Week 8 – Leases

Types of tenancies
Fixed term: certain starting date and period
Periodic tenancies: for a term that continues to roll over
o The periodic tenancy doesn’t require writing because it’s not a term longer than three years
and falls into s23 (d)(2): short-term tenancy

- The common law: will recognise an implied periodic tenancy and a yearly tenancy is the
longest, the common law recognises outside a legally enforceable contract.
- If a tenant has gone into possession of the property and started paying rent.
- the parties have agreed to create a tenancy but have not complied with the formalities.
- Have created a void agreement.
- where a tenant ‘remains in possession and pays rent after the expiration of a fixed-term lease.

Section 127(1) CA:

o if there is a tenancy and no agreement as to its duration, then such tenancy shall be
deemed to be a tenancy determinable at the will of either of the parties by one
month's notice in writing expiring at any time.
Section 127 CA applies where a tenancy from year to year would have been implied from the
manner of payment of rent: (Turner v York Motors)
o Periodic lease still exists, and s.127(1) will apply: one month notice
o if the landlord accepts the payment, lease will turn to a periodic tenancy

- Dockrill v Cavanagh: ‘no agreement as to duration’ that complies with legal formalities.
Therefore section 127(1) applies where the parties have agreed to a longer term but have not
created an enforceable agreement.

- Burnham v Carroll Musgrove Theatres Ltd: a tenancy from year to year would have been
implied by entry into possession and payment of rent. (Means common law recognised)

- Tenancy at sufferance: It was a fixed term. s.127(1): one month notice

Remon v City of London Real Property: a tenant, who initially entered under a valid
tenancy, remains in possession after the tenancy has come to an end, without the landlord’s
assent or dissent.

Tenancy at will: (It was a fixed term - express agreement – there is consent)
- Hagee (London) v AB Erikson and Larson: A tenancy at will arises whenever a person,
with the owner’s consent, occupies land as a tenant on terms that either party may determine
the tenancy at any time. Tenancy at will may be created by express agreement.
- Commonwealth Life (Amalgamated) Assurance v Anderson: Fundamental to a tenancy at
will is the right of either landlord or tenant to terminate it at will, without prior notice.
- The first situation is where a tenant “holds over” under an expired fixed-term lease with the
landlord’s consent but without yet having paid rent on an agreed or periodic basis. it’s a legal
lease s.23(D)(2) apply, but now it turns to periodic. (Meye v Electric Transmission)

- The second situation is where a prospective tenant is let into possession pending a concluded
agreement for the grant of a lease without yet having paid rent on an agreed or periodic basis.
(Fox v Hunter-Paterson).
- In both situations one relationship between the parties has ended and a new one has not yet
been settled. (Ramnarace v Lutchman).

- The third situation is where a purchaser under a contract of sale is allowed into possession
before the completion

Tenancy by estoppel – 2 kinds

- Tenancy by want of title: if the landlord discovers that he/she has no title agreement is still
binding between landlord and tenant but not against 3rd parties
- Concurrent tenancies: a lease of the reversion – commercial property (Coles – Aldi)
o S 120A (3) CA: cannot be longer than 21 years wait
- Reversionary leases: a lease of the reversion that comes into being at a future time
- Marshall v Council of the Shire of Snowy River: (tenancy at will – notice one month)
- Marshall entered into an agreement to lease a retail for a term of 5 year.
- The agreement provided for three options to renew, each for terms of five years. The lease
was not registered.
- the appellant exercises the first option under the agreement for lease.
- The council notified the appellant to vacate.
- lease not legal as it wasn’t registered.
- Under the common law, a tenancy from year to year would have been implied from the
memorandum as the rent provided.
- Walsh v Lonsdale: He didn’t have an equitable lease because he didn’t pay the rate. He was
not ready to perform his obligation
- He had CL legal lease, One-month notice s.127(1) CA
Essential characteristics of a lease
- A leasehold interest is created in circumstances where a landlord/lessor grants to a
tenant/lessee:

1) Certainty of term: (just apply to fixed term lease not periodic or tenancy at will)
 The requirement of certainty of term has two aspects: a certain commencing date and
duration capable of being rendered
 Caboolture Park Shopping Centre v Edelsten: A lease without an ascertainable
commencement date is void.

