Lease/ Licences Lecture 2:
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Hammersmith Case – concerns the right of a 16 year old pregnant woman taken in by the
Fulham Council who tried to give her the right to exclusive possession of her dwelling –
although exclusive possession is not enough for a legal lease as she was too young. Can’t do
anything other than a declaration of a trust.
Another Lease/Licence/Equitable Interest Problem
Hammersmith & Fulham LBC v Alexander-David [2009]
Pregnant,homeless 16 year old was given accommodation by the H& F LBC - signed a
standard form tenancy agreement, conferring right to exclusive possession. But this could
not operate to give her a legal lease, as s 1(6) of the LPA makes clear that a minor (someone
under the age of 18) cannot hold a legal estate in land.
Tried to look after her, but this broke the lease terms as she was too young.
What to do about this? Trying to rehome the pregnant 16 year old, in terms of land law what
are their options? She sued stating she should have a lease, but authorities released this
would mean she could stay forever.
If they let everyone in need of housing get a potential lease they can stay there.
Mr Bruton – homeless drug addict who didn’t pay his rent.
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Where was he living? In a charity flat, had signed a license not a lease and the housing trust
had been told they could not grant leases. If a tenant and the roof is leaking this could be
repaired if he was a tenant – held to be here meaning he could withhold payment over the
leak in the roof. This was despite the agreement expressing he had a license not a lease.
Problem: on what basis can a local authority provide accommodation to a minor?
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Sullivan LJ in Hammersmith
It should not be too difficult for the local authority, in
discharging both its local housing authority and social services functions to co-ordinate
matters so that, whether by making provision in the agreement for some attention or
services, or by permitting inspection of the premises by those charged with the child's
welfare, and thereby preventing the grant of exclusive possession, any agreement with a
16-17 year old is not merely expressed to be, but is the grant of a licence rather than a
tenancy.
. . . an agreement to grant a lease for the period until the applicant turns 18 rather than the
grant of a lease may also be an option.
Leases/Licences - Lectures 1-2: Summary of points
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Licence protects against actions for nuisance and trespass BUT it is not a proprietary
interest which can bind third parties automatically
Lease IS a propriertary interest capable of binding third parties
Factually it can be difficult to distinguish between the two.
The crucial distinction is whether or not the claimant has EXCLUSIVE POSSESSION
A lease is a proprietary interest which can bind third parties but you must be careful
about this – how does a lease bind? Depends on unregistered land
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Important to remember: In unregistered land a legal lease means we don’t need to
worry about registering it, a legal lese binds the whole world.
In registered land, if it’s over 7 years it has to be registered to be legal, must be
protected by notice. Important to remember you don’t have to come up with the right
answers.
Do they have exclusive possession? Actual occupation protecting rights in registered
land is matter establishing whether or not you have a lease over the common law on
possession. Doesn’t mean you have to enjoy your occupation, means having a legal right
to be there.
Legal right can come from an implied contract, long term use etc. Possession between a
lease and a license is not simply about enjoying occupation, there must be an element of
entitlement – crucial difference between occupation and possession. If you have such
rights, you have the potential to have a lease, only working between the original parties.
Licence is personal and will end when you leave the property; a lease is something that
can be passed on.
Looking at what you need to constitute a lease.
Leases
Versatility of Lease-holding:
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Doctrine has been adopted for a very wide variety of purposes ‘like plasticine’.
Can occur over residential housing, commercial use of property and regulation of
agricultural land.
Lease defines the rights and responsibilities of:
1. The weekly periodic tenant who pays £55 per week for a room in shared student
accommodation
2. The home-owner who has just paid £200,000 for a 99 year lease of a riverside
flat
Leases are therefore just as important as a freehold is some places, can pay money
upfront for a lease of 80 years e.g. £220,000 for an 80 year one. Issue of leasing
property when you aren’t moving it into the registered sphere.
Crown owns lots of land here, and has particular terms and conditions over leases.
3. And the large IT company which rents high class office buildings for 10 million a
year.
Can lease a small cottage, and then lease from company running Canary wharf,
fundamentally all these different things are fundamentally all regulated by same
land law which is – is it a lease or is it a license?
Do not assume too much from terminology.
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Landlord (“L”) – person holding superior title, out of which lease has been granted.
May not be over personal occupation.
Do not assume that L receives rent as it is commonly understood:
Landlord may not necessarily take rent, rent can be a premium, a small figure
given for a long lease. E.g. Very expensive properties in Exeter will not be sold as
freeholds as they’re too valuable, so if the freehold owner divided her house into
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flats and sold them, the lease would be sold at a premium of 99 years and the
‘landlord’ would not receive weekly/ monthly rent but would own the superior
title.
Leasehold has huge potential to make money here.
