rise to an interest in land. This is an ‘unfortunate’ exception)
 There are generally 2 types of leases:
o Fixed term lease (i.e. a lease of no.1 OneMenerung for 3 months / 1 year / 999
years)
o Periodic tenancy (i.e. a lease of no.1 OneMenerung for 1 month renewable until
either party change their mind) week/month/year tenancy
 Student rental, business rental, low cost rental
 It renews itself unless one of the party says that they don’t wanna renew
 Also, leases will contain leasehold covenants, defining the rights of lessor / lessee (Landlord /
tenant)
 A point to note here – although S1 LPA 25 used the words ‘term of years’, strictly speaking
term of years is not necessary:
o Smallwood v Sheppards [1895]
 Even 3 successive public holiday can be counted as a lease
 The lesser the number of years of lease left, the lower the value of the property.
 U cant cancel a lease. If u say lease for 20 years, then 20 years it is.

Common law requirements for a lease

 Lord Templeman defined a lease in Street v Mountford [1985] as:

o The tenant possessing exclusive possession is able to exercise the rights of an owner,
which is in the real sense his land albeit temporarily and subject to restrictions
(leasehold covenants). A tenant armed with exclusive possession can keep out
strangers and keep out the landlord
 When u have a lease, u are an owner of a property
 Restrictions – covenants
 Landlord covenant
 Tenant covenant
 Mutual covenant
 However, note that in Street v Mountford, Lord Templeman also noted that a person having
exclusive possession might not always be the owner of a lease
o To have a lease u must have a determinate term and an exclusive possession. But
having these 2 doesn’t mean that you have a lease.
o Isaac v Hotel de Paris
 Isaac (hotel manager). In the employment contract, Isaac was given a
penthouse in London. Exclusive…
  Isaac is a tenant in the lease. Court said u cannot be a tenant be ur lease is
subject to the…
 As can be seen in the above, the 2 most important characteristics of a lease are:
o Exclusive possession
o Determinate term