- Lace v Chantler: A lease “for the duration of the war” was invalid lease because the
period of time was uncertain and not capable of being rendered before the commencement of
the rental term.

- Prudential Assurance v London Residuary Body: (term of the lease was: until plans to
widen the highway by the council- uncertain – UK case)
o the agreement in the present case did not create a lease and the tenancy from year to year
enjoyed by the tenant as a result of entering into possession and paying a yearly rent can be
determined by six months' notice by either landlord or tenant. (periodic lease)
o If you have a lease we need to know when it comes to the end.

2) Exclusive possession
- Wik Peoples v Queensland: it is that the conferring of exclusive possession is an
indication that the arrangement is a lease.

3) Lease or Licence?
- A licence does not create an interest in land and does not have the protective covenants
contained in a lease.
- Licences are in personam/contractual not proprietorial
- The fundamental difference between a lease and a licence is that a lessee has exclusive
possession of the land.
- In construing whether an agreement creates a lease or a licence, the whole agreement must be
considered: Abbeyfield Society v Woods

4) Intention to create a lease

Fatac Limited (In Liquidation) v Commissioner of Inland Revenue:
 a tenancy is an interest in land conferring the right to possess it for a limited period. A
licence is a mere permission to be on the land, with or without additional permission to
perform specified acts there. The former creates an estate in the land; the latter does not.

- Radaich v Smith: if the right conferred on the occupant of the premises is one of
exclusive possession for a set period of time , then it creates a leasehold interest and
not a licence.

- Street v Mountford: (AU - lease)

- Street granted to Mountford the right to occupy two rooms at a weekly payment and subject
to conditions set out in a document referred to as a “Licence Agreement”.
- held the agreement between the parties had the effect of creating a tenancy despite the use of
the words “Licence Agreement”.
- In coming to this conclusion decision in Radaich considered (exclusive possession +rent
for a period of time). It doesn't matter what you call it.
- Isaac v Hotel de Paris: (Bar - Licence)
- The circumstances and conduct of the parties show that all that was intended was that
the defendant should have the personal privilege of running a night bar on the
premises, with no interest in the land at all. It was at first only a privilege to be there pending
the execution of a formal contract. Later, when the contract fell through, and notice was given
to him to remove his belongings, even that privilege came to an end.

- KJRR v Commissioner of State Revenue: (not Lease – intention - AU)

 “This Licence shall confer no right of exclusive occupation of the premises to the Licensee
 The franchise agreement entitled the franchisor to inspect and investigate the franchisee’s
business
that exclusive possession of the subject premises had been intended to be given and taken.

- Bruton v London and Quadrant Housing Trust: (Homeless - exclusive possession is not
perfect)
- The London Housing Trust, contract stated that Bruton had a licence to use the premises on
payment of a set amount per week.
- It said that he would vacate at any time upon being given four weeks’ notice and that he
would allow the Trust to have access to the flat during business hours for the purposes of the
trust.
- force the Trust to undertake repairs.
- The court found that the Trust had, in effect, made a grant of exclusive possession to Bruton
as against the Trust; that despite their stated intentions regarding licence, they had still
intended to make a grant of exclusive possession and that the clauses in the lease about access
for the Trust supported this – because if it was only a licence, you didn’t need such clauses.

