Leases and licences

what are the two core elements of a lease

exclusive possession and a certain term (fixed or periodic) → Fatac

how does fatac distinguish leases from licences

• lease confers exculsive possession for a limited term

• licences confer a mere permission to occupy

is rent essential to a lease

n0 → it indicates an intention to be bound (fatac)

does calling it a licence make it one

no, substance over form (street v mountford)

what are the key factors for determining if it is a lease or a licence set out in fish and game

Critical factors:

• Logical form: more like a grant with subtractions than a series of permissions → consistent with exclusive possession

• The most intrusive rights reserved (such as the ability to let a third party come onto the land) by grantor can be exercised only with grantee’s consent

• The extent of the obligations put on grantee (there are so many, would be surprising if this were only a licence)

• Crowns purpose of making grant (most important)

what happens to a lease that states it runs “until the war ends”

it is valid if the event is defined, but it ends at 10 years (unless a later fixed date is specified), and is equitable only → s 212

what does a licence give

• personal right only

• it binds only the parties and does not bind a new owner

what counts as a short term lease, what are the key sections

unregistered, starting within 20 working days, for 1 year or less (or periodic with periods of 1 year or less) → s 207

• it can be oral, and gives a legal interest subject to the LTA

• s 207 = short term lease form

• s 208 = short term lease can be made orally or in writing

• s 209 = effect → legal interest in the land. However is subject to the Land Transfer Act 1952 (subject to a registered lease), sort of middle ground between unregistered lease and registered lease.

what happens to an oral agreement for a 2 year lease

→ it is an equitable lease only if partly performed (e.g, entry and payment of rent), otherwise there is no lease (s 26 PLA)

what is the rule in walsh v lonsdale

an enforceable agreement to lease is treated as an equitable lease

does an unregistered lease bind a new owner

it is vulnerable under LTA s 51 → caveat it

what does a new landlord take when the reversion is transfered

all benefits and burdens

is the original tenant liable after assigning to a new tenant

yes, for the whole term, and so is every assigning tenant (s 241)

is an assignment without landlord consent effective

• yes it takes effect (s 240(2))

• lessor can cancel, re enter, or sue

Property Law Act 2007 → S 218 what are the Covenants, conditions, and powers implied in all leases

• (1) every lease contains the implied covenants, conditions and powers set out in Part 2 of Schedule 3

• e.g quiet enjoyment, rent, no alterations without consent, no nuisance,

• Clause 13 Lessee to keep and yield up premises in existing condition

  The lessee will-

  • At all times during the currency of the lease, keep the leased premises in the same condition that they were in when the term of the lease began, and

  • At the termination of the lease, yield the leased premises in that condition

what is the tenant not liable to repair

wear and tear, flood, fire, explosion, natural disasters, insured risks

Property Law Act 2008 s 240 → what does this say about tenant assignment

If a lease contains a covenant that the lessee will not, or will not without the lessor’s consent, transfer or assign the lease, a transfer or assignment of the lease by the lessee has effect whether or nor

• The lessor has consented to the transfer and

• The transfer is in breach of that covenant

what are the default cancellation grounds

Section 12 (schedule 3) Power to cancel lease for non-payment of rent or other breach → The lessor may cancel the lease in accordance with section 244 if:

• rent unpaid for 15 working days

• another covenant unperformed for 15 working days

How must the landlord validly cancel

by giving notice (s 245 or 246), then a court possession order or peacable re entry (244)

Section 244 Cancellation of lease for breach of covenant or condition → what does this general condition set out

• A lessor who wishes to exercise a right to cancel a lease because of a breach by the lessee of a covenant or condition of the lease may-

• Apply to a court for an order for possession of the land; or

• Re-enter the land peaceably

what process must a landlord follow to cancel (full breakdown)

A landlord can cancel a lease only by following the PLA code. Any lease term that makes cancellation automatic on breach, or tries to get around the code, has no effect (s 243). The steps are:

1. Is there a ground to cancel?

• Under the lease terms, or

• Under the implied power (Sch 3 cl 12):

  • rent unpaid for 15 working days; or

  • failure to perform any other covenant for 15 working days.

2. Serve a proper notice first.

• Unpaid rent (s 245): the notice must state the breach and the amount of rent unpaid. It must also state that the landlord intends to cancel if the rent isn't paid within the period the Act requires.

• Other breaches (s 246): the notice must:

  • specify the breach;

  • require it to be remedied within a reasonable time, if it can be remedied;

  • state any compensation sought; and

  • state that the landlord intends to cancel if the breach isn't remedied.

• Wait for the notice period to end without the tenant remedying the breach.

• A defective or missing notice means the lease is not validly cancelled.