Exclusive Possession

 Definition: The possession that is so exclusive that it may include the landlord
 The more a landlord can come in to the room that u rent, the more the court can say that ?
o If I own a room, do I need to tell u that I wanna do A B C in the room? A: No.
o The more the landlord reserve, the more the ?
 Two important points to note here:
o leases are governed by the Rent Act 1977 and the Housing Act 1988 to protect rights
of lessee in statutory leases
 statutory leases are…
 that’s why landlord doesn’t like to give leases because the Act protects you
o the owner of a lease has an interest in land enforceable against even the landlord
 if u have an interest in the land, u own the land. The landlord cannot simply
enter into the property without your permission.
 Due to this, many had attempted to draft leases without granting exclusive possession to
avoid the legal ramifications. The courts have provided a wealth of cases to thwart these
attempts
o The creation of leases depends on the nature of the rights of lessee, not the label
(Street v Mountford) (Antoniades v Villiers)
 Street v Mountford
 Antoniades v Villiers
o The creation of the element of exclusive possession gives the lessee a right to
exclude everyone, including the landlord (Street)
o However, there are situation where Landlord is allowed to enter premises for
specific purposes (Street – mortgage) on reasonable hours. A landlord’s right to
enter & exit as he likes = X lease (Appah v Parncliffe [1964] – change linen)
 Also, there can be exceptions where a person is given exclusive possession but does not
amount to ownership of a lease:
o Occupation given on charity Gray v Taylor [1998]
 Does not amount to ITCLR
o Occupation given without intention to create legal relation Facchini v Bryson [1952]
 No intention to CLR
o Continued occupation based on job performance Carroll v Manek [1999] (hotel
lodger)
o Isaac v Hotel de Paris
 Can co-ownership give rise to exclusive possession? The court had taken a view that if the 4
unity of joint tenancy exist, there can be a co-owned leasehold (AG Securities v Vaughan
1988) However, note the relaxation of the unity of title in Antoniades v Villiers [1990]
 As noted above, the true nature of the rights of tenants would determine whether it is a
lease or a license, what would happen if the landlord did not have a fee simple / lease over
the demised land? In Bruton v Quadrant Housing Trust [1999] – The CA (overruled by HOL)
 held that the rule of nemo dat quod non habet prevented Quadrant Housing trust from
granting a lease
 Also as noted above, a lease always creates interest in land, however, in Bruton (HOL), Lord
Hoffman held that despite Quadrant housing not having an estate, its contract with Bruton
created a leasehold between the parties, but not a ‘proprietary lease’ This oddity will be
considered again in detail when we study ‘licenses’. For our purposes, lets pretend this case
never existed
 u own the property exclusively and u posses it exclusively to the exclusion of the world
including the landlord. i.e. the property is urs not the landlord. The landlord will own it back
once the lease ends.
o There has to be exclusive possession for a lease to exist. This was the conclusive
feature of a lease.
o The tenant has control over anyone who enters the premises and can exclude
everyone, incl the landlord.
o If someone occupying property doesn’t have exclusive possession, they can only
claim a license which is a mere personal right.
o There will be NO exclusive possession if:
 The landlord can move the occupier at any time
 Westminster City Council v Clarke [1992]: there is no EP in a council-
run hostel for homeless persons who could not claim any particular
room.
 Someone merely has exclusive occupation
 E.g. hotel guest
 Services are provided
 E.g. housekeeper, collection of rubbish
 Marcou v De Silvesa [1986]
o The agreement required the landlord to provide services like
removal of rubbish and laundering of linen. It is not the
services that prevents this from being a tenancy, but the
fact that the owner can enter at will.
 Occupation of the premises is based on employment.
 Street v Mountford [1985]
o Occupancy by a servant of his master’s premises in order to
perform his duties as a servant.
 Norris v Checksfield [1991]
o A coach mechanic was granted the use of a bungalow by his
employer. The court held that although he was found to
have EP, he was a service occupier and not a tenant.
 Purchasers were let into possession of the premises prior to completion.
o There MAY be EP even if:
 Landlord retains a set of keys
 Aslan v Murphy [1990]
o A landlord can retain keys but still have to request entry
from the tenant if he wants to gain access.
 There are a number of people sharing the premises
 Antoniades v Villers [1990]
 o It was held that there was a JT even though the owner had
asked each of the 2 joint occupiers to enter separate
agreements with himself and each was described as a
license requiring them to separately undertake to pay half of
the rent. There were also clauses reserving the right of the
owner to occupy the flat. The HoL held these provisions to
be a sham.
 Premises provided by an employer, so long as occupation is not required for
the better performance of the tenant’s job
 Fachini v Bryson [1952]
o The assistant was allowed to live in a house in return for a
sum of money paid weekly and this was found to be tenancy
event though the parties referred to it as a license; the use
of premises didn’t improve the carrying out of the
employee’s duties.
 The grantor doesn’t have an estate to support a lease
 Bruton v London & Quadrant Housing Trust [1999]
o There is t
o Landlord had a mere license but the landlord still had the
right to create a lease in favour of the claimant
 If there are terms in the agreement that suggest that the occupier doesn’t
have EP which have been inserted as a sham

Determinate term

 As required by the LPA’s ‘term of years’ absolute, a definite time is a fundamental

requirement for a leasehold, hence, in Lace v Chandler [1944], a lease for the ‘duration of
war’ is NOT a valid lease
 The importance of the term absolute is so absolute that the court in Prudential Assurance v
London Residuary Body [1992] overruled Ashburn Anstalt v Arnold [1989] whereby an
undefined periodic leasehold subject to 3 months termination notice was held to be a lease
 The lease will last as long

Statutory changes to period indeterminate leases

 The habit of granting period indeterminate leases has now been regulated by statute:
 A lease for life due to end with life / marriage with payment converted to lease for 90 years
subject to ending terms – S149 LPA 25
 Perpetually renewable leases converted into lease for 2000 years – S145 LPA 22
o Happens by accident

