Page 2 requirement of a valid lease PDF

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LEASE & LICENCES [REQUIREMENTS OF A VALID LEASE] 5) There are certainty parliamentary exceptions to the certainty of duration rule: i. ii.

Leases granted for life are converted to leases for 90 years or terminable by death if earlier- S.149 (6) LPA1925 Perpetually renewable lease is converted into a lease for 2000 years- S.145 LPA 1922

6) Leases intended to begin more than 21 years after the instrument creating it is void- S.149(3) LPA 1925

7) The case of Ashburn Anstalt v Arnold [1989] Court of Appeal appeared to have relaxed the rule of certainty of duration but has since been overruled by the case of Prudential Assurance v London Residuary Body [1992] House of Lords.

8) In the case of Ashburn Anstalt v Arnold, the case of Lace v Chantler was distinguished: the question was not whether there was a fixed maximum duration, but whether the lease terminated on a sufficiently certain event.

9) Courts’ attitude toward the certainty of duration rule is mixed.  Courts seemed reluctant to recognize creation of a tenancy due to an uncertain term in Prudential Assurance v London Residuary Body [1992] House of Lords.  Prudential Assurance v London Residuary Body affirmed the decision in Lace v Chantler

 Lord Templeman in Prudential Assurance v London Residuary Body: i. “A term must either be certain or uncertain. It cannot be partly certain because the tenant can determine it at any time and partly uncertain because the landlord cannot determine it for an uncertain period. ii. “A grant for an uncertain term does not create a lease. A grant for an uncertain term which takes the form of a yearly tenancy which cannot be determined by the landlord does not create a lease.”  However, in the case of Berrisford v Mexfield Housing Co-operative [2011] UKSC, where a grant is given to an individual on the occurrence of an uncertain event, it can be treated as a lease for life until the occurrence of that said event.  The judges in the case were critical of the rule that a tenancy has to be for a certain period, and particularly the way in which, that rule applies to periodic tenancies. They

LEASE & LICENCES [REQUIREMENTS OF A VALID LEASE] recommended that this rule be looked at again by Parliament, after consultation on the issue by the Law Commission.  The Supreme Court accepted that prior to 1926 the agreement would have been treated as a tenancy for life as it was for an uncertain term. By virtue of an old rule of common law, a lease for an uncertain term is treated as a lease for the life of the tenant.  It was then accepted that s149 of the Law of Property Act 1925 converted that into a lease of 90 years.  The circumstances in which such a lease would arise were then clarified. i.

Lord Neuberger MR:  Accordingly a periodic tenancy with an invalid fetter on the landlord's right to determine should be treated in the same way as a tenancy for a fixed, if indeterminate, term.  That seems to me to be justified in principle, logical in theory, and it ensures the law in this area is the same for all types of tenancy, whether or not periodic in nature.  On that basis, even if the tenancy created by the Agreement was a monthly tenancy (periodic tenancy) with an objectionable fetter, it seems to me that it would have been treated as a life estate under the old law (subject to the right to determine in accordance with the terms of the fetter), and so would now be a tenancy for 90 years.  Lord Neuberger damning of the requirement for "fixed/ascertainable maximum duration"- tried to find a rule to overturn it; says that it seems to be an unfair rule but is one that has stood the test of time. "No practical justification for holding that an agreement for a term of uncertain duration cannot give rise to a tenancy" However PRUDENTIAL is still that law!!!

 The court thought that, if for some reason it had not been able to find in favour of Ms Berrisford on the analysis that it was a lease for life, the arrangement could still take effect as a contract, enforceable as between the parties personally, albeit not capable of binding their successors because no interest in land would subsist.  In other words, it would take effect as a contractual licence.