• Check your supplement for the exact notice periods, because ss 245–246 aren't set out in your course materials.

3. Then cancel in one of two ways (s 244):

• (a) Apply to the court for an order for possession; or

• (b) Re-enter peaceably. This must be without forcible entry (Crimes Act s 91). For example, changing the locks when the premises are empty is peaceable; forcing a tenant out isn't.

4. Expect a relief application.

• The tenant (or a mortgagee or receiver of the lease) can apply for relief against cancellation (s 253):

  • before a possession order is made, or

  • within 3 months of peaceable re-entry.

• The court can grant relief on conditions (s 256), even for an essential or irremediable breach.

  • Rent-only breach: relief is presumptive if the arrears and costs are paid (Mulholland).

  • Other breaches: apply the factors in Strong v Hurunui.

Also:

what does s 243 set out with regards to fair process requirements

• s 243 states cancellation must be in accordance with ss 244-264

• which involves fair process requirements, particularly:

• Serve a proper formal notice first: notice must include the breach and provide time for remedy, state any compensation sought

• s 243 also empowers the court to grant relief, broad discretionary power

is an automatic forfeiture clause effective

→ no (s 243(3)

who can apply for relief and what are the limits

• The tenant (or a mortgagee or receiver of the lease) can apply for relief against cancellation (s 253):

  • before a possession order is made, or

  • within 3 months of peaceable re-entry.

can relief be given for a breach of an essential term, or one that cant be remedied

• yes (s 256) shows court broad discreiton

what is the rule for rent only breaches

presumptive right to relief upon paying arrears and costs

• relief only refused in exceptional circumstances e.g tenant is hopelessly insolvent or hasnt paid (mulholland)

what are the factors for other breaches set out in studio x, cited in strong

• Whether the breach was advertent or deliberately committed

• Conversely, whether the breach was caused by an inadvertence or was entirely beyond the tenant’s control

• Whether the tenant has made or will make good the breach of the covenant and is able and willing to fulfil his obligations in the future

• Whether the landlord has contributed to the breach

• Balancing- in whose favour should it be exercised

what does s 256 set out

Section 256 Powers of court on application for relief

→ grants courts broad powers to grant relief against cancellation

In determining an application for relief against the cancellation, or proposed cancellation, of a lease, under section 253, a court may grant-

• The relief sought on any conditions (if any) as to expenses, damages, compensation, or any other relevant matters that it thinks fit; and

• An injunction restraining any similar breach in the future

• The court may grant relief against the cancellation, or proposed cancellation, of a lease even though-

• The cancellation is for a breach of an essential term of the lease; or 

• The breach is not capable of being remedied

• Section 207: short term lease: form

what factor did the court put alot of weight on in strong

• Cancellation based on T’s breach of multiple covenants- failure to remedy a requirement to redecorate the hotel premises as required under clause 6.3 of the lease

• The breach is a serious one- deliberate, important and persistent

• A lot of weight is given to how cancellation would affect tenants - there is no evidence of lasting harm, could be remedied quickly

→ conditional remedy given, shows courts broad discretion

• example of courts granting relief

What happened in Sibrad

Relief against refusal to renew was declined, based on 4 key breaches:

1. Breach of covenant stating what the farm could be used for. Sibrad was farming bulls and not dairy cows (serious breach as would not have leased if it was for bulls)

2. Breach of specific covenant requiring fertiliser tests (serious breach as hard to remedy)

3. The use of land that was not leased to Sibrad (49 acres vs 45 leased),

4. Nuisance, disturbance or damage to landlord and neighbours and using land in a noxious or offensive manner

• serious ongoing breaches and a hostile tenant

• Weighed taking into account:

  • The prejudice on each side

  • Sibrad would suffer some loss

  • But sibrad had been a ‘bad tenant’

  • And the landlords lived in close proximity. Particular prejudice in having a hostile/uncooperative tenant in breach in these circumstances

  
  

  Ratio: When the breaches outweigh the loss that the tenant would have, relief may not be granted

does the code (s 243) apply to licences - fair process requirements

yes, to licences to occupy for rent or payment in kind (s 206), but creates no interest in land

can a tenant sue a trespasser? can the landlord?

the tenant can, the landlord generally cannot

can a licensee sue in trespass

traditionally no, as a licensee has no possession (Georgeski)

• Sealink obiter however → A licensee has standing to sue in trespass if it has lawful possession, which needs two things:

  1. factual possession: the right degree of custody and exclusive physical control of the land; and

  2. intention: the parties intend the licensee to exercise that control for its own benefit.