When the cases refer to a lease being granted for a “premium”, they are referring
to the lump sum price which accompanies most long domestic leases
This is effectively the same as the price paid for a fee simple, except that the form
of a lease is respected by a nominal “ground rent” and sometimes also service or
management charges. Subject to the obligations of a leaseholder, as a freeholder.
Dividing freehold from the leasehold is crucial as it allows you to do what you wish
with your land.
So:
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Tenant (“T”) – person holding lease, also known as leaseholder. Can be the
“owner” of the £200,000 riverside flat or the students.
Lease – what the law has decided (or not) to protect. It can and often is, called
something different, like a licence or occupancy agreement (?) If it’s called a
licence but is a lease doesn’t this cause confusion – issue to email about.
Formalities for creating (or granting) a lease-
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No deed or even writing is necessary for a legal lease of three years or under,
which takes effect in possession, at the best rent which can be reasonably
obtained, without taking a fine.
This applies to both registered or unregistered land
For a lease of more than three years, or a lease (of any duration) not taking
effect in possession, a legal lease can only be created by deed.
No deed is needed whatsoever for a lease to be legal if it’s three years or
under, the agreement has to take effect in possession – the person has to go
and live there at the best rent. Won’t be examined on this but idea is if
someone says you may stay in the backroom, this is a legal lease applying to
both unregistered and registered land.
Does it have to be protected? No, it is legal.
Can have a legal lease so protected you don’t have to enter it in the land
registered, legal lease for three years or under requires only 3 years and one
day.
If it complies with the other requirement’s it is legal without deed or writing.
LMPA makes it an equitable lease.
Why do leases have this level of protection in comparison to other land? Should
it?
Periodic tendency:
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Running week to week, month to month or year to year.
If you only pay your rent weekly, you have to give a week’s notice here over leaving.
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Landlord can also give you a weeks’ notice, if you pay by month, they’ll give you a monthly
notice (will review this next week)
If you take possession and pay the rent, you have a legal lease which depends on how you
have to pay the rent. Even if you pay yearly, the Common law will state this is for 6 months.
In equity,
Important element of lease and licence – in equity a contract for a lease, a contract textbook
will say a contract for a lease is as good as a lease but this is not true. Contract for a lease
must comply with S2 of LMPA 1989.
Can have an absolutely binding legal lease on a handshake as long as it complies with the
following –even without writing or formalities so long as it is under 3 years.
Over 3 years, the only way it can be binding is under S2 LMPA.
Contract for the provision of legal lese must be in all terms given, identical and exchanged to
both parties (also applies to any disposition of an interest in land)
If you have S2 you have an equitable lease. How does a lease comply with S2? If it’s an
equitable lease:
If the lease is over three years and not made by deed – then what?
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At law, if the tenant takes possession and pays rent, then he holds under a periodic tenancy,
which runs according to the rent period (weekly, monthly or yearly).
In equity, a contract for a lease is “as good as a lease”, and the terms of the lease will be
enforced.
But NB.
s.2 LP(MP)Act 1989 – if the contract is not in writing and signed by both landlord and tenant,
it is void, and cannot be the basis of an equitable lease
Review slides 52-57
Registration points: Registered Land
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A lease for seven years or less is not substantively registrable. If the lease is for more than
three years, it can only be legal if created by deed.
If it is created by deed, it will be an overriding interest (LRA 2002 Schedule 2.para 1). If it is
not created by deed, and is only equitable, then it is overriding only if the tenant is in actual
occupation (LRA 2002 Schedule 3 para 2
If it is an equitable lease without the protection of actual occupation, then it needs to be
protected by the entry of a notice.
Unregistered land:
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An equitable lease based on a valid contract under s.2 LP(MP)Act 1989, is an estate contract
under Class C(iv) of the Land Charges Act 1972, and must be protected by registration or it is
void against a purchaser for value.
If it’s not protected by notice, it’s subject to the notice rule.
If given an essay question/ problem when comparing registered land it is more ruthless, will
protect any proprietary interest if you’re in occupation.
Lease/Licence Distinction
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Also, as we have already discussed, where the alleged “licence” gives B occupation rights, it
may be crucial to decide if in fact the interest granted by A is a lease. You will remember
that the lease ( “term of years”) is an interest in land.
It is one of the 2 interests which are legal estates and therefore capable of substantive
registration.
As such, the lease can be assigned (transferred) by B.
Also, if A transfers his interest to C, B can enforce the lease against C.
License cannot be sold or transferred without any proprietary status, simply either a
contract of a different duration or a lease.
If there’s a previous leasehold agreement, at what point can the interest be enforced
separately and independently of the original parties?
Why you want a proprietary right and not a personal one. All kinds of other interest go with
a legal lease – rent control etc.
For B to succeed in showing that he has a lease, not a licence, is also crucial to his entitlement to
statutory landlord/tenant protection, e.g.
