Leases and leasehold Covenants
Structure
1. Leases
1.1 Determine whether the right is a lease (rather than, say, a licence), unless the question tells
you that it is a lease, by considering and applying to the facts the essential characteristics of a
lease. If you decide it is merely a licence, this is not a proprietary interest in the land and will not
generally bind a purchaser.
CERTAINTY OF DURATION AND EXCLUSIVE POSSESSION = ESSENTIAL, RENT = NOT
Certainty of duration
S205(1)(xxvii) of LPA 1925 defines a ‘term of years absolute’ as a term of years certain or liable to be
determined by notice. A lease must be for a term. This can include either a lease granted for a fixed
period of time – a fixed-term lease or a lease granted for a basic period of time, either expressed, or
implied by a regular payment of rent – a periodic lease. For there to be certainty of duration, the
date of commencement of the lease must be known to both parties at the start. In the absence of a
date specified in the lease, it will be deemed to start immediately. The term must be less than that
held by the grantor.
In Lace v Chantler [1944] KB 368- lease for the duration of the war was not valid, as it was not
possible to say when the war would end. A lease granted for an uncertain period of time is not a
term certain and, therefore, not an estate in land.
In Prudential Assurance Co Ltd v London Residuary Body [1972] 2 AC 386- the ability of either party to
end a periodic tenancy by notice was essential to meet the requirement of certainty.
Berrisford v Mexfield Housing Co-operative [2011] UKSC 52- held that s 149(6) of the Law of Property
Act 1925 operates to convert a tenancy for life into a 90-year lease, determinable either on the death
of the tenant, or as provided in the agreement itself.
Exclusive Possession
Street v Mountford [1985] AC 809- The actual intention demonstrated by the agreement was to grant
Mrs Mountford exclusive possession of residential premises for a term at a rent. It was necessary to
look at the effect of the agreement rather than at any labels given to the agreement. The
circumstances and the conduct of the parties showed that what was intended was that Mrs
Mountford should be granted exclusive possession at a rent for a term with a corresponding interest
in the land which created a tenancy. Any express reservation of rights to the landlord to enter and
view the premises for the purposes of repair emphasises the fact that the occupier is entitled to
exclusive possession of the premises.
There would not be a tenancy when:
a) Where the parties clearly do not intend to enter into legal