LEASE & LICENCES [REQUIREMENTS OF A VALID LEASE]  The court also thought that it was very unsatisfactory that, in the 21st century, it had to resort to such a technical line of reasoning.  Moreover, the court pointed out that this would not always be the case in every instance where a lease for an uncertain term was granted.  The lease for life analysis only works where the "tenant" is an individual. It cannot work for companies. The court thought that this distinction could not be justified, other than on historical grounds.  However, in the case of Southward Housing Co-operative Ltd v Walker[2015] High Court:  A tenancy granted by a fully mutual housing association had been caught by the rule against uncertain terms.  The Court held that this did not have the effect of creating a 90-year tenancy because this was directly contrary to the parties' intentions and fundamental aspects of the agreement. i) ii)

Hildyard J- it was not the intention of the parties that they should be legally entitled to enjoy the premises for life. Drawing support from some of the obiter comments in Mexfield, the Judge went onto to determine that the solution was to award a contractual licence.

Payment of Rent 1. Consideration must be sufficient, it need not be adequate 2. S.205(xxiii) LPA 1925- “Rent” includes a rent service or a rentcharge, or other rent, toll, duty, royalty, or annual or periodical payment in money or money’s worth, reserved or issuing out of or charged upon land, but does not include mortgage interest... 3. Whilst Street v Mountford [1985] refers to the requirement of rent to create a tenancy, this is not always strictly enforced. 4. Fox LJ in Ashburn Anstalt v Arnold [1989] concluded that rent was not necessary to create a tenancy. Neill LJ and Bingham LJ concurred.

LEASE & LICENCES [REQUIREMENTS OF A VALID LEASE] 5. The occupation agreement was certain enough, and it was thus an overriding interest, as they were in actual occupation, even though it was not registered as an estate contract, applying Street v Mountford. 6. But rent is usually something that is charged in reality. 7. Generally, it seems possible for a term of years (TOYA) without rent, though the courts tend toward holding that there is a licence where the arrangement is gratuitous as evinced in Street v Mountford. 8. Rent becomes especially important whenever it concerns S.54(2) LPA 1925 (short leases not exceeding three years) 9. S.54(2) LPA 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. 10. In order for short leases to exist as a legal right, it is absolutely necessary that tenants pay best rent & go into possession. 11. In such cases, existence of rent becomes pivotal because it will determine if tenants’ rights are enforceable against the whole world or merely against everyone who is not a bona fide purchaser of value for notice. 12. Fizkriston v Panayi : What is best rent is best determined by reference to market price/value/rent

Exclusive Possession 1. Exclusive possession looks to legal entitlement rather than what is actually going on in practice. In this sense it needs to be distinguished from de facto occupation which does relate to what is happening in practice. 2. To determine if there exists exclusive possession, courts will now look at arrangement to determine what the true bargain is. (Objective Approach) 3. Courts have repeatedly stressed the need to look at the reality of the arrangement, and to disregard the artificial labels which are typically employed in the documents (which,

LEASE & LICENCES [REQUIREMENTS OF A VALID LEASE] being invariably drafted by the landowner, represent only the landowner's view of the rights being created) – labels such as 'licensor' and 'licensee' – on the principle that it is necessary to call a spade a spade. 4. In Street v Mountford [1985] UKHL Lord Templeman held that: i.

“Exclusive possession is of first importance in considering whether an occupier is a tenant.” The defining feature of a lease was exclusive possession, despite the fact that this view had been rejected and heavily criticised in a number of Court of Appeal cases previously, for example in the judgment of Denning LJ in Errington v Errington.

ii.

“A tenant armed with exclusive possession can keep out strangers and keep out the landlord unless the landlord is exercising limited rights reserved to him by the tenancy agreement to enter and view and repair.”

iii.

“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.”

iv.

“The consequences in law of the agreement, once concluded, can only be determined by consideration of the effect of the agreement.”

v.

“If the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties cannot alter the effect of the agreement by insisting that they only created a licence.”

vi.

“The manufacture of a five pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade.”

vii.

The court should, in Lord Templeman’s opinion, be astute to detect and frustrate sham devices and artificial transactions whose only object is to disguise the grant of a tenancy and to evade the Rent Acts- rejected Somma v Hazlehurst [1978]

5. Label is not decisive, thus courts look at substance instead of the form. 6. Factors to consider:

i.