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rent control, or
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the right for the holder of a lease over 21 years to purchase the fee simple (Leasehold
Reform Act 1967, Leasehold Reform, Housing and Urban Development Act 1993)
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If a leaseholder you can claim rent control etc. Have hugely different rights as a leaseholder
than a license holder.
Does the Property/Contract Debate Actually Matter?
• Is the “agreement” purely contractual or does it have sufficient proprietary status to be
registrable under LRS 2002? Arguably the Bruton style “lease” is not capable of registration.
• If tenancies are merely contractual, why should they give rise to the right of L to purchase
the fee simple – cf Leasehold Reform Act 1967, Leasehold Reform, Housing and Urban
Development Act 1993
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What are our rights? Equally what are our responsibilities?
If rights are contractual they’ll be subject to contractual rules:
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Frustration
National Carriers Ltd v Panalpina [1981]
The issue was whether or not a lease could be frustrated on ordinary contractual
principles. Previously the orthodox view was that so long as some element of
possession remained possible, the proprietary interest survived. By a majority the HL
held that leases could be frustrated, although the circumstances in which frustration
would be held to have occurred were likely to be “extremely rare”.
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Indicated leases are more contractual than property based, but rarity of circumstances
complicates finding. What are the circumstances?
Point here is that this case indicates leases are not purely proprietary but have huge
contractual input.
L Roskill described these circumstances as
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“a fundamental change in circumstances [such] as to enable the court to say – ‘this was
not the bargain which these parties made and their bargain must be treated at an end’”.
On the facts, the lease was for 10 years. For 18-20 months of it, access to the leased
property had been blocked by the local authority. This was held insufficient to frustrate
the lease.
Repudiatory Breach
Until relatively recently, English law did not consider that a L’s breach of his obligations
would, in itself give T the right to terminate the lease, or withhold rent – see Amrani v
Oniah (1984)
On this view T has to take separate legal action by way of damages or injunction.
Response to a repudiatory breach is termination of the contract so the tenant like any
promisee can state they will not comply with the terms of the contract due to this
repudiatory breach, unless and until the obligations are performed.
In Hussein v Mehlman [1992] Sedley QC controversially held that Ts could utilize the
contractual doctrine of repudiatory breach, and give up a tenancy when L broke the
tenancy agreement. L was in serious breach of its repair obligations under a lease. T
was held justified in giving up the tenancy, and was not restricted to suing L for nonrepair.
Sedley LJ expressly denied that a lease of land is essentially different from other
contracts.
NB repudiatory breach only allows T to give up a tenancy if the breach “goes to the root
of the contract” i.e. is very serious. Many failures by Ls are not, and the T will be
restricted to suing for non-repair etc.
Rights and responsibilities:
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Chartered Trust v Davies (1997)
T let a business in a shopping mall from its owner L, and claimed that L was in
repudiatory breach by not dealing with the nuisances caused by a nearby coffee shop
and a pawnbroker. She was held to be entitled to terminate the lease and to refuse to
pay any more rent.
How far did she have the right to terminate the rental agreement?
Terms of the lease were broken but the underlying concept was the terms of the lease
were set by the contract she entered into. Terms go together.
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If tenancies are primarily contractual, then arguably the concept of joint tenancy of an
interest in land can be superceded by an implied contractual analysis.
Hammersmith and Fulham v Monk [1992] it was held by the HL that the nature of a
weekly tenancy was such that one joint tenant could give effective notice to L to
terminate it.
Overview if a lease rather than a licence three certainty is are required;
Rent, commencement of term in tenure, proprietary view of lease, must be registered.
Rent, can have a registerable legal lease, seems likely paying on a reasonable basis
requires the distinguishing between private homes and commercial relationships.
Appears paying rent is the hallmark of turning a license into a lease.
Need rent to turn a private arrangement into a lease with all the legal qualifications that
brings with it. Rent must be valuable, but can be and is sheep shearing, wine, can be
services in kind.
If you agree to look after an elderly couple and use their cottage without paying any
actual money this will be rent, but for it to be protected under some tenancies they will
require money – will talk about uncertainty of rent next week.
Slides:
A – The Three Certainties – rent, commencement and length of tenure
Under an orthodox proprietary view of the lease as an interest in land, it is obvious that
the nature of the interest must be certain, especially in the context of substantive
registration as a legal estate.
Rent – A legal term of years can exist without rent see LPA s205(1) (xxvii). The
statutory definition of a lease uses the words “whether or not at a rent”. Ashburn
Anstalt v Arnold [1989] Ch 1, 9-10 confirmed this principle, which had previously been in
some doubt.
But it seems likely that the periodical payment of rent will remain a hallmark of turning a
residential occupation from a licence into a lease
L Templeman in Street v Mountford clearly thought that rent was essential to turn the
agreement into a lease protected by legislation.