Estates and Interests lecture notes PDF

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2- Estates and Interests Estates What is a legal estate? - An estate is something below the crown. - It’s a title (possession/seisin) taking possession is having an estate. - Two types of estate: i) Fee simple absolute in possession (freehold) ii) Term of years absolute in possession (leasehold) What is a legal interest? Right in land other than title (i.e. other than possession). E.g. - Legal easement- third party might have right to walk over land - Legal mortgage- companies have rights to repossess land if mortgage repayments are not paid. Before Law of Property Act 1925 It changed the common law and abolished many common law concepts. It tells us that there are just two estates in land. Before, there were multiple legal estates in the same land at the same time. E.g. - Fee tail- allowed freeholds to be tied up to families, this was abolished in 1925 - Life estate- having an estate for life - Estate pu autre vie- an estate for the duration of someone else’s life (e.g. until the queen dies), this is abolished but can still do it under equity. Reform of legal estates: - Law of Property Act 1925, s.1(1)- Only estates now existing are fee simple absolute in possession & term of years absolute in possession. - Law of Property Act 1925, s.1(3)- Old estates can continue in Equity

Fee simple absolute in possession (freehold) The end result of reform is a fee simple absolute in possession legal freehold - ‘In possession’ not in remained or reversion. Not going to be taken on death. - ‘Absolute’ capable of continuing indefinitely, can be passed down freely (Law of Property Act s.7).

Term of years absolute (leasehold) The lease must be a certain term; need to know how long it will last. Certainty is needed to allow smooth business transactions. -

Sparkes, ‘Certainty of Leasehold Terms’,(1993) 109 L.Q.R. 93- Leases must be for a certain term (know when they started, how long they will, and when they will end). Harwood, ‘Leases: are they still not really real?’ (2000) Legal Studies 503- Distinguishes between realty and personalty- He says Leases are better classed as realty than personalty. Personalty is movables on the land, whereas realty is the land itself (immovables). Can ‘leases’ be fitted into this conceptual distinction? He says that the conclusion is inescapable, real property (either a land or non-land) includes a lease hold. Real property is land and includes lease hold interest.

Lease as a contract- A contract usually creates an estate in land (Law of Property Act 1925; s.205 (1) (xxvii)). 1

Lease vs license Definition of a lease:  Street v Mountford (1985) - Lord Templeman “the arrangement that gives a person the right of exclusive possession of land, for a tem, at a rent”. Licences involve a permission form the owner of land that is given to another person to use that land for some specific purpose. This permission or licence can be to:  Hurst v Picture Theatres 1915- attend a cinema  Colchester & East Sussex co-op v Kelvedon Labour club (2003- parking a car  Kewal Investment v Arthur (1990)- erecting an advertising hoarding  Re Hampstead (1995)- running a school The difference is that with a lease you get exclusive possession, (the right to exclude people form coming onto your property). Cannot do that with a license.  Thomas v. Sorrell (1673) Vaugh 330:- ‘[a licence] properly passeth no interest nor alters or transfers property in any thing, but only makes an action lawful, which without it had been unlawful.’ In a land context, it’s the right to use property which will be trespassed. Facts: Prosecution against Sorrel for selling wine without a license. Sorrel had to pay £50 because he didn’t have a license. A license is just a legal permission to take an action (e.g. sell wine), it does not give you the right to property. Leases also bind others (inheritors or purchases of the freehold) whereas licenses do not. Licenses are not binding on successors but leases are so binding Errington v Errington & Woods [1952] 1 K.B. 290- A father bought a house for his daughter to live in (he had a freehold). He borrowed £500 from building society. The son and daughter in law took on the society payments and moved into the house. Father said to daughter in law, when you pay up the mortgage, the house is yours. Courts found that this was a license to occupy. Father died before mortgage was paid off, the wife tried to take possession. Court invented an equitable right for the couple, through equity they were able to stay at the property. In law they only had a license, so the wife could chuck the couple out. -

Third parties? Leases bind third parties, licenses don’t Revocable? Licenses are normally revocable, leases are normally described as being for a certain term. However ‘periodic tenancies’ can be ‘broken’ easily. Exclusive possession? That at the core of the distinction. Leases have exclusive possession, with a license you don’t.