Labelling of Agreements, Separateness of Agreements & Sham Devices Concerning Single Occupancy

LEASE & LICENCES [REQUIREMENTS OF A VALID LEASE]

 Aslan v Murphy [1989] CA – Lease  The agreement stated that the licensor was not willing to grant the licensee exclusive possession of any part of the room and that the licensor may permit others to use the room.  The rent was referred to as a licence fee. The agreement also reserved Mr Aslan the right to retain keys.  Mr Aslan was to provide services in the form of cleaning the room, rubbish collection, provision of and laundering of bed linen.  However, in practice no others were permitted to enter the room and no services were actually provided.  Mr Murphy was a tenant rather than a licensee.  ISSUE 1- On Agreement being Labelled as Licence  The agreement was wrongly described as a licence. 

Lord Donaldson MR “The labels which parties agree to attach to themselves or to their agreements are never conclusive and in this particular field, in which there is enormous pressure on the homeless to agree to any label which will facilitate the obtaining of accommodation, they give no guidance at all…”

 ISSUE 2- On Provision excluding Exclusive Possession  The provisions relating to exclusive possession, permitting others to use the room and the provisions for services were a pretence for the sole purpose of defeating the Rent Act. 

The retention of keys by a landlord will not automatically negate exclusive possession.



Lord Donaldson MR i. “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.”

LEASE & LICENCES [REQUIREMENTS OF A VALID LEASE] ii.

Courts must keep a weather eye open for pretences, taking due account of how the parties have acted in performance of their apparent bargain.

iii.

“It is the true rather than the apparent bargain which determines the question 'tenant or lodger?'”

iv.

A landlord may well need keys in order that he may be able to enter quickly in an emergency, to read meters or do repairs which are his responsibility. None of these underlying reasons would of themselves indicate that the true bargain between the parties was such that the occupier was in law a lodger.

v.

If, on the other hand, the true bargain is that the owner will provide genuine services which can only be provided by having keys, then this is when you can infer the occupier is a lodger and not a tenant.

 There is the risk that the courts could effectively re-write the parties bargain- Susan Bright in “Street v Mountford Revisited”

 Westminster CC v Clarke [1992]- Licence  By the terms of the licence to occupy Mr. Clarke was not entitled to any particular room, he could be required to share with any other person as required by the Council and he was only entitled to "occupy accommodation in common with the Council whose representative may enter the accommodation at any time."  It is accepted that these provisions of the licence to occupy were inserted to enable the Council to discharge its responsibilities to the vulnerable persons accommodated at the Cambridge Street terrace and were not inserted for the purposes of enabling the Council to avoid the creation of a secure tenancy.  The accommodation was provided for a clear purpose, and that would require the ability to ask residents to swap rooms or to move on. (Objective Approach)  This is a very special case which depends on the peculiar nature of the hostel maintained by the Council, the use of the hostel by the

LEASE & LICENCES [REQUIREMENTS OF A VALID LEASE] Council, the totality immediacy and objectives of the powers exercisable by the Council and the restrictions imposed on Mr Clarke.  The decision in this case will not allow a landlord private or public to free himself from the Rent Acts or from the restrictions of a secure tenancy merely by adopting or adapting the language of the licence to occupy. The clause in this case was genuine. (Subjective Approach invalidated)

 Bruton v London and Quadrant Housing Trust [1999] House of LordsLease  Bruton v London and Quadrant Housing Trust [1999] UKHL is an English land law case that examined the rights of a 'tenant' in a situation where the 'landlord', a charitable housing association had no authority to grant a tenancy, but in which the 'tenant' sought to enforce the duty to repair on the association implied under landlord and tenant statutes.  In Court of Appeal, nemo dat rule was applied.  In House of Lords however, the agreement fulfilled all the criteria to create a tenancy since it conferred exclusive possession for a certain period in return for rent. It did not matter that the Trust held no legal estate in the property.  Lack of legal title was irrelevant because the character of this agreement was the key point to decide if a lease existed. It is not the nature of the right, all that matters is exclusive possession.  ISSUE 1- On Exclusive Possession 

