LEASES

HT 2025
Simon Douglas

1. Introduction
1.1 A lease as an estate in land
A lease typically arises when a freeholder (or leaseholder) exercises their power to
grant an estate in the land to a tenant (or lessee) for a certain period. The grant of
the estate leaves the landlord with a “reversionary interest” in the land.

Street v Mountford [1985] AC 809

“A tenancy is a term of years absolute. This expression, by section 205(1)
(xxvii) of the Law of Property Act 1925 , reproducing the common law,
includes a term from week to week in possession at a rent and liable to
determination by notice or re-entry. Originally a term of years was not an
estate in land, the lessee having merely a personal action against his lessor.
But a legal estate in leaseholds was created by the Statute of Gloucester 1278
and the Act of 1529 21 Hen. VIII, c. 15 . Now by section 1 of the Law of
Property Act 1925 a term of years absolute is an estate in land capable of
subsisting as a legal estate …” (Lord Templeman, 814)

1.2 Proprietary nature of a lease

The proprietary characteristics of a lease are illustrated by the contrast with licenses.
Take the case of King v David Allen [1916] 2 AC 54, where A granted a contractual
licence to display a poster on the wall of a cinema to B. A purchaser of the cinema, C,
refused to honour the contract. The licensee, B, was unable to sue C as his right, as a
licensee, was purely personal:

King v David Allen [1916] 2 AC 54

“There is a contract between the appellant and the respondents which
creates nothing but a personal obligation. It is a licence given for good and
valuable consideration and to endure for a certain time. But I fail to see —
although I have done my best to follow the many authorities which the
learned Solicitor-General has thought it right to place before our
consideration — that there is any authority for saying that any such
document creates rights other than those I have described.” (Lord
Buckmaster, 61)

Contrast with Ashburn Anstalt v Arnold [1989] Ch 1 where A granted B a lease

(without an obligation to pay rent – see below) of retail premises. A sold the
reversion to C, who sought to evict B. The claim failed: once it was concluded that B
held a lease, it was binding on C.
The tenant’s interests are enforceable against not just the landlord and any
purchaser of the reversionary interest, but all third parties, such as squatters,
trespassers etc.

Hunter v Canary Wharf [1997] AC 665

“In the dust action it is not disputed that, in principle, activities which cause
dust to be deposited on the plaintiff's property can constitute an actionable
nuisance. The question raised by the preliminary issue is: who can sue? In
order to answer this question, it is necessary to decide what exactly he is
suing for. Since these questions are fundamental to the scope of the tort of
nuisance, I shall deal with them first.

Up to about 20 years ago, no one would have had the slightest doubt about
who could sue. Nuisance is a tort against land, including interests in land such
as easements and profits. A plaintiff must therefore have an interest in the
land affected by the nuisance. …

[T]he plaintiff (or joint plaintiffs) must be enjoying or asserting exclusive

possession of the land: see per Blackburn J. in Allan v. Liverpool Overseers
(1874) L.R. 9 Q.B. 180 . Exclusive possession distinguishes an occupier who
may in due course acquire title under the Limitation Act 1980 from a mere
trespasser. It distinguishes a tenant holding a leasehold estate from a mere
licensee. Exclusive possession de jure or de facto, now or in the future, is the
bedrock of English land law.” (Lord Hoffmann, 702-3)

1.3 Chattel leases?

De Mattos v Gibson (1859) 4 De G & J 276

1.4 Varieties of leases

As with “trusts”, the term “leases” describes a wide variety of legal relationships.
There are short term residential leases, long leases (leases of 999 years are
commonly granted for various reasons), statutory leases, Bruton leases, periodic
leases, to name a few. They are grouped together as they typically (not always)
display certain characteristics: that they entitle the tenant to exclusive possession for
a certain term.

1.5 Leases and contracts

As well as the grant of an estate in land, a lease also constitutes a contractual
relationship between the Landlord and the Tenant.

Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386

“[A lease] is a contract for the exclusive possession and profit of land for
some determinate period.” (Lord Templeman, 390)

Query whether the contract is fully executed once the lease has been granted, or
whether it subsists for the duration of the term of the lease (see below). If the latter,
 then contractual doctrines, such as frustration and repudiatory breach, should be
available to the tenant for the duration of the lease.

c.f. Bruton leases.

2. Substantive requirements of a lease (1): Exclusive Possession

2.1 The Right to Exclusive Possession

A freeholder has the right to exclude all others from the land, sometimes called the
“right to exclusive possession forever” (see Swadling, ‘Property’ in Burrows (ed)
English Private Law (3rd ed, 2013)).

The creation of a lease usually involves the transfer of the freeholder’s “right to
exclusive possession” to the lessee for the term of the lease. The lessor retains a
“reversionary interest”, whereby their “right to exclusive possession” will revert at
the expiry of the term; but the lessee is the “owner for the time being” as she holds
the right to exclusive possession for the term of the lease.

To bring about a lease, it is normally necessary for the landlord to intend to grant the
tenant the right to exclusive possession. The fact that a person “exclusively
possesses” land does not mean that they hold the right to exclusive possession.