- How can the Housing Trust create a lease when it only has licensee rights?
o Exclusive possession and Residential Tenancies under s 13
 It should be noted that a “residential tenancy agreement” means “any agreement” under
which a person occupies premises for residential purposes:
 (a) whether or not the right is a right of exclusive occupation,
 (b) whether the agreement is express or implied, and
 (c) whether the agreement is oral or in writing, or partly oral and partly in writing,

Creation of leases
Legal Leases under Old System
- Section 23B CA: it should be in the form of a deed.
- Section 23D (2) CA: allows for the creation of parol (or oral) interests in land by way of
lease if the conditions in 23D are met: short-term tenancy
o 1. that the lease must be at the “best rent which can reasonably be obtained without taking a
fine”
o 2. the lessee has taken effect in possession, including a right to immediate possession:
Haselhurst v Elliiot
o 3. the term of the lease including any option does not exceed 3 years: 2 yrs +2 yrs = 4-year
lease: cannot fall in to short-term tenancy – must be less than 3 years (RM Hosking v
Barnes)
- Walsh v Lonsdale: Specific performance: agreement, possession
- part performance

- Torrens – s 53 RPA
o S.53 RPA: lease exceeding 3 years must be registered.
o (1) When any land under the provisions of this Act is intended to be leased or demised for a
life or lives or for any term of years exceeding three years, the proprietor shall execute a lease
in the approved form. ...

- RM Hosking Properties Limited v Barnes

o lease was for a 2-year period with an option to renew for a further 2 years. The lease was not
registered on the title. Before the expiry of the first 2-year period under the lease, the
registered proprietor sold the land to Mr Hosking. Hosking allowed Barnes to stay in the
property and accepted rent from Barnes after the sale. But when Barnes sought to exercise the
option to renew the lease for a further 2 years, Hosking sought to evict Barnes.
o Is the lease registered? No - unregistered lease.
o Does the lease fall within the express lease exception to indefeasible title? No – option not
yet exercised – 4 years (exceeds 3 in NSW).
 What was left at law? Legal lease based on possession; failed four-year term: Moore v
Dimond / s.127(1) – 1 month notice.
o Is there another exception that might apply? Fraud - notice of a prior interest does not
amount to fraud (s 43A) and no evidence of dishonesty in the time leading up to the transfer.
 No in personam

Leases: An exception to indefeasibility

Short term tenancies
- s53 RPA: Tenancy for less than three years does not have to be registered
- Parkinson v Braham: But you can register shorter ones if you wish

- Section 42(1)(d)
a tenancy whereunder the tenant is in possession or entitled to immediate possession, and an
agreement or option for the acquisition by such a tenant of a further term to commence at the
 expiration of such a tenancy, of which in either case the registered proprietor before he or she
became registered as proprietor had notice against which he or she was not protected
Provided that:
(i) The term for which the tenancy was created does not exceed three years,
(ii) in the case of such an agreement or option, the additional term which it provides would not,
when added to the original term, exceed three years.

- If the lease is less than three years and not registered

- what sort of interest does the lessee hold?
- Legal but subject to the registered interests. If there is competition between the unregistered
but legal lease and an unregistered equitable interest, an equitable mortgage the normal
priority rules apply

- Alcova Holdings v Pandarlo

o A tenant was in occupation of a property under a two-year unregistered lease which contained
an option to renew for a further two years.
o After this, the RP sold to a new RP and the new RP tried to evict the tenants
o The court found that the tenant was in occupation of the property under a two-year lease – the
first lease was finished and a new 2-year lease had come into occupation and so they could
not be evicted as their lease was an exception to the indefeasible title of the new RP.

Timing of Notice? After an exchange of the contract and before settlement.