• Manchester Airport (not nz law): a licensee may get an order for possession against a trespasser where that's needed to give effect to the occupation rights in the licence. → in essence court thought the licensee should be able to vindicate its rights under the contract against those with lesser rights (majority in manchester)

• note manchester airport majority criticised in georgeski → prefered the dissenting judge approach

why did sealink lose

it had no exclussive possession, and its rights were contractual against ARTA only

• ARTA retained control

• any issues with 3rd parties, sealink was to take up with ARTA, it could not enforce its interests against a third party.

in what situations might you want to try argue a license here should confer possession

• On the traditional view (Georgeski; Hill v Tupper), a licensee has no possession, so can't sue in trespass.

• Applied to someone like the widow, that's harsh. She is the only person living there, but if a stranger intruded she would have no trespass claim of her own. She'd have to rely on the owner to act.

• That's the policy pull towards letting licensees sue:

  • the Sealink test (a licensee who actually has exclusive factual control and the intention can sue);

  • the Manchester Airport approach (a remedy against people with lesser rights).

Lease or licence problem Q engine

Street v mountford → substance over form (label irrelevant)

Fatac → lease confers exclusive possession with certain term, cf licence mere permission to occupy land→ rent not essential, evidence of intention to be legally bound

1. a certain term → term must be fixed or periodic, can be discontinuous. Lease can end on uncertain future even, if sufficiently defined (s 212), but ends at 10 years, unless a later date is stated.

2. exclusive possession? (fundamental distinction Fatac) → Fish and game factors, cf wik and game, sealink

3. If merely a licence can still sue in trespass?

• Georgeski → traditional approach no

• Sealink obiter and manchester → yes

• sealink obiter test → in possession and intention of parties that licensee..

• Manchester = should be able to vindicate rights gained under the contract against parties with lesser right

what factors point towards a licence

Factor pointing to a licence	Authority
The owner keeps control or the right to let others in. The occupier can't exclude the owner, or people the owner admits	Sealink (ARTA reserved underlying control and decided which operators got access); Fish & Game (the key question is whether others can be let in without the occupier's consent)
Use is shared, or limited to time slots, under an open-access regime	Sealink
The rights read as a series of permissions for a set purpose, rather than possession of land	Sealink

Factor	How it points to a licence
The right is created by statute for a set purpose	Interpret the right by its own terms and purpose, not by the label "lease"
It's limited to a particular use (grazing, access, storage)	It's a permission for a purpose, not possession of the land
Others keep rights of access (the Crown, the public, other users, customary users)	The occupier can't exclude everyone, so there's no exclusive possession

The NZ court preferred the Wik minority view: restrictions on use are consistent with exclusive possession, because you only need to restrict someone who has possession.

just a random comparison table for more lease like vs licence like

Points to a licence (typical for market stalls and food courts)	Points to a lease
The operator keeps control: it can move the stall, allocate pitches, or let others use the space (Sealink)	The stallholder has a defined, fixed space that no one else may use without their consent (Fish & Game)
Use only during set hours or days, shared with other traders at other times (Sealink: time slots)	Use at all times for the term
The operator holds the keys and manages security, cleaning and access	The stallholder has its own keys and can lock the space
No fixed term, or terminable at will, or a day-to-day or weekly pitch fee	A certain term (for example, 2 years, or month to month) (Fatac)
A market or event setting, where the organiser runs the whole site	A permanent kiosk or shop unit the trader runs as its own premises
No rent, or a fee tied to the operator's services. This is only an indicator (Fatac)	Rent paid for the space

what does fish and game say about restrictions on use compared to the wik

Under Fish & Game, restrictions on use are consistent with exclusive possession. → only need restrictions on someone with possession

• Wik was like a series of permissions while others kept access rights/control like in sealink too.

if it is a lease what form does it take and how strong is it

• registered: LTA s 51, binds a new owner

• short term lease → PLA ss 207-209 = legal interest, stronger than unregistered but weaker than registered

• unregistered/equitable leases (walsh v lonsdale) = vulnerable, protect by caveat

cancellation and relief problem Q engine

• Grounds → schedule 3 clause 12: rent unpaid for 15 working days or failure to perform any other covenant for 15 working day s

• procedure → cancellation only possible under the code in ss 243-264. A clause that cancels automatically on breach, or avoids code has no effect (s 243). Landlord must serve notice (specify breach, give tenant time to remedy, state the compensation sought), then can aplply to the court to get a order for posession or re enter peaceably (s 244)

• Relief (can apply for relief under s 253) → court has wide discretion and can grant relief even where the breach was of an essential term or cant be remedied (s 256)

• Refusal to renew (ss 261-264)

• licences for rent (s 206) → cancellation and relied code also applies to licences to occupy for rent. Apply code if unsure if its a lease or licence