Street v Mountford [1985] AC 809

“There can be no tenancy unless the occupier enjoys exclusive possession;
but an occupier who enjoys exclusive possession is not necessarily a tenant.
He may be owner in fee simple, a trespasser, a mortgagee in possession, an
object of charity or a service occupier. To constitute a tenancy the occupier
must be granted exclusive possession for a fixed or periodic term certain in
consideration of a premium or periodical payments.” (Lord Templeman, 818)

Watts v Stewart [2018] Ch 423

“[T]here is a distinction between legal exclusive possession or a legal right of
exclusive possession, on the one hand, and a personal right of exclusive
occupation, on the other hand: see Windeyer J in Radaich v Smith (1959) 101
CLR 209 , 222 approved by Lord Templeman in Street v Mountford , at p 827.
Legal exclusive possession entitles the occupier to exclude all others,
including the legal owner, from the property. Exclusive occupation may, or
may not, amount to legal possession. If it does, the occupier is a tenant. If it
does not, the occupier is not a tenant and occupies in some different
capacity. In the reported cases, including the passage in Street v Mountford
which Mr Wonnacott has criticised, the expression “exclusive possession”
does not refer to legal possession but to exclusive occupation. In Woodfall's
Landlord and Tenant looseleaf ed, vol 1, para 1.023 this is referred to as “de
facto exclusive possession”.” (Etherton MR, 435)
The need for a lessee to have “exclusive possession” distinguishes leases from
contracts to occupy or use land. Contrast the position of A, who takes a “right to
exclusive possession” of a residential property for a year, with that of B, who books
into a hotel room for a month. A is likely to have a lease; B a license.

2.2 Rent Acts cases

Significant pressure was put on the concept of “exclusive possession” as landlords
sought to avoid the effects of the Rent Acts. Generally speaking, these statutes
conferred protection on tenants, both on the term of the lease and the rent
chargeable by the landlord. The Acts were of general application to residential
lettings, applying whenever a landlord granted a tenancy (e.g. Rent Act 1977, s. 2).

To avoid the effect of the Rent Acts, landlords would grant “licences” rather than
“leases”. This was often accepted by the courts, as in the case of Somma v
Hazelhurst [1978] 1 WLR 1014. The landlord gave separate “licence” agreements to a
couple for a bed-sit. The document purported to retain to the landlord a right to
occupy themselves and introduce a third party. This was found to be a licence, not a
lease.

Somma v Hazelhurst [1978] 1 WLR 1014

“We can see no reason why an ordinary landlord not in any of these special
categories should not be able to grant a licence to occupy an ordinary house.
If that is what both he and the licensee intend and if they can frame any
written agreement in such a way as to demonstrate that it is not really an
agreement for a lease masquerading as a licence, we can see no reason in
law or justice why they should be prevented from achieving that object. Nor
can we see why their common intentions should be categorised as bogus or
unreal or as sham merely on the ground that the court disapproves of the
bargain.” (Cummings-Bruce LJ, 1024-25)

This approach was seen as divorced from reality, and there was criticism of landlords
for making profit from renting their land without accepting the statutory protection
that was afforded to tenants.

It is generally thought that this approach changed in Street v Mountford [1985] AC

809. The claimant granted the defendant a “license to occupy” two rooms in the
claimant’s house. It was conceded that the effect of the agreement was to grant the
defendant exclusive possession of the premises. However, the claimant argued that
it did not create a lease by reason of the clause inserted at the end of the
agreement:

“I understand and accept that a licence in the above form does not and is not
intended to give me a tenancy protected under the Rent Acts.”

Notwithstanding this, the House of Lords found that there was a lease. The
claimant’s intention – that the agreement would not have proprietary effect – was
considered irrelevant:
 Street v Mountford [1985] AC 809
“My Lords, the only intention which is relevant is the intention demonstrated
by the agreement to grant exclusive possession for a term at a rent.
Sometimes it may be difficult to discover whether, on the true construction
of an agreement, exclusive possession is conferred. Sometimes it may appear
from the surrounding circumstances that there was no intention to create
legal relationships. Sometimes it may appear from the surrounding
circumstances that the right to exclusive possession is referable to a legal
relationship other than a tenancy. Legal relationships to which the grant of
exclusive possession might be referable and which would or might negative
the grant of an estate or interest in the land include occupancy under a
contract for the sale of the land, occupancy pursuant to a contract of
employment or occupancy referable to the holding of an office. But where as
in the present case the only circumstances are that residential
accommodation is offered and accepted with exclusive possession for a term
at a rent, the result is a tenancy.” (Lord Templeman, 826-7)

c.f. Street, ‘Coach and Horses Trip Cancelled? Rent Act Avoidance after Street v
Mountford’ [1985] Conv 328.

Does this mean that the landlord’s intention is irrelevant? No. The landlord must still
intend to grant exclusive possession; but his desire for this not to have proprietary
effect is not relevant. Contrast with the opposite situation, where the parties wish a
personal right to have proprietary effect (e.g. Hill v Tupper (1863) 2 H & C 121).

2.3 Sham Analysis

More difficult are cases where landlords have included express terms in leases so as
to make clear that they do not intend to grant a tenant the right to exclusive
possession.

In Aslan v Murphy [1990] 1 W.L.R. 766 the landlord granted a “licence” of a small
bedsit to the tenant, and included terms in the agreement designed to prevent the
grant of exclusive possession, including the right to introduce new licensees and the
obligation of the tenant to leave the premises for 90 minutes each day. None of
these clauses were ever actually enforced. The defendant successfully argued that
there was, in reality, a lease.

Aslan v Murphy [1990] 1 W.L.R. 766

“Quite apart from labelling, parties may succumb to the temptation to agree
to pretend to have particular rights and duties which are not in fact any part
of the true bargain. Prima facie, the parties must be taken to mean what they
say, but given the pressures on both parties to pretend, albeit for different
reasons, the courts would be acting unrealistically if they did not keep a
weather eye open for pretences, taking due account of how the parties have
acted in performance of their apparent bargain. This identification and
exposure of such pretences does not necessarily lead to the conclusion that
 their agreement is a sham, but only to the conclusion that the terms of the
true bargain are not wholly the same as those of the bargain appearing on
the face of the agreement. It is the true rather than the apparent bargain
which determines the question ‘tenant or lodger?’” (Lord Donaldson, 770-
771)

The difficulty lies in explaining why the problematic terms are not part of the “true
bargain”, given their inclusion in the formal document signed by the parties. The
mere fact that they were not enforced by the landlord does not mean that they are
not legally binding. The answer to this difficulty may be found in the concept of a
“sham” or “pretence”.