Terms permitting the landlord to enter at a reasonable hour for the purpose of inspecting the state of repair and cleanliness was not inconsistent with exclusive possession. (Aslan v Murphy’s principle)

 ISSUE 2- On Absence of Legal Estate 

Lord Hobhouse

LEASE & LICENCES [REQUIREMENTS OF A VALID LEASE] “The case of Mr Bruton depends upon his establishing that his agreement with the Housing Trust has the legal effect of creating a relationship of tenant and landlord between them. That is all. It does not depend upon his establishing a proprietary title good against all the world or against the Council. It is not necessary for him to show that the Council had conveyed a legal estate to the Housing Trust.” 

Lord Hoffman “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.”

 House of Lords flirted with the concept of a non-proprietary lease.

 Kevin Gray and Susan Francis Gray Traditionally it has been held that an estate interest (interest in land) can only arise out of one of equal or superior status. A licence is not an estate interest, and provides essentially only access to another's estate. However, the implication of the Bruton case "controversially confirms the existence in English Law of the phenomenon of the contractual or non-proprietary lease"

 Susan Bright It has been suggested by some commentators however, that Bruton was driven by policy as established in Street v Mountford, that individuals enjoying exclusive possession should be protected.

 Martin Dixon 

House of Lords muddled up the law



There is no such creature as a non-proprietary lease



Lord Hoffman called it a strange creature that has been introduced which existed for 100 of years already

LEASE & LICENCES [REQUIREMENTS OF A VALID LEASE] 

In reality, it is actually a licence and the House of Lords just partook in mere relabeling

 Opinion 

Bruton is merely a policy decision- The Bruton Tenancies



Insensible to make everything leases so long as there exists exclusive possession.



There are exceptional circumstances when a lease will not be found even though exclusive possession is said to exist.

Concerning Multiple Occupancy  Where a property is occupied by more than one person, the first question that must be asked is whether the arrangement is one made with a series of individuals, or if the arrangement is made to the occupiers as a collective.  If there is a series of separate and individual arrangements, the occupiers will either be licensees or individual tenants of the separate parts of the property let to them. (Lord Oliver’s Obiter in AG Securities v Vaughan)  This will depend upon the facts of the case and decided on a case by case basis.  The greater difficulty arises in understanding what is required in order for there to be a lease to a group.  A lease to a group is no more than a co-owned lease. This means that there must be both co-ownership and exclusive possession.  There are two methods of co-ownership of land: the joint tenancy, for which the “four unities” are required (time, title, interest and possession) & the tenancy in common (which requires only unity of possession)  It may be that some of the difficulties perceived by commentators to be found in the case law would be due to the obscurity of the concept of unity of possession.  This can be illustrated by discussion of the decision of the House of Lords in AG Securities v Vaughan.

LEASE & LICENCES [REQUIREMENTS OF A VALID LEASE]

 AG Securities v Vaughan [1988] UKHL- Licence  A large flat was let out to four occupants who moved in at different times, paid different rents and signed separate agreements denying exclusive possession.  Held: Mr Vaughan with his co-tenants licensees only and not tenants.  ISSUE 1- On Separateness of the Agreements a. The occupants, at first, did not know each other. There was never a group of persons coming to the flat altogether. b. There was no artificiality in the contracts when they all signed separate agreements. c. Lord Bridge “The four respondents acquired their contractual rights to occupy the flat in question and undertook their relevant obligations by separate agreements with the appellants made at different times and on different terms. These rights and obligations having initially been several, I do not understand by what legal alchemy they could ever become joint.”  ISSUE 2- On Absence of Any Kind of Unity a. None had exclusive possession and their ...