- The section says “before he or she became registered as proprietor had noticed”

- United Starr-Bowkett Co-operative Building Society v Clyne: the purchaser holds subject
to a tenancy for a term not exceeding three years created by a previous registered proprietor.
- if he had notice of that tenancy before he obtained a registered instrument.
- So when you received a dealing registrable? CT+ registrable dealing usually at settlement

- Snowlong Pty Ltd v Choe: (Good Case - notice – Fraud)

o A contract for the sale of Torrens Title land disclosed the existence of and annexed a copy of,
an unregistered lease agreement for part of the land for a term of five years with options for
renewal in favour of the lessee. Under the contract, the purchaser agreed to abide by the terms
and conditions of the annexed lease.
 the purchaser, having acknowledged or agreed to recognise that the lessee had a lease for five
years with two options for renewal, took title subject to an express trust on those terms;
 repudiation of the agreement to abide by the terms and conditions of the annexed lease
constituted fraud within the exception to indefeasibility in s 42 and s 43 RPA, so that
registration of the transfer free of any reference to the lease did not destroy the lessee's rights

Implied Covenants in leases

1) Quiet enjoyment
- Right to occupy without disturbance
- Karaggianis v Malltown: ( sixth floor – escalator – breach of lease- business efficacy)
- premises on the sixth floor of a city building were leased.
- a) that a covenant should be implied in the lease.
o b) such a covenant was necessary to be implied to give business efficacy to the transaction
between the parties.
o (c) the landlord should not be permitted to derogate from his grant.
- Kazas and Associates Limited v Multiplex (Mountain Street): (business efficacy – goods
lift)
- the plaintiff sought a declaration to restrain the defendant from carrying on a redevelopment.
- It is a breach of the covenant for quiet enjoyment contained in the lease.
 is it necessary to give business efficacy to the lease.
 “business efficacy” in this context means implementation in a practical and businesslike way
of the intended use of the demised premises by the lessee consistently with the reasonable use
of the whole property by the lessor and any other occupiers;
2) Non-derogation from grant
- Did the landlord undermine the purposes for which the property was let?

- Harmer v Jumbil: lease for the area to store explosives derogated from when the landlord
rented out an adjoining area to residential. It means they cannot store explosives in that store.

Fair wear and tear:

- Warren v Keen: (no implied covenant – nature force)
o Tenant not liable for natural wear and tear caused by seepage through brickwork, underlying
natural forces

- Haskell v Marlow: (implied covenant – she didn’t avoid the damage)

- The widow did nothing actively to damage the premises but did nothing to counteract the
natural processes of decay.
o She had failed to replace a broken tile and water damage was caused
o So fair wear and tear can include some small active repairs

- Yielding up
- More than just leaving but making sure that there is vacant possession
- The landlord can claim the costs of evicting the sub-tenant: Anderson v Bowles

Conveyancing Act Implied Covenants

1) Repair
- Section 84 CA:
o (1)(b) That the lessee or the lessee’s executors, administrators and assigns will, at all times
during the continuance of the said lease, keep and, at the termination thereof, yield up the
demised premises in good and tenantable repair, having regard to their condition at the
 commencement of the said lease, accidents war damage and damage from fire, flood,
lightning, storm and tempest, and reasonable wear and tear excepted.

- Proudfoot v Hart:
o “Good tenantable repair” is such repair as, having regard to the age, character, and locality of
the house, would make it reasonably fit for the occupation of a reasonably-minded tenant of
the class who would be likely to take it.
2) Pay Rent
- Section 84:
o (1)(a) That the lessee or the lessee’s executors, administrators and assigns will pay the rent
thereby reserved at the time therein mentioned:
4) Inspection
- twice in every year during the term at a reasonable time of the day upon giving to the lessee
two days’ previous notice,
- a notice in writing of any defect, requiring the lessee or the lessee’s executors, administrators
or assigns, within a reasonable time, to repair same in accordance with any covenant
expressed or implied in the lease.
Re-entry
- Section 85
o (d) such default is continued for the space of two months, or in case the repairs required
by such notice as aforesaid are not completed within the time therein specified, the
lessor or the lessor’s executors, administrators or assigns may re-enter upon the demised
premises

What is an assignment of a lease and the difference between a sublease?