Snook v. London and West Riding Investments Ltd. [1967] 2 Q.B. 786
“As regards the contention of the plaintiff that the transactions between
himself, Auto Finance and the defendants were a ‘sham,’ it is, I think,
necessary to consider what, if any, legal concept is involved in the use of this
popular and prejorative word. I apprehend that, if it has any meaning in law,
it means acts done or documents executed by the parties to the ‘sham’ which
are intended by them to give to third parties or to the court the appearance
of creating between the parties legal rights and obligations different from the
actual legal rights and obligations (if any) which the parties intend to create.
But one thing, I think, is clear in legal principle, morality and the authorities
(see Yorkshire Railway Wagon Co. v. Maclure (1882) 21 Ch.D. 309 and
Stoneleigh Finance Ltd. v. Phillips [1965] 2 Q.B. 537 ), that for acts or
documents to be a ‘sham,’ with whatever legal consequences follow from
this, all the parties thereto must have a common intention that the acts or
documents are not to create the legal rights and obligations which they give
the appearance of creating.” (Lord Diplock, 802)

Although “sham” is sometimes seen as a distinct doctrine in the law (e.g. Conaglen,
‘Sham Trusts’ [2008] CLJ 176), it is arguably no more than the application of the
requirement of an intention to create legal relations (see McFarlane and Simpson,
‘Tackling Avoidance’ in Getzler (ed) Rationalizing Property, Equity and Trusts: Essays
in Honour of Edward Burn (2003)). It applies to a case such as Aslan v Murphy by
showing that particular clauses are so “unreal” that the parties did not reasonably
consider themselves to be bound by them.

Bright has argued that “sham”, in the Snook sense, is too narrow a doctrine to
explain Aslan v Murphy and similar cases. The need for a “common intention” to
deceive is too high a standard as, arguably, the landlord does intend the clauses to
be binding, albeit she has no intention to enforce them. Bright, therefore, relies on
the concept of a “pretence”.

Bright, ‘Avoiding Tenancy Legislation: Sham and Contracting Out Revisited’

[2002] CLJ 146
 “(i) where there is a common intention to deceive, that document will be
void as between those parties. It is this automatic consequence of voidness,
and possible impact upon third parties, that accounts for the reluctance of
courts to find a sham and the need for very clear evidence that the provisions
are not genuine. If an innocent third party has relied upon the form of the
document, the parties may be estopped from setting up the invalidity of the
document.

(ii) where only one of the parties intended to deceive or inserted provisions
which he had no intention of honouring and the other party was ignorant of
this (or did not "know or care") or simply went along with it through absence
of choice, the party with the deceitful (non-genuine) intent:

(a) will not be allowed to take advantage of the formal appearance of rights
to the disadvantage of an "innocent" party. This means that a person
innocent of the sham will be allowed to rely upon external evidence to prove
that the formal agreement is a sham/non-genuine. Similarly, when applied to
the residential tenancy cases, the occupier is allowed to prove that the
"licensor" never had any intention of relying upon clauses which prevent a
tenancy arising, as, for example, with the "sharing clause" in AG Securities or
the clause requiring a daily 90 minute departure in Aslan. As Lord Donaldson
M.R. said in Aslan, it "is the true rather than the apparent bargain which
determines the question: tenant or lodger?"

(b) will not be allowed to set aside the formal document by proving it is a
sham and thereby rely on the real/true agreement if an innocent person has
relied upon the formal agreement. The Yorkshire Railway case and Snook are
examples of this: in both cases the court held that there was no sham
because there was no common intention to deceive but the effect was the
same as saying that the "shammer" could not set aside the sham document
to the detriment of the innocent party.” (157-8)

Contrast with approach in Westminster CC v Clarke [1992] 2 AC 288.

2.4 Multiple Occupancy cases

Particular problems arise in cases where there are multiple occupants of a demised
premises. For a lease to exist in such cases, the occupants must either have exclusive
possession of particular parts of the premises, or they must hold the right to
exclusive possession of the entire premises as joint tenants. If neither is present,
then no one occupant has the right to exclude the others, and their right must be a
licence.

Landlords have taken advantage of this point in their attempts to avoid the Rent
Acts. The leading case is the conjoined appeals of AG Securities v Vaughan;
Antoniades v Villiers [1990] 1 AC 417. In Antoniades a couple, who moved into a bed-
 sit, were each given a separate licence agreement, each of which provided that they
would permit other licensees to use the room.

AG Securities v Vaughan; Antoniades v Villiers [1990] 1 AC 417

“My Lords, in each of the cases which were disapproved by this House in
Street v. Mountford [1985] A.C. 809 , and in the second appeal now under
consideration, there was, in my opinion, the grant of a joint tenancy for the
following reasons. (1) The applicants for the flat applied to rent the flat jointly
and to enjoy exclusive occupation. (2) The landlord allowed the applicants
jointly to enjoy exclusive occupation and accepted rent. A tenancy was
created. (3) The power reserved to the landlord to deprive the applicants of
exclusive occupation was inconsistent with the provisions of the Rent Acts.
(4) Moreover in all the circumstances the power which the landlord insisted
upon to deprive the applicants of exclusive occupation was a pretence only
intended to deprive the applicants of the protection of the Rent Acts.”

Where it is alleged that there is “pretence”, and in reality the parties occupy the land
as joint tenants of the lease, the courts often search for the “four unities”:
possession, time, title and interest. Note that these were absent in AG Securities v
Vaughan where the occupants had moved into the flats at different times.

