Land - Essential Requirements of a Lease

When is a lease created?

When one person with an estate in land grants the temporary right to another person to use & enjoy that land exclusively.

What is a sub-lease or under lease?

A lease granted out of a superior lease

What are the differences between a lease & a licence?

Lease is a proprietary right enforceable on 3rd parties, can confer security of tenure, enforceable in rem, has statutory protection

Licence is a personal right only enforceable on the grantor, no security in tenure, enforceable in personam.

How do you decide whether an agreement is a lease or a licence? What do you not consider?

The substance not the label

What are the requirements for a lease?

Certainty of term, exclusive possession, correct formalities.

What is NOT essential for a lease?

Payment of rent

What is certainty of term?

Tenancy must be granted for a certain duration - you know when it will end.

What is a fixed term?

When a maximum duration of the tenancy exists from the outset.

What is a break clause?

A right for either party to end the lease early, may be conditional, often requires notice.

What is a periodic term?

A lease for one period e.g. weekly ,monthly, quarterly, yearly, which goes on extending itself automatically until either landlord/tenant give notice to terminate.

How can a periodic term be created?

Expressly or impliedly

What is an express periodic tenancy?

Tenancy where there is written agreement of the periodic agreement.

What is an implied periodic tenancy?

Nothing set out in writing, certain term arises by looking objectively at all relevant circumstances such as payment, acceptance of rent on a periodic basis.

How is the term of a periodic tenancy assessed?

By reference to which the rent is calculated e.g. rent is £10,000 per year paid monthly = term is annually.

What is exclusive possession?

The right to exclude all others from the property including the landlord

How do you determine whether an occupier has exclusive possession?

The substance of the agreement is examined with all the facts & the reality of the situation.

Give some examples of scenarios which may indicate the occupier does not have exclusive possession?

Landlord retains a key & has right of access

Landlord provides services

Sharing clause

Landlord retains right to relocate the tenant

What is important in distinguishing whether the tenant has exclusive possession when a landlord retains a key?

The purpose for which the key is retained e.g. if for emergencies then tenant likely has exclusive possession.

What is important in distinguishing whether the tenant has exclusive possession when a landlord retains a right of access?

Whether it is restricted or unrestricted.

What is an example of restricted access for a landlord?

Access restricted to carry out repairs

What are examples of services provided by a landlord?

Cleaning, changing linen

What is the real situation if a landlord provides services or attendance?

There is a licence not a tenancy, the occupier is a lodger without exclusive possession.

What should be considered as to whether a sharing clause is a sham or genuine?

Size & nature of the accommodation

Relationship between the occupiers

Wording of the clause - how widely is it drafted

Whether the clause has ever been exercised

What is realistic

What is a sharing clause?

Where the landlord reserves the right to share the property with the tenants OR reserves the right to introduce others to share

Do stranger tenants in a 4 bed flat with shared space, separate agreements & a landlord reserving right to introduce others to share the flat have exclusive possession? Why?

No - the occupants were willing to share the flat with others introduced time to time.

Do a couple who occupy a small flat with one bedroom with a double bed, separate but identical rent agreements, a landlord who reserved a sharing clause and clauses stated the occupants did not have exclusive possession & had a licence, have exclusive possession? Why?

Yes - it was not realistic that the landlord would himself use or occupy or put someone else in to share. The clauses about licence & exclusive possession are sham.

What is the type of agreement if an occupation agreement contains a right for the landlord to relocate & move tenants to an alternative premises?

Not a lease - unless this is a sham clause.

What must a business tenant show for there to be a lease?

Certain terms & exclusive possession

Will the courts accept the label of 'licence' in a business context?

Yes, there is more equality in bargaining power

What is an important consideration as to whether an occupant has exclusive possession in a business occupancy context?

Degree of physical control over the premises of the business

How do the courts assess an occupation agreement document in a business context?

As a whole, to see whether the landlord retains control over the property.

Will consider any label & terms as they are

Can multiple occupiers have exclusive possession?

Yes if they demonstrates the 4 unities of title, & are joint tenants.

Do multiple occupiers have a lease?

If they have the right to exclude all others including the landowner then prima facie yes.

What if the occupiers do not have all 4 unities?

They cannot have a joint tenancy, may have individual tenancies or failing that individual licences.

What if co-owners & joint occupants signed separate but interdependent & identical agreements?

There is still unity of interest & title - if either both would be signed or neither.

Which situations can make something that would otherwise be a lease, a mere licence?

When there is no intention to create legal relations

Where there is a service occupancy

When is a lack of intention to create legal relations presumed?

Where there is a family arrangement, an act of friendship or generosity.

What will rebut the presumption that there is no intention to create legal relations between family/friends?

If there is a degree of formality and/or market rent is paid

What is a service occupancy?

Employee/employer relationship between landowner & occupier

Occupier required to live in premises for better performance of his duties as an employee

Is there a lease if there is a service occupancy?

No

What is the key part of determining whether a service occupancy exists?

Whether the occupation is for the better performance of their job role.

What are the general formalities for creating a legal lease?

A deed

Depends on the length of the tenancy

What are the formalities for a lease of over 7 years?

Deed

Registration - compulsory requirement

What are the formalities for a lease 7 years or less?

Deed

Lease will be binding as an overriding interest.

What are the formalities for a lease of 3 years of less (parol lease)?

No formalities providing:

- The lease takes effect in possession (immediately)

- Is granted at market rent

- No premium is payable upfront

Not registered

How can a short (parol) lease be granted?

Verbally, no formal requirements

What kind of leases fall within the short lease exception?

Short fixed-term leases

Express periodic tenancies

Implied periodic tenancies

What are the formalities for an equitable lease?

Tenant has an equitable lease if the agreement is:

- In writing

- Contains all terms

-Signed & agreed by both parties