• S.10 and 123 allow a landlord to permit an assignment or sublease in the face of an
absolute bar

• S 133B CA: applies to qualified covenants with the landlord’s permission and landlords are
not allowed to unreasonably withhold their consent.
- An assignment of a lease is a transfer of the whole of the tenant’s interest in the lease.
- Debonair Nominees v J & K Berry Nominees An assignment does not create a new lease
but merely transfers to the assignee the assignor’s interest in the lease.

- A sublease is the creation of a lease out of a lease: by means of a transfer of less than the
whole of the tenant’s interest in the lease.
- An example is a transfer of the unexpired term of the lease less one month, or less one day.
The sublessor necessarily retains a reversion in the lease. A sublease can be assigned or
further subleased.
- Lonsdale v Carra: It follows from the nature of a sublease that a purported assignment of
less than the tenant’s interest in the land necessarily results in a sublease, not an assignment.
- Goldman v 682980 Ontario: A leasehold interest requires privity of the estate; therefore, to
preserve the original landlord/tenant relationship, the “assignor” must reserve at least the last
day.

Who has the right to assign or sublease the property in question?

- National Provincial Bank v Ainsworth: Consistent with the general principle that property
rights are inherently transferable.
- Keeves v Dean: the right to assign or to sublease is a right incident to every leasehold interest
-
- Commonwealth Life Assurance v Anderson: The right attaches not only to leases for a
term of years but also to periodic tenancies, including short-term periodic tenancies such as
those from week to week.
- GJ Coles & Co Pty Ltd v Commissioner of Taxation: It includes the right to assign or
sublease part only of the leased premises.

- Anderson v Toohey: There are two exceptions to this right to assign or sublease: neither a
tenancy at will arising at common law nor a tenancy at sufferance may be assigned or
subleased. Any attempt to do so terminates the tenant’s interest and confers no interest on the
purported assignee or sublessee.
- However, a tenancy “at will” under s 127 can be assigned or subleased, because it is not a
tenancy at will as at common law but is essentially a periodic tenancy from month to month
determinable by one month’s notice in writing expiring at any time.

- Covenants against Assignment or Subletting

 Narrow test: In Re Gibbs and Houlder Brothers & Company, Limited’s:
 Narrow test: must relate to use of premises or new lessee

 Broad test: Bickel v Duke of Westminster

 court should not restrict the number of factors that may be relevant
 What was the purpose of the clause and what are the surrounding circumstances?

Intermediate test: what is unreasonable withhold means?

o International Drilling Fluids v Louisville Investments: (unreasonably withheld)
 1. The purpose of a covenant against assigning [or subleasing] without the landlord’s consent,
such consent not to be unreasonably withheld , is to protect the landlord from having
the premises used or occupied in an undesirable way, or by an undesirable assignee.
 2. As a corollary to 1, a landlord is not entitled to refuse consent on grounds unconnected
with the relationship of landlord and tenant as it relates to the leased premises.
 3. The tenant bears the onus of proving that consent was refused unreasonably.
 4. The landlord does not have to justify the conclusions which led to consent being
refused if they were conclusions that a reasonable person in the landlord’s position could
have reached in the circumstances.
  5. It may be reasonable for a landlord to refuse consent on the ground of the
purpose for which the proposed assignee intends to use the premises, even though the lease
does not forbid that purpose.
 6. Usually, landlords need consider only their own interests; but there may be cases of such
imbalance between the benefit to the landlord and the detriment to the tenant if consent is
refused, that for the landlord to refuse consent would be unreasonable.
 7. Subject to the above propositions, whether the landlord’s consent is withheld unreasonably
is a question of fact, depending on all the circumstances.
o In this case, property was leased with a proviso that it was not to be used “for any purpose
other than as offices”
o .The premises were vacated and the tenant sought an assignment of the lease to a company
intending to use the premises as serviced offices.
o The landlord formed the view that this would be detrimental to the investment value and
refused consent. The judge held that the evidence did not justify a refusal of consent.

o Bromley Park Garden Estates v Moss: The intermediate test asks whether the landlord’s
refusal was designed to gain a collateral advantage for the landlord, an advantage not
contemplated by the lease.