In Mikeover Ltd v Brady [1989] 3 All ER 618, the determinative factor is that the two
occupants each had a separate liability to pay rent, meaning that there was no unity
of interest.

Mikeover Ltd v Brady [1989] 3 All ER 618

“It is, however, well settled that four unities must be present for the creation
of a joint tenancy, namely the unities of possession, interest, title and time:
(see Megarry & Wade The Law of Real Property (5th ed. 1984) pp. 419 et
seq). In the present case there is no dispute that the two agreements of June
6, 1984 operated to confer on the defendant and Miss Guile unity of
possession and title. Likewise, there was unity of time in that each of their
interests arose simultaneously and was expressed to endure for six months.
The dispute concerns unity of interest. The general principle, as stated in
Megarry & Wade at p. 420 is that “the interest of each joint tenant is the
same in extent, nature and duration, for in theory of law they hold but one
estate.” “Interest” in this context must, in our judgment, include the bundle
of rights and obligations representing that interest. The difficulty, from the
defendant's point of view, is that the two agreements instead of imposing a
joint liability on him and Miss Guile to pay a deposit of £80 and monthly
payments of £173.32, on their face, imposed on each of them individual and
separate obligations to pay only a deposit of £40 and monthly payments of
only £86.66. On the face of it, the absence of joint obligations of payment
were inconsistent with the existence of a joint tenancy.” (Slade LJ, 521)

c.f. Mrockova and Rostill, “Leases and the Nature of Co-Ownership” in Modern Studies in
Property Law (vol 12)
3. Substantive requirements of a lease (2): Term

3.1 General rule

The general rule is that the maximum duration of the lease must be ascertainable
from the commencement of the lease.

Berrisford v Mexfield [2012] 1 A.C. 955

“Following the decision of the House of Lords in the Prudential case [1992] 2
AC 386 , the law appeared clear in its effect, intellectually coherent in its
analysis, and, in part, unsatisfactory in its practical consequences. The
position appears to have been as follows: (i) an agreement for a term, whose
maximum duration can be identified from the inception can give rise to a
valid tenancy; (ii) an agreement which gives rise to a periodic arrangement
determinable by either party can also give rise to a valid tenancy; (iii) an *968
agreement could not give rise to a tenancy as a matter of law if it was for a
term whose maximum duration was uncertain at the inception; (iv) (a) a
fetter on a right to serve notice to determine a periodic tenancy was
ineffective if the fetter is to endure for an uncertain period, but (b) a fetter
for a specified period could be valid.” (Neuberger, 967-8)
- SO ---> leases for an uncertain duration ‘saved’ by s149(6) LPA ---> automatically
interpreted as a lease for life
- Premise of Neuberger’s judgement questioned in Southward v Walker --->
o Walker argues Berrisford turns any uncertain term into a 90 year lease +
rule that lease had to be certain has been abolished
 Court disagrees---> 2 possibilities from Berrisford:
 1) prove positively that also not specified duration, could
infer a 90 year lease from the conduct
 2) prove positively that parties did not want to grant a
lease for life ---> can be put outside of the scope of
Berrisford
o Burden falls on the landlord in this instance
- Effect on a case like Prudential --->

A lease granted “for the duration of the war” was held to be void in Lace v Chantler
[1944] KB 368. A lease granted until the land “was required for the purposes of road
widening” was held to be void in Prudential Assurance Co Ltd v London Residuary
Body [1992] 2 AC 386: “My Lords, I consider that the principle in Lace v. Chantler
[1944] K.B. 368 reaffirming 500 years of judicial acceptance of the requirement that
a term must be certain applies to all leases and tenancy agreements.” (394)

The difficulty can easily be avoided by introducing a maximum term: “a lease for 999
years or until the road is required for the purposes of road widening.” Provided that
maximum term is ascertainable from commencement then it is fine, even though
determinable at earlier (uncertain) date.
 3.2 Periodic leases
If the lease fails for lack of certainty, likely to get an implied periodic tenancy. This
occurred in Prudential, where the tenant was held to have a yearly lease that would
be renewed each year. This is sometimes said to be a lease for an uncertain term, as
can continue for long period until the landlord or tenant determines the lease.
However, best viewed as separate year-long leases, each for a certain duration.

Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386

“A tenancy from year to year is saved from being uncertain because each
party has power by notice to determine at the end of any year. The term
continues until determined as if both parties made a new agreement at the
end of each year for a new term for the ensuing year.” (Lord Templeman,
394)

A fetter on the right to give notice is void if it is not exercisable within in a certain
date.

3.3 Berrisford v Mexfield

Section. 149(6) Law of Property Act 1925:

“Any lease or underlease, at a rent, or in consideration of a fine, for life or
lives or for any term of years determinable with life or lives, or on the
marriage of the lessee, [or on the formation of a civil partnership between
the lessee and another person, or any contract therefor, made before or after
the commencement of this Act … shall take effect as a lease, underlease or
contract therefor, for a term of ninety years determinable after … the death
or marriage of … the original lessee …”

The claimant was a housing association which bought properties from former
owners who had had difficulty in re-paying their mortgages, with the purpose of re-
letting the properties to their former owners. There was no maximum term for the
lease. Whilst the claimant could determine the lease with one month’s notice, the
defendant was unable to determine the lease save on the occurrence of certain
events (e.g. rent arrears). Despite being for an apparently uncertain term, the
Supreme Court held that it was converted into a 90 year lease by s. 149.

Lord Neuberger reasoned:

(a) Pre-1925 a lease of an uncertain duration would be construed as a lease for
life;
(b) By s. 149(6) leases for life are turned into 90 year leases (determinable on
death of the tenant); and therefore
(c) The tenant’s lease was certain, being a lease for 90 years.