Rent Rent is not essential for the existence of a lease but exclusive possession is essential Ashburn Anstalt v Arnold [1988] 2 All ER 147- there was a lease without a rent, but the courts found it to be a valid lease. Mr. A sold his property to be redeveloped and leased it back with no rent. The courts said its fine, it’s a lease even though there is no rent.

Certainty of term a) Fixed Term  Lace v Chantler [1944] KB 368- Chantler let a house for the duration of the war, the question before the court was whether or not it was a lease. The duration of the war was discussed in courts when decided 2

whether or not it is a certain lease. Court said that the duration of the war is not certain, don’t know when war will end, so no lease found here. Certain term concept has generated a large amount of case law. - Bright ‘The uncertainty of certainty in leases’ (2012) L.Q.R. 337- gives clear definitions of some core concepts. Says that a lease provides a way of occupying… the beginning and the duration and the end date of the lease must be assetainable. General rule- leases must be for a fixed term  Prudential Assurance Co Ltd v London Residuary Body [1992] 3 All ER 504- Mr. N starts renting, had an agreement with the council that he can only rent the strip of land until the council decided to widen the road. It never did widen the road. The new owner tried to get rid of Mr. N, he said you can’t do that, I have a lease, but he lost his case and so lost his land. Affirmations of Lace v Chantler. Important House of Lords case on the principle that leases must be for a determinable term. Peculiar exception to the fixed term rule Law of Property Act 1925, s.149(6)- If you set up a lease for the life of someone, then by this section, because that type of estate has been abolished, this section says that that life estate will automatically be turned into a 90 year lease. Applying the exception Skipton Building Society v Clayton (1993) 66 P&CR 223- Turns on Law of Property Act 1925, s.149 (6). Couple sold their home subject to an agreement that they could live in it for the rest of their lives. Court had to decide what type of property right this couple had. They applied this section, so in this circumstance the company could never take possession, because the lease became for 90 years.  *Berrisford v Mexfield Housing Co-op [2011] UKSC 52- Mr.s B owned property in Barnett, she was having difficulty paying her mortgage, so she sold her property to Mexfield with an agreement that she could live in it. Mexfield attempted to take possession of the property and chuck Mr.s B out. Mr.s B went to court, the court applied s.149 (6) and said that an estate for life had been attempted and that would become a 90 year lease. So Mr.s B got to stay in her home. ‘There is no apparent practical justification for holding that an agreement for a term of uncertain duration cannot give rise to a tenancy, or that a fetter of uncertain duration on the right to serve a notice to quit is invalid.’ b) Periodic term -

A major exception to the fixed term rule because practically periodic terms can just roll on indefinitely. The tenancy runs on a month to month or week to week basis. Terminable at the end of the month or week. They exist at law, if the parties intend to create them. They are very difficult to reconcile with the wider rule that all leases must be for a certain term

 Javad v Aqil [1991] 1 WLR 1007- Aqil lost his place of business, the landlord took pity on him and offered him use of property on Brick Lane. Aqil left. Aqil and the owner agreed informally that Aqil would pay £3000 per quarter. Looking at the intention of the parties, the court was not prepared to say that there was a periodic payment. How can we justify a periodic term?

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 Prudential Assurance Co Ltd v London Residuary Body [1992] 3 All ER 504- ‘[certainty is provided] 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.’ The courts say that periodic terms are certain.

