Leases 2
Certainty of Term
A lease MUST be expressed as being for a certain period of time.
Remember back to the types of tenancies:
❏ Fixed term tenancy
❏ Periodic tenancy
❏ Revisionary tenancy
Prudential Assurance Ltd v London Residuary Body [1992]
Before 1930, Nathan owned a shop on Walworth Road in London.
London City Council owned the road, which they decided to widen.
The plan would have widened the road on Nathan's shop.
Solution? LCC bought a strip of the land.
LLC bought the strip of land, however, since they did not need it right away, they entered into a lease with Nathan so
that he could use the land until they needed it back.
Nathan was to pay them £30 per year and the lease was to ‘continue until… the land is required by the Council’ for the
purposes of road widening.
It was intended as a temporary agreement.
By 1988, the road widening had still not happened…
By 1988:
The store is now owned by Prudential Assurances (and therefore they now own the lease).
The strip of land is now owned by London Residuary Body – the successor to LCC.
Issue: The LRB had NO road widening powers.
Why significant? Because in effect they would never need the land back for road widening services, as was intended by
the initial agreement.
What was the cause of the dispute?
The strip of land, being a shop frontage, was now worth £10,000 per year. PA was still paying only £30 per year.
Issue? A lease? Could it be ended without taking the land back for road widening purposes, as stated in the agreement.
Did the agreement satisfy the rule relating to certainty of term?
This rule applies to both fixed-term AND periodic tenancies (just like this one!)
This means that either party must be able to end the tenancy by giving notice.
In this case, it was held that the practical restriction on the landlord’s right to give notice made the length of lease
UNCERTAIN.
The court held that this was an implied (yearly) period tenancy (which could be ended by giving 6 months notice).
This was because the tenant had gone into possession of the land, and had paid rent on an annual basis.
Lord Templeman:
‘A power for nobody to determine, or for one party only to be able to determine, is inconsistent with the concept of a
term from year-to-year…’
Result: PA ended up with a shop with no front on the shopping street, and the LRB has a shop front on the street with
no shop…
Lord Browne-Wilkinson noted that it was difficult to think of a more unsatisfactory outcome, or one further away from
what the parties actually agreed to in 1930…
, Berrisford v Mexfield Housing Co-Op Ltd. [2011]
FACTS: Mrs Berrsford owned a property in Barnet. She got into a financial difficulty and could not continue paying her
mortgage.
Instead, she entered into an ‘occupancy agreement’ with Mexfield. She sold them her property, and Mexfield would
allow Mrs B to continue living in the property as a tenant.
The agreement stated that Mrs B could end the tenancy with one month's notice, or it could be ended if:
- the rent was unpaid for 21 days
- or breaching one of the other terms of tenancy
Mrs B continued to pay the rent on time and did NOT breach any of the terms.
Nonetheless, Mexfield attempted to remove her from the property. Mrs B refused to vacate and Mexfield sought an
order for possession.
Mexfield argued that there was no lease – there was no certain period of the tenancy, so they argued they could
remove her at will.
WHAT DO YOU THINK?
The agreement allowed Mrs B exclusive possession, for rent, but for an uncertain term.
SC confirmed that it was a long established principle that you cannot have a lease, where there was an uncertain term.
The opinion of the court was that the rule relating to certainty of term is frustrating and its practical effects were
unsatisfactory (think back to Prudential Assurance Ltd).
Lady Hale: The “[certainty] rules have an Alice in the Wonderland quality which makes it unsurprising that distinguished
judges have sometimes had difficulty with them”.
Lord Neuberger: “There is therefore much to be said for changing the law, and overruling what may be called the
certainty requirement…”
If this rule results in unsatisfactory results WHY is this still a requirement?
What happened to Mrs Berrisford?
The SC found a way around this rule, in order to reach a satisfactory outcome for Mrs B.
The SC accepted an argument made under an old common law rule that applied before the LPA 1925 came into force,
which allowed them to interpret the agreement to give her a right to exclusive possession for life.
This tenancy for life, was converted into a 90 year term, under Section 149 (6) of the LPA 1925:
‘Any lease or underlease, at a rent, or in consideration of a fine, for life or lives or for any term of years determinable
with life or lives, or on the marriage of the lessee… shall take effect as a lease… for a term of ninety years determinable
after the death or marriage of…the original lessee.’
When discussing a period of time, we also need to consider whether someone can create a separate lease (carve out a
chunk of their own time to someone else).
Sub- letting: ‘caving up an estate in land’
Despite the fact that there may only be ONE freehold over an estate, there may be multiple leaseholds.
The freeholder carves out a chunk out of his/her bundle of rights.
The leaseholder can then carve out a smaller chunk and create a new lease.
This is known as sub-letting.
Let’s imagine how this would work in practice…
Tanya owns the freehold.
She creates a lease over the property
for 99 years, in favour of Benny.
Benny (the tenant), sub-lets the property
to Jane for 5 years.
Jane = the sub-tenant
Could Benny grant a sublease to Jane for 100 years?
NO! The sublease must be shorter than the head lease.
This is why it has the reverse pyramid shape.
If Benny attempts to grant a 100 year lease, no lease is created, instead he is considered to have assigned (transferred)
his entire leasehold to Jane.