Controversy relates to (a). Pre-1925, some leases for apparently uncertain terms
were construed as leases for life (e.g. Re Carne’s ST [1899] 1 Ch. 324, where it was
clear that the trustees wanted the tenant to occupy the manor house for her life);
however, it is not clear that all leases for uncertain terms would be so construed.

The question is whether cases such as Lace v Chandler and Prudential would now be
decided differently, so that the uncertain terms would be converted into 90 year
leases under s. 149? In Berrisford both Lady Hale (at 93) and Lord Dyson (at 117) said
that all uncertain terms were “automatically” transformed into leases for life/90
years. This absolutist approach was doubted in the case of Southward Housing v
Walker, which involved similar facts to Berrisford.

Southward Housing Co-operative Ltd v Walker [2016] EWHC 1615

“In Mexfield Housing Co-operative Ltd v Berrisford [2012] 1 AC 955 , all the
justices of the Supreme Court were agreed that in the particular
circumstances of that case it was intended that the defendant should enjoy
the premises for life; that, to put that into more legal language, the parties
did in fact intend a lease for life determinable earlier by the tenant on one
month's notice and by the landlord on the happening of certain specified
events.” (Hilyard, 69)

“I have concluded that the “rule” does not depend for its application on the
parties' intentions; but the judgments of the Supreme Court in the Mexfield
case leave open the possibility that it may be disapplied where those
intentions and fundamental aspects of their agreement would be
confounded by it.” (Hilyard J, 91)

Hilyard J held that there is a distinction between a positive intention to create a lease
for life, and the negative intention not to create a lease for life. Concluded that the
former was not necessary to engage s. 149(6), but the latter would exclude its
operation. In the case there was provision giving the landlord the power to serve a
notice to quit; this evinced an intention that the term was not to run for 90 year
term.

3.4 Criticism of the certainty of term rule

If the parties wish to create a lease for an uncertain term, why should the law
prevent them from so doing? The need for a term has been criticised as making in-
roads on the principle of freedom of contract (see Bright, Landlord and Tenant Law
in Context (Hart, 2007) 74).

Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386

“No one has produced any satisfactory rationale for the genesis of this rule.
No one has been able to point to any useful purpose that it serves at the
present day.” (Lord Browne-Wilkinson, 396)
- BUT this proceeds upon the assumption of freedom of contract (or freedom of
landlord) ---> but leases come with property rights which are restricted by the
s4(1) numerous clausus principle

Yet there are arguments in its favour:

 a. If parties were free to create any type of property right through their contract,
then there would be no “closed list”, or “numerus clausus”, principle;
b. Without a term certain a lease can become perpetual;
a. E.g. Prudential ---> land became alienated
b. CA ---> leases are often in practice perpetual
i. e.g. 3000 lease ---> in effect alienate the land and almost/ in
substance a sale
1. Rationale for this ---> due to maintaining a relationship LT
a. Legal significance ---> can impose obligations they
wouldn’t be able to if sold outright
2. If sell freehold ---> relationship with that person comes to
an end
ii. BUT in Prudential ---> not intended to be prudential so they
charged quite a nominal/ small amount ---> unlike lease for 3000
years
c. Whilst perpetual leases can, in practice, be granted (e.g. a lease for 999 years),
the landlord’s intention in such a case is effectively alienation – which is not the
case in Prudential, where the landlord was clearly not intending to permanently
dispose of its interest in the land.

4. Substantive requirements of a lease (3): Rent?

It has been suggested that the third requirement for a lease is an obligation to pay
rent, although such rent may be nominal.

Street v Mountford [1985] AC 806

“If exclusive possession at a rent for a term does not constitute a tenancy then
the distinction between a contractual tenancy and a contractual licence of land
becomes wholly unidentifiable.” (Lord Templeman, 825)

This is probably incorrect. In Ashburn Anstalt v Arnold [1989] Ch 1, where the tenant
had a right to stay on the premises rent free, it was held that this did not prevent the
creation of a lease.

Ashburn Anstalt v Arnold [1989] Ch 1

“As regards rent, Arnold & Co. was not required to pay a rent under the
provisions of clause 5, nor did it do so. It may be that the sum paid to Arnold
& Co. for its leasehold interest took account of the freedom from rent under
clause 5. There is, however, no evidence of that. We treat the case as one
where no rent was payable. Did that prevent the provisions of clause 5 from
creating a tenancy? We do not think so. We are unable to read Lord
Templeman's speech in Street v. Mountford as laying down a principle of "no
rent, no lease." In the first place, that would be inconsistent with section
205(1) (xxvii) of the Law of Property Act 1925, which defines "Term of years
 absolute" as "a term of years (taking effect either in possession or in
reversion whether or not at a rent)..." (Fox LJ, 9)

However, even though rent is not required, as there is a contract between the
landlord and tenant there is a need for consideration. This might be satisfied simply
by the tenant agreeing to be bound with the terms of the lease, and hence coming
under various duties (such as to keep the land in good repair, allow the landlord
access etc).

5. Bruton Leases
The possibility of a purely contractual lease is raised by the case of Bruton v London
& Quadrant Housing Trust Ltd [2000] 1 AC 406. The local council were the
proprietors of a block of flats. It had long term plans to redevelop the property, but
in the meantime it gave the housing trust, Quadrant, a licence to use the flats.
Quadrant was a charity that sought to provide homes for homeless people.

Quadrant purported to “lease” a flat to Gary Bruton, who sought to argue that
Quadrant had a duty to keep the flat in good repair under s.11 of the Landlord and
Tenant Act 1985. This required him to demonstrate that he had a lease, rather than a
licence. The problem was that Quadrant were themselves licensees and hence had
no estate in the land from which they could grant a sub-lease. Notwithstanding this,
the claim succeeded.