Exclusive possession The right to exclude all others from the land including the lessor Street v Mountford [1985] AC809- Lord Templeton sought to place exclusive possession at the heart of the lease/and license distinction. Street owned a property, in 1983 he entered a signed written agreement with Mountford allowing her the right of exclusive possession of two rooms in the property. M preceded that she had exclusive possession. The agreement described itself as a license. M was saying that she has a lease which is subject to rent controls, and not a licensees which is subjected to rent control. Court had to distinguish whether it was a license or a lease, said that it was a lease and M has exclusive possession. Having a lease gives you extra protection over a license. S.11 of the Landlord and Tenant Act 1985- imposes a fairly minimal duty of repair on landlord in a lease. An owner cannot create a ‘sham’ agreement to deny a lease Aslan v Murphy [1990] 1 WLR 766- owner made sure that the tenant did not grant a lease. In an agreement she included the right to pay other occupier in the property (she could just move people in), a right for her to come in with cleaners and she kept a key, so a right to access it. The reason she wanted a license and not a lease is because she wanted to take possession and sell the place when she moves out. Licenses are revocable, leases are not. Court found that it was a ‘sham’ agreement, in reality the tenants had exclusive possession, it wasn’t feasible to place other people in the property so it was a lease. Separate agreements can be ‘read together’ to find exclusive possession for couples  AG Securities v Vaughan [1990]- A couple rented a top floor flat under two separate identical agreements. Said they are a couple so in reality these couple were given a single exclusive possession. No exclusive possession of that would defeat the purpose of the agreement  Westminster CC v Clarke [1992] 2 AC 288- a homeless shelter, the whole point of the hostel is to move on and move new people in. one of the men claimed he had exclusive possession, the agreement said it was a license to occupy. An exclusive possession will defeat the purpose, because it is a temporary accommodation. Judge will assess the nature of the agreement carefully, case-by-case, in a fact-sensitive way.  Gray v Taylor [1998] 4 All ER 17- an accommodation for old people, the occupant was behaving badly, the owner wanted to kick the occupant out. Occupant claimed they had an exclusive possession so couldn’t be kicked out. Judge looked into the nature of the agreement which says if you behave badly you could be kicked out. Leases are estates: they are proprietary, a possessory right in the land

Relationship of landlord and tenant with no legal estate Bruton is a legal disaster, idea that law isn’t necessary clear. 4

 Bruton v London Quadrant Housing Trust [1999] 3 WLR 150- s.11 of the landlord and tenant act 1985, applies a duty of repair to landlord, which apply to leases not licenses. Lambeth council owned a house (oval house), it planned in the future to demolish and rebuild the flats. So the council gave London quadrant housing trust the right to use the property to house homeless people. Mr. Bruton tried to force London Quadrant to repair it, he said he had exclusive possession and so he did have a lease. They agreed that he had exclusive possession. Council for London quadrant argues that despite Mr.. B having exclusive possession, there was no lease for these reasons: - London Q was a social landlord preforming charitable functions, - LQ had agreed with Lambeth Council not to grant leases, - Mr.. B had agreed that he only had a license, LQ was itself a licensee and had no proprietary right (estate) in the land, it had not proprietary right to grant away, don’t have a right to grant a lease. Court disagreed and found that Mr. B had a lease, court was trying to force repair. Court seems to have invented a special type of lease, which is a Bruton lease. This new type of non-proprietary lease, a lease that is not a right in the land and doesn’t bind third parties. ‘[T]he 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.’ (per Lord Hoffmann)  Kay v London Borough Lambeth [2006] 2 WLR 570- Mr. B and the residents of Oval House did not have a binding lease vis a vis Lambeth Council. So Lambeth Council were not bound by Mr. B, it was only between London Q and Oval house residents. ‘The 'estate' tenancies held by the appellants were derived from and could not survive the termination of the [head] lease. The 'non-estate' Bruton tenancies could survive as against the grantor of them [the Housing Trust], but they were not binding as against [the freeholder]’ (per Lord Scott) Bright Article- ‘Leases, exclusive possession, and estates’ [2002] 116 LQR 7- Bruton leases do not bind the world. He gives 4 steps: Mr. B had a right of exclusive possession, the relationship of landlord/tenant consisted between Mr. B and the council, this relationship brings the new type of lease that doesn’t bind the world, it just a relationship between LQ and Mr. B, it’s just a contract. Pawlowski article- ‘Occupational rights in leasehold law: time for rationalisation’ [2002] Conv. 550– Bruton marks the emergence of a contractual agreement. It’s just a type of contract between LQ and Mr.. B, but it’s called a lease just to force them to repair. This binds the immediate landlord, but not the world. Bruton leases are basically just contracts. Hinojosa article- ‘On property, leases, licences, horse and carts: revisiting Bruton v London quadrant housing trust’ [2005] 69 Conv 114- he attack the idea of proprietary rights, says that Bruton was rightly decided, what has caused all the complications is the fact the proprietary rights doesn’t really mean anything unless you refer to law and so should be flexible. Says forget proprietary rights, and look at the relationship between the tenant and the occupier. Rights in land are a fiction.