Payment

 In most circumstances, a rent is almost always required for a lease of short period, while a
lum sump premium is more common for long leases i.e. 99 years
 While Lord Templeman included payment of rent as a defining feature of a lease in Street v
Mountford, today, this is not specifically required:
  S205(1)(xxvii) LPA 25 defined a term of years absolute as: ‘a term of years… (whether or not
at a rent)’
o If u don’t have rent it’s hard to establish ITCLR

Creation of leases

 We will look at the granting of leases in 2 elements:

o Grant of legal leases
o Creation of equitable leases
 Under the granting of legal leases, we will look at:
o Express grant
o Implied grant (3 yrs < only)
 Under the granting of equitable leases, we will consider:
o Creation of equitable lease
o The position of equitable leases vis-à-vis legal leases
 Is EL as good as LL? A: almost

Express grant of legal leases

 The ‘standard’ requirement of the granting of a legal lease (7 yrs >) in registered land is that:
o Conform to the requirement of ‘deed’ in S52 LPA 25 & S2 LP(MP)A 89
o Registered as a legal estate at land registry (S27(2) LRA 02)
 The requirement of the granting of a legal lease (7 yrs >) in an unreg land is:
o Registration (S4(1) LRA 02 – compulsory registration)
o Conform to the requirement of ‘deed’ in S52 LPA 25 & S2 LP(MP)A 89
 The granting of legal leases (3 yrs <) will take effect either with a deed S52 LPA 25 OR orally
 The granting of legal leases (3 yrs > 7 yrs <) must take effect only by way of a deed S52 LPA
25 & S2 LP(MP)A 89

Implied grant of legal leases (3 yrs <)

 There can be circumstances where leases less than 3 years could be created impliedly by the
actions of the landlord and the tenant. This kind of situation is provided as an exception in
S54(2) LPA 25 – informal creation of legal leases, hence they are legal
 The key point would be the intentions of the parties. In Javad v Mohammed Aqil [1991] the
CA held that:
 the inference to be drawn… will depend upon a fair consideration of all the circumstances,
of which payment of rent… is only one, albeit a very important one

Creation of equitable leases

 While the creation of legal leases 3 yrs < without the use of a deed does not invalidate the
lease, creation of leases longer than 3 years without using a deed would amount to
equitable leases
 There are 2 elements to fulfill before an equitable lease can be enforced:
 oThere must be a contract in writing between the parties (the fundamentals of
contractual law applies)
o Since equitable leases are enforced in equity, hence, the right to grant the remedy
of ‘specific performance’ is discretionary. See Coatsworth v Johnson [1886] – bad
behaviour of farmer who seeks equity
 Note that there is a 3rd type of leases that can arise – ‘proprietary estoppel’ lease whereby
the landlord gave a promise to the ‘tenant’, and that the tenant relied on the promise
(Whether oral or written) to his detriment

The position of equitable leases vis-à-vis legal leases

 As seen in the above, one of the odd conclusion that one might deduce is that equitable
leases are as good as legal leases:
o The reasoning for this is because with the equitable remedy of specific performance,
a person successfully claiming an equitable lease (i.e. creation of leases (7 yrs >) with
just a written contract (see Re Maughan [1885]) – ‘a contract for lease is as good as
a lease’
 While enforcement of equitable lease between landlord and tenant is ‘almost as good as a
legal lease’, there are certain circumstances where the protection of equitable lease is less
than that for legal leases:
 As seen in Coatsworth v Johnson [1886], equitable remedies are discretionary, there can be
circumstances where a person entitled to an equitable lease would not be granted. Also, a
person seeking equity must satisfy the maxims of equity
 The protection of equitable leases against 3 rd party (purchaser) is shaky:
o In registered land – if equitable lease is registered with a notice, then it will bind
purchaser. Otherwise, a bare contract does not bind purchaser for value w/o notice
 Of course, if a person is in actual occupation, the equitable lease could still
be an overriding interest brought in by sch 3 para 2
o In unreg land – must register as a land charge, if not cannot bind purchaser, even if
purchaser know Midland bank v Green