Bruton v London & Quadrant Housing Trust Ltd [2000] 1 AC 406

“… the term "lease" or "tenancy" describes a relationship between two
parties who are designated landlord and tenant. It is not concerned with the
question of whether the agreement creates an estate or other proprietary
interest which may be binding upon third parties. A lease may, and usually
does, create a proprietary interest called a leasehold estate or, technically, a
"term of years absolute." This will depend upon whether the landlord had an
interest out of which he could grant it. Nemo dat quod non habet. But it is
the fact that the agreement is a lease which creates the proprietary interest.
It is putting the cart before the horse to say that whether the agreement is a
lease depends upon whether it creates a proprietary interest.” (Lord
Hoffmann, 415) ---> basically need to look at the terms of the agreement to
see if it hypothetically creates a proprietary interest

- SO the landlord having a prop interest in the land is NOT a requirement for
granting a lease
- Lease has dual effect ---> contractual relationship between landlord and tenant
(both obligations and rights) AND conveyance of a proprietary effect --->
combination of these= lease
o Reason Bruton is odd is because it is saying that a lease can happen with
just the contract ---> CRITICISM
 Possible basis of decision:
a. Policy based view on the applicability of the Landlord and Tenant Act 1985?
a. Meant to protect tenants in vulnerable situations
b. SO policy should apply to people in tenancy adjacent relationships to
protect them
b. Tenancy by estoppel?
a. Should they be able to deny this when they have clearly said to them
that they are granting a lease
c. Relativity of title?
a. Kay v Lambeth ---> Bruton does have a property right due to relativity
of title ---> there is never someone with absolute ownership, but
rather someone with more relative title than someone else
i. So have rights against TPs as have a more relative title than
the rest of the world (e.g. adverse possession and squatters)
b. London Quadrant’s initial right given from the local authority ---> they
can this give this right to exclusive possession to Bruton BUT this is a
weak right
i. SO, if the local authority wanted the land back ---> Bruton
wouldn't be protected as London Quadrant’s title is more
relative and is based on the one given by the local authority

Kay v Lambeth BC [2006] 2 AC 465

“An analogous situation would arise if a person not the owner of land but in
adverse possession of it were to grant a tenancy of the land to another. As
between the grantor and grantee there would be a valid “non-estate”
tenancy. But unless and until the adverse possession had continued for the
requisite 12 years the tenancy would not bind the true owner of the land. An
agreement by the adverse possessor to deliver up the land to the true owner
would not affect the rights of his tenant against him, the landlord, but equally
could not turn the tenant into the true owner's tenant or give the tenant any
rights against the true owner.” (Lord Scott, 525)

6. Creation of Leases- know these rules V carefully for FHS

6.1 Who can grant a lease?

A lease can be granted (subject to Bruton) by a person with a freehold or leasehold
interest in land. A question that sometimes arises is whether a landlord can grant a
lease to themselves (no), or to themselves and another (yes).

This was in issue in Proctor v Proctor [2021] EWCA Civ 167, which concerned a lease
of agricultural land to a number of siblings. Some of the siblings (but not all) were
also freeholders of the land. Some old authorities had held that where there is
overlap between landlords and tenants then their interests could ‘merge’ and
destroy the tenancy. In Proctor the court held that this was a consequence of the
old-fashioned legal ‘tenancy-in-common’ (where each landlord had their own
separate title that could merge with their respective leasehold interest). However, as
legal title can now only be held under a joint tenancy, there is no longer the problem
of merger, provided there is not complete overlap between landlords and tenants.

Proctor v Proctor [2021] EWCA Civ 167

“The only species of co-ownership that can now exist in England and Wales is
a joint tenancy, the problem of merger no longer applies. A joint tenancy of a
leasehold interest held jointly by A, B and C will not merge in a freehold
interest held jointly by A and B. The reason for that is that since the joint
tenancy in each interest is incapable of severance at law, there is not the
necessary coincidence of interest in the two interests in land. Accordingly,
the common law does not mandate a merger; and in equity merger depends
on intention. Where, as in our case, a tenancy is granted by one partner to a
partnership for the benefit of the partnership business, the mutual duty of
good faith would, in my judgment, in any event preclude merger.” [55]
“Although the common law set its face against the grant of a tenancy by A
and B to A and B, I do not consider that there was an absolute rule that
prohibited the grant of a tenancy by A to A and B; or by A and B to A, B and
C.”[58]
- With co-ownership ---> composition of the rights over the land must be
different
- Ingram v IRC ---> even a slight difference between identity of landlord and
tenant
6.2 Basic requirements
The creation (and assignment) of leases must normally be complete by deed (and
registration if over 7 years). This results from:

s. 52(1) of the Law of Property Act 1925:

“All conveyances of land or of any interest therein are void for the purpose of
conveying or creating a legal estate unless made by deed.”
- Requirements of deed (s1 LP(MP)A 1989):
o Must be executed as a deed (rule of intention)
o Signed in presence of a witness who attests signature

s. 27 of the Land Registration Act 2002:

“Dispositions required to be registered
(1) If a disposition of a registered estate or registered charge is required to be
completed by registration, it does not operate at law until the relevant
registration requirements are met.
(2) In the case of a registered estate, the following are the dispositions which
are required to be completed by registration—
…
(b)where the registered estate is an estate in land, the grant of a term
of years absolute—
(i)for a term of more than seven years from the date of the
grant,
 (ii)to take effect in possession after the end of the period of
three months beginning with the date of the grant,
(iii)under which the right to possession is discontinuous,