Formalities Deeds Leases need a deed unless for 3 years or less- Law of Property Act 1925; ss 52 & 54. You can’t convey land, unless you have a title deed. The traditional rule for a deed is that it had to be signed, sealed and delivered. Modern title deeds have to be witnessed as well. Equitable lease- created where the courts think it’s just to do so. ‘in the interests of fairness and justice enforced by the courts’. 5

 Walsh v Lonsdale (1882) 21 Ch D 9- agreed to without a deed to lease his mill to Walsh for 7 years, they agreed without correct formalities that Walsh will pay rent at the end of every 3 months. The owner then changed his mind and said he wanted rent advanced for the year. Walsh couldn’t pay, so it went to court. Court found that Walsh had an equitable lease and could pay every 3 months, because it was just and reasonable.

Relationship between landlord and tenant Covenants/ implied covenants impacting on landlord- ‘contractual terms’ in a lease (e.g. can’t keep pets in flat). Minimal protection from implied covenants for tenant: - Right to quite enjoyment (right to be left undisturbed) is minimal.  Southwark L B C v Mills [1999] 4 All ER 449- council landlord converted house into 4 different dwellings. One of the tenants went to court and claimed it was too noisy and disturbing. Tenant was trying to force the council to put sound installation, court said no. quite enjoyment doesn’t actually mean you have a right to quite, this just a right not to be harassed. - Implied repair covenants are minimal  Lee v Leeds City Council [2002] 1 WLR 1488- tenants had mold in their home, tried to force council to deal with the mold, council said no, the repair doesn’t include mold, just have to keep property into good habitable condition. -

No derogation from grant- protection of tenants No derogation from grant- Covenants undermining the rights of the tenant will not be ‘implied into’ the lease. e.g. an easement over land will not normally be implied.

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Statutory interface to protect tenants - Repair: Landlord and Tenant Act 1985,s .11 - Housing Tenure: Rents act 1960-1977- imposed controls to stop landlord charging too much Housing Act 1980- need to match with the rate of the market. Housing Acts 1988 & 1996- need to match with the rate of the market. Localism Act 2011- can pay deposit if you have a lease. - Business Tenancies: Landlord and Tenant Act 1955

Passing of covenants Covenants in leases: - These are like contractual terms, they are agreements in leases - They can be implied into a lease in a way that benefits tenants (Landlord and Tenant Act 1985, s 11) – statutory duty of repair and right to quiet enjoyment. Covenants can be bad for tenants as well as good: - Pre- 1996 leases For lease made by a deed (formalised) pre 1996, the original tenant could not escape covenants simply because there was a replacement assignee. Original tenants impacted by acts of replacement assignees, perhaps years later. It’s possible to go after assignees as well as tenants, subject to certain conditions.  Spencer’s Case (1583) 5 Co Rep 16a- ‘covenant must touch and concern the land’ e.g. can’t keep pets 6

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 City of London Corp v Fell [1993] WB 589- ‘the contractual obligations which touch and concern the land having become imprinted on the estate, the tenancy is capable of existence as a species of property independently of the contract’ (per Nourse LJ)Law of Property act 1925, ss.141 & 142 ‘covenant must have reference to the subject matter of the lease’ same rule from spencer restated So pre-1996: original tenant are liable even after assignment and covenants had to ‘tough and concern the land’

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Post- 1996 leases (the landlord and tenant (covenants) act 1995. Original tenants are released from covenants upon assignment- original tenants relief themselves against liability upon assignment All covenants bind fresh assignees unless they are explicitly expressed to be personal n the lease: No need to worry about ‘toughing and concerning the land’ or about the LPA 1925 ss 141 & 142. So post -1996- original tenants are relieved from liability and all covenants are binding unless they are explicitly expressed to be personal in the lease. Protection Form Eviction Act 1977- Breach can be remedied- e.g. forcing payment of rent.

Flats and common hold Most conversions in a deed have long leases (e.g. 999 years) and very often the landlord would be a company. Common hold and Leasehold Reform Act 2002- put forward an alternative to the long leasehold stem. Enacted common hold which is a new type of property system, with common hold, flat owners are regarded as unit owners.

Legal and Equitable interests in land -

Estates (possession) Interests (non-possessory) interests which will impact upon third parties that d...