Certainty of Term
A lease MUST be expressed as being for a certain period of time.
Remember back to the types of tenancies:
❏ Fixed term tenancy
❏ Periodic tenancy
❏ Revisionary tenancy
Prudential Assurance Ltd v London Residuary Body [1992]
Before 1930, Nathan owned a shop on Walworth Road in London.
London City Council owned the road, which they decided to widen.
The plan would have widened the road on Nathan's shop.
Solution? LCC bought a strip of the land.
LLC bought the strip of land, however, since they did not need it right away, they entered into a lease with Nathan so
that he could use the land until they needed it back.
Nathan was to pay them £30 per year and the lease was to ‘continue until… the land is required by the Council’ for the
purposes of road widening.
It was intended as a temporary agreement.
By 1988, the road widening had still not happened…
By 1988:
The store is now owned by Prudential Assurances (and therefore they now own the lease).
The strip of land is now owned by London Residuary Body – the successor to LCC.
Issue: The LRB had NO road widening powers.
Why significant? Because in effect they would never need the land back for road widening services, as was intended by
the initial agreement.
What was the cause of the dispute?
The strip of land, being a shop frontage, was now worth £10,000 per year. PA was still paying only £30 per year.
Issue? A lease? Could it be ended without taking the land back for road widening purposes, as stated in the agreement.
Did the agreement satisfy the rule relating to certainty of term?
This rule applies to both fixed-term AND periodic tenancies (just like this one!)
This means that either party must be able to end the tenancy by giving notice.
In this case, it was held that the practical restriction on the landlord’s right to give notice made the length of lease
UNCERTAIN.
The court held that this was an implied (yearly) period tenancy (which could be ended by giving 6 months notice).
This was because the tenant had gone into possession of the land, and had paid rent on an annual basis.
Lord Templeman:
‘A power for nobody to determine, or for one party only to be able to determine, is inconsistent with the concept of a
term from year-to-year…’
Result: PA ended up with a shop with no front on the shopping street, and the LRB has a shop front on the street with
no shop…
Lord Browne-Wilkinson noted that it was difficult to think of a more unsatisfactory outcome, or one further away from
what the parties actually agreed to in 1930…
, Berrisford v Mexfield Housing Co-Op Ltd. [2011]
FACTS: Mrs Berrsford owned a property in Barnet. She got into a financial difficulty and could not continue paying her
mortgage.
Instead, she entered into an ‘occupancy agreement’ with Mexfield. She sold them her property, and Mexfield would
allow Mrs B to continue living in the property as a tenant.
The agreement stated that Mrs B could end the tenancy with one month's notice, or it could be ended if:
- the rent was unpaid for 21 days
- or breaching one of the other terms of tenancy
Mrs B continued to pay the rent on time and did NOT breach any of the terms.
Nonetheless, Mexfield attempted to remove her from the property. Mrs B refused to vacate and Mexfield sought an
order for possession.
Mexfield argued that there was no lease – there was no certain period of the tenancy, so they argued they could
remove her at will.
WHAT DO YOU THINK?
The agreement allowed Mrs B exclusive possession, for rent, but for an uncertain term.
SC confirmed that it was a long established principle that you cannot have a lease, where there was an uncertain term.
The opinion of the court was that the rule relating to certainty of term is frustrating and its practical effects were
unsatisfactory (think back to Prudential Assurance Ltd).
Lady Hale: The “[certainty] rules have an Alice in the Wonderland quality which makes it unsurprising that distinguished
judges have sometimes had difficulty with them”.
Lord Neuberger: “There is therefore much to be said for changing the law, and overruling what may be called the
certainty requirement…”
If this rule results in unsatisfactory results WHY is this still a requirement?
What happened to Mrs Berrisford?
The SC found a way around this rule, in order to reach a satisfactory outcome for Mrs B.
The SC accepted an argument made under an old common law rule that applied before the LPA 1925 came into force,
which allowed them to interpret the agreement to give her a right to exclusive possession for life.
This tenancy for life, was converted into a 90 year term, under Section 149 (6) of the LPA 1925:
‘Any lease or underlease, at a rent, or in consideration of a fine, for life or lives or for any term of years determinable
with life or lives, or on the marriage of the lessee… shall take effect as a lease… for a term of ninety years determinable
after the death or marriage of…the original lessee.’
When discussing a period of time, we also need to consider whether someone can create a separate lease (carve out a
chunk of their own time to someone else).
Sub- letting: ‘caving up an estate in land’
Despite the fact that there may only be ONE freehold over an estate, there may be multiple leaseholds.
The freeholder carves out a chunk out of his/her bundle of rights.
The leaseholder can then carve out a smaller chunk and create a new lease.
This is known as sub-letting.
Let’s imagine how this would work in practice…
Tanya owns the freehold.
She creates a lease over the property
for 99 years, in favour of Benny.
Benny (the tenant), sub-lets the property
to Jane for 5 years.
Jane = the sub-tenant
Could Benny grant a sublease to Jane for 100 years?
NO! The sublease must be shorter than the head lease.
This is why it has the reverse pyramid shape.
If Benny attempts to grant a 100 year lease, no lease is created, instead he is considered to have assigned (transferred)
his entire leasehold to Jane.