6.3 Short Leases

s. 54(2) of the Law of Property Act 1925

“Nothing in the foregoing provisions of this Part of this Act shall affect the
creation by parol of leases taking effect in possession for a term not exceeding
three years (whether or not the lessee is given power to extend the term) at the
best rent which can be reasonably obtained without taking a fine.”
Note that “parol” not limited to leases granted orally, but also by writing (anything
not amounting to a deed).
BUT still has Requirements:
- Not exceeding 3 years
- ‘Best rent’ [to counter the lack of evidence of the lease and risk for TPs]
o Acts as an insurance ---> most it can last is 3 years AND purchaser will be
in receipt of good rent to comp for this
- ‘Taking effect in possession’ ---> Long v Tower Hamlets
o Lease must commence at the date of the grant/ document is executed
o EVEN if not move in straight away

Problems are caused by the words “takes effect in possession”. The grant of a lease
the term of which commences in the future is said to give the lessee a “reversionary
interest”. This contrasts with a grant which permits the lessee to take immediate
possession, which is called an “interest in possession”.

In Long v Tower Hamlets BC [1998] Ch 197 the landlord wrote to the tenant on the
1st September, offering a lease that begin on the 27 th September. This was a
reversionary lease and not within the section.

Long v Tower Hamlets BC [1998] Ch 197

“… reversionary leases conferring no immediate right to take possession are
altogether excluded from the ambit of section 54(2) of the Law of Property
Act 1925 and that such reversionary leases can take effect only if made by
deed. It follows that the tenancy document (which it is common ground was
a reversionary lease not made by deed and not conferring on Mr. Long an
immediate right to take possession) was incapable of taking effect as a parol
lease under section 54(2).” (218)

- This is to protect a purchaser ---> expect tenants to be in possession who they’d

see when they inspect the land

Note the purpose served by the “best rent” requirement: offers some protection for
the Landlord?
6.4 Effect of acquisition of Legal Lease

Leases over 7 years (and some special Deed (s52) + Registration (s27)
leases) Purchaser is bound by lease- s28
LRA
Leases between 3 – 7 years Deed (s52) ---> no need for
registration
Purchaser is bound by the lease-
sch 3 para 1 LRA as an overriding
interest ---> lease overrides the
sale/ disposition
Leases under 3 years* Oral/informal if s54 is satisfied
Purchaser is bound by the lease --->
sch3 para1

* Note the additional requirements in s. 54(2) LPA 1925.

Provided a legal lease is created, the Tenant has a legal estate binding on the
Landlord and third parties. The tenant is protected either under the normal rules of
priority (s. 28 – 29 Land Registration Act 2002), or as the holder of an overriding
interest (Sched 3, para 1, Land Registration Act 2002)

If the parties have failed to comply with the rules of acquisition, there are three
possibilities:

 Implied periodic tenancy

 Equitable lease
 Licence to occupy/tenancy at will

6.5 Periodic tenancy

These can arise expressly (“a lease from year to year”), but more commonly by
implication. The typical case is where a tenant occupies land under a void lease, e.g.
Prudential, or holds over at the end of the lease.

Such leases do not arise automatically, but are based upon the intention of the
parties as inferred from the Landlord’s acceptance of rent for a period. An example is
Javid, where the tenant was permitted in as the parties negotiated a term, held that
there was no implied PT as the parties were so far apart in terms of their
negotiations.

Javid v Aquil [1991] 1 WLR 1007:

“The law will imply, from what was agreed and all the surrounding
circumstances, the terms the parties are to be taken to have intended to
apply. Thus if one party permits another to go into possession of his land on
payment of a rent of so much per week or month, failing more the inference
 sensibly and reasonably to be drawn is that the parties intended that there
should be a weekly or monthly tenancy. Likewise, if one party permits
another to remain in possession after the expiration of his tenancy.” (1012)

- Here, tenant asked to occupy land and pay rent until they reached agreement
- Never reached agreement through negotiation and tried to kick out
- Tenant argued they have a periodic tenancy
- Court REJECTED ---> there still needs to be an agreement (can be implied)
o Held that here the agreement presumption was rebutted as the parties
were still locked in negotiation ---> so NO agreement

The fact that rent is paid does not give rise to presumption of a Periodic Tenancy.
Rather, the intention must be proved from the background context. In Barclays
Wealth Trustees v Ermis [2014] 2 P. & C.R. 4, where parties were negotiating for a
lease, it was clear that there was no intention at that stage to form a legal
relationship.

Barclays Wealth Trustees v Ermis [2014] 2 P. & C.R. 4

“The most obvious and most significant circumstance in the present case, as
in Javad v Aqil , was the fact that the parties were in negotiation for the grant
of a new formal lease. In these circumstances, as in any other subject to
contract negotiations, the obvious and almost overwhelming inference will
be that the parties did not intend to enter into any intermediate contractual
arrangement inconsistent with remaining parties to ongoing negotiations.”
[23]

The term of such leases do not exceed a year (being the maximum period over which
rent is normally calculated). As such, these leases can fall within s. 54(2) and take
effect as legal leases created informally.
- Classed as small leases as are less than 3 years
- SO they do fit into the acquisition rules in s54(2)

The term is inferred from the period upon which rent assessed. As such, a rent of
“£36,000 per annum, payable monthly” would create a term for a year, even though
rent payable at more frequent intervals: Ladies Hosiery & Underwear Ltd v Parker
[1930] 1 Ch 304. A rent of “£3,000 per month” would create a monthly lease.

Such leases are determined by giving notice, usually when there is at least half of the
term remaining, although parties are free to agree some different period:
Sidebotham v Holland [1895] 1 QB 378.