- Creer and Another v P. & O. Lines of Australia: (not unreasonably withhold)

- In this case, the lease provided that if the lessee desired to assign the lease then “the lessee
shall before doing so offer in writing to the lessor
- The lessee sought consent from the lessor to an assignment but did not offer inwriting.
- The lessor refused an assignment
- The Court held that consent was not unreasonably withheld in the circumstances of this case
as the lessee had not offered to surrender the lease as required by the lease provision.

- Swan v Uecker: (Airbnb – breach of lease – he didn’t seek the landlord consent – exclusive
possession)
- In the case of residential accommodation, there is no difficulty in deciding whether the grant
confers exclusive possession. An occupier of residential accommodation at rent for a term is
either a lodger or a tenant.
- The occupier is a lodger if the landlord provides attendance or services which require the
landlord or his servants to exercise unrestricted access to and use of the premises. A lodger is
entitled to live in the premises but cannot call the place his own.
In the present circumstances, it is no different from the nature of the occupancy—the
exclusive possession—granted to the tenants, the Respondents, under the Lease from the
Applicant. They have, by means of the Airbnb Agreement, effectively and practically passed
that occupation, with all its qualities, to their Airbnb guests for the agreed period under the
Airbnb Agreement.

- Torrens: Where a lease over Torrens title land has not been registered, an assignment or
sublease must be by deed if it is to be effective at law.
- This is because such an assignment or sublease falls outside the exempting provision of
s.23B(3) CA
- Section 23B(3): exempts from the need for a deed otherwise required by s 23B(1), an
“assurance” of “land under the provisions of the Real Property Act, 1900”.
- An assignment or sublease, ineffective at common law for lack of appropriate form, may
nevertheless be effective in equity, provided there is writing or sufficient part performance.
Also, the principle in Walsh v Lonsdale, applies to agreements to assign or sublease.

Enforcement of covenants in assignment

- Privity of contract: Beswick v Beswick
- Privity of estate: the relationship of landlord and tenant
Privity of contract
Continuing liability
- Privity of contract exists between the original landlord and the original tenant . The
express covenants in the lease are enforceable between them as a matter of contract law.

- Some exceptions
o By agreement between the parties.
o For example, the lease might provide that on the assignment the assignor is released from all
obligations, or the parties might later agree to release an assigning party.

Privity of estate
- Privity of estate exists between any persons who stand in the relationship of
landlord and tenant.

Important of distinguishing between the Privity of contract and estate

- The importance of establishing either privity of contract or privity of estate appears from the
following:
- 1) Where privity of contract exists between parties, the express covenants in the lease are
enforceable between them as a matter of contract law.
- 2) Where privity of estate exists between parties, the covenants in the lease are enforceable
between them if the covenants “touch and concern” the land.

Assignment of the leasehold and the question of the tenant’s covenants

- Burden of covenants:
- Spencer’s case: covenants will run if they touch and concern the land
o Under a long-standing rule of the common law, the burden of a tenant’s covenant binds
assignees of the lease if the covenant touches and concerns the leased land. This is the rule in
Spencer’s Case.
o For example, the burden of a tenant’s covenant to pay rent, or to repair, binds assignees of the
lease
 - Covenants which effect use value or the relationship of landlord and tenant
- EG pay rent, repair, insure, not to assignment without consent
- S 70A: intention for the burden of covenants to pass

- Benefit of covenants: Spencer’s case

- Benefits also pass if they touch and concern the land
- Section 70 – intention for the benefit to pass to successors

Assignment of the reversion and the question of the tenant’s covenants No equivalent of
Spencer’s case
o In contrast to the position with an assignment of the tenant’s interest in the lease, the common
law held that on an assignment of the landlord’s interest (the reversion) neither the burden
nor the benefit of express covenants passed to the landlord’s assignee, even where the
covenants “touched and concerned” the land. This was because a reversion was not a
corporeal “thing” to which covenants could be attached. Modern legislation remedies this.