6.6 Equitable Leases

Consider the case of a lease contained in a written agreement that does not satisfy
the requirements of a deed. May give rise to an equitable lease.
Example: Landlord (L) and Tenant (T) sign a “leasehold agreement” providing for a 5
year lease of premises. The document is not witnessed and hence not a deed.

L and T have a contract to create a lease: in consideration for T’s promise pay rent
and undertake the leasehold covenants, L promises to grant T a lease by executing a
deed. T normally has the right to specifically enforce this contract, and create the
lease.
- Can sue for damages OR ask for specific performance from the court
- Court can order L to execute the deed OR execute the deed on L’s
Behalf

In Walsh v Lonsdale (1882) 21 Ch D 9 the court went a step further and held that if
specific performance was available, then a tenancy in equity arose the moment the
agreement was executed.
- So treated as if coming to court and asking for specific performance
- SO treated as if L has executed the deed ---> fiction of performance
- SO equitable lease

The case concerned an agreement for a lease which included an obligation to pay a
year’s rent upfront. There was no deed. The T went into possession and paid
monthly rent. When the L tried to enforce right to lump sum, the T said he had an
implied PT, and the terms in the lease were void. Held that L and T in same position
as if lease had been executed as a deed.

Walsh v Lonsdale (1882) 21 Ch D 9

“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 had if a lease had
been granted. On the other hand, he is protected in the same way as if a
lease had been granted; he cannot be turned out by six months' notice as a
tenant from year to year. He has a right to say, “I have a lease in equity, and
you can only re-enter if I have committed such a breach of covenant as would
if a lease had been granted have entitled you to re-enter according to the
terms of a proper proviso for re-entry.” That being so, it appears to me that
being a lessee in equity he cannot complain of the exercise of the right of
distress merely because the actual parchment has not been signed and
sealed.” (Jessel MR, 14 – 15)

This is called the “doctrine of conversion”, whereby equity treats as done that which
ought to be done. The equitable interest in the land is said to “anticipate” the legal
interest. As such, between the L and T, they are in the same position as if the
agreement had been executed as a deed, i.e. T is entitled, as against L, to exclusive
possession, and the L is entitled to performance of the covenants.
- Between L and T ---> whether legal lease or equitable one ---> no difference
whatsoever ---> L would have all the ordinary remedies against L as if legal lease
given
- BUT effects TP – see below ---> reason for granting a deed

Why bother to execute a deed if a contract for a lease is a good as a lease? Concerns
third-parties:
 Can a tenant in equity sue a trespasser? (c.f. Shell v Total [2010] EWCA Civ
180)
o
 Protection against an assignee of the L?:
o It does not qualify as an overriding interest under sch 3, para 1 [only
applies to legal leases]. Must either protect the right on the register or
show an overriding interest under sched 3, para 2 Land Registration
Act 2002 [Actual Occupation which is obvious on reasonably careful
inspection]
 There must be a written agreement: s. 1 LP(MP)A 1989; if written contract,
why not execute a deed?
 Specific performance must be available; query whether a tenant in breach of
the agreement (i.e. unclean hands) benefits under this doctrine: Coatsworth
v Johnson (1885) 55 LJQB 220

7. Ongoing contractual relationship

Leases are both the grant of a legal estate and a contractual relationship between
the landlord and tenant:

Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386

“[A lease] is a contract for the exclusive possession and profit of land for
some determinate period.” (390)

The “Contractualisation of Leases” debate has arisen in the context of renewal of

periodic tenancies (Hammersmith & Fulham LBC v Monk [1991] UKHL AC 478) and
the implication of terms into a lease (Liverpool CC v Irwin [1970] AC 239). Yet query
whether this is a real issue. The co-existence of contractual rights and property rights
is not unusual, but occurs (for instance) whenever parties enter into a contract of
sale of goods.

The real issue is whether the contract is wholly executed on the creation of the
lease, or whether it subsists for the term. If the latter, then it affords the parties
means of bringing the lease to an end early by applying contractual doctrines such as
frustration or repudiatory breach.

National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675

 “[I]f the argument is to have any reality, it must be possible to say that
frustration of leases cannot occur because in any event the tenant will have
that which he bargained for, namely, the leasehold estate. Certainly this may
be so in many cases - let us say most cases. Examples are London and
Northern Estates Co. v. Schlesinger [1916] 1 K.B. 20 , where what was
frustrated (viz. the right of personal occupation) was not at the root of the
contract, and requisitioning cases, for example, Whitehall Court Ltd. v.
Ettlinger [1920] 1 K.B. 680 , where again the tenant was left with something
he could use. But there may also be cases where this is not so. A man may
desire possession and use of land or buildings for, and only for, some purpose
in view and mutually contemplated. Why is it an answer, when he claims that
this purpose is "frustrated," to say that he has an estate if that estate is
unusable and unsaleable? In such a case the lease, or the conferring of an
estate, is a subsidiary means to an end, not an aim or end of itself.” (Lord
Wilberforce, 694 – 5)
- Sceptical of applying frustration here as frustration only applies where the
contractual relationship continues
- Should see lease as a contract of sale ---> once the deed is submitted and
lease acquired, the contract is fully effected and thus cannot be frustrated
- BUT criticism ---> relationship continues during the lease (see Hussein)
o Obligation to pay rent and grant exclusive possession

Repudiation: Hussein v Mehlman [1992] 2 EGLR 287

- Hussein argued L repudiated the contract as he did not give him peaceful
possession of the land (due to the anti social behaviour)
- This only works if the relationship continues throughout the lease and does
not end upon granting of the lease
- Only a HC decision
o Confirmed by privy council in Ramsbury v Ocean View
Implication of terms: Liverpool CC v Irwin [1970] AC 239
- Implied terms work the same way as in a tenancy agreement