- S 117 CA – rent and benefit is annexed to the reversion and goes with it
o All benefits of re-entry or forfeiture also annexed to the person entitle to the income from the
land
- Must touch and concern the land: “having reference to the subject matter of the lease”

- Burden – s 118
o By s 118, the burden of a landlord’s covenant “with reference to the subject matter of the
lease” is annexed to and runs with the reversion and may be enforced by the person in whom
the lease is vested from time to time.1125 There are clear parallels in some of the
terminology of ss 117 and 118, and similar principles of interpretation apply. Thus, in s 118
as in s 117, the words “with reference to the subject matter of the lease” are
synonymous with “touching or concerning” the leased land.
- Touch and concern.
- No liability for breaches prior to the assignment

Torrens title and assignment

- Sections 117 and 118 apply to RPA land
- S 51 RPA – on registration of transfer, the transferee is subject to the same liabilities
- S 52 – right to sue on instrument passes to the transferee
- S 53 – an option to purchase freehold does not ordinarily touch and concern the leased land,
but s 53 enables this to happen in registered leases.

Unregistered Torrens interest?

- Despite s.116, it has been held that ss 117 and 118 do not override the general indefeasibility
principles under the Real Property Act. Leros Pty Ltd v Terara
- in the case of New South Wales, if the lease exceeds three years and is unregistered (and
hence does not enjoy protection under s 42(1)(d) and the landlord transfers the reversion to a
purchaser who becomes registered, then the purchaser takes free of the lease. (Ibid).

Remedies for breach

o Where the tenancy has been lawfully terminated, a tenant who refuses to vacate the premises
is a trespasser. The landlord is then entitled to “mesne profits”. These are damages for the
rent that would have been obtained on a re-letting but for the tenant’s continued occupation
- Damages
- Injunction
- Termination
- Clauses for re-entry on breach
- Repudiation
- Recovery of possession – not possible for dwelling house Landlord and Tenant Act 1899,
s.2AA
- Mesne profits

Relief against forfeiture

- For non-payment of rent – equity jurisdiction
- Need to show ability to repay
- S 129 – for breach of covenant other than to pay rent
- Court will consider applicant’s conduct, gravity of breaches and difference between value of
lease and damage caused

Guide:
Sam, the owner of the fee simple in Blackacre (old system) agrees to lease it to Dean for 5
years for a monthly rental of $1000. No deed is executed. Dean goes into possession and
pays the agreed rent. After 2 years Sam discovers that he can earn higher rent, and serves
notice of termination of the lease on Dean. Advise Dean of his rights.
To enter this question use a three-step process:
Is the agreement to lease legally enforceable? No because it should be in the form of deed
s. 23B of the CA and its not a lease less than 3 years.
If it is not legally enforceable, will equity specifically enforce the lease? There is an
agreement and possession specifically performable: Walsh v …
If it is not legally enforceable and equity won't specifically enforce it, what type of lease will
the common-law recognise?
Is the agreement to lease legally enforceable? Deed? – No; s23D(2) – No – longer than three
years.
If it is not legally enforceable, will equity specifically enforce the lease? - we don't know if
they have created a written agreement which equity would enforce; if they haven't, then
Dean’s act of going into possession may be considered to be a sufficient act of part
performance for equity to enforce the agreement. If it is not specifically enforceable (tenant
has delayed or not ‘done equity’) go to the third point:
If it is not legally enforceable and equity won't specifically enforce it, what type of lease will
the common-law recognise? (ie - what is left over?)
Here on the basis of Dean’s possession of the premises and his payment of rent there will be
an implied periodic lease. The least will be for a period of one year due to the rule in Moore v
Dimond because they had agreed on a fixed term of years. In New South Wales Section
127(1) of the Conveyancing Act makes legal yearly leases terminable on one months notice,
so Sam may terminate this agreement with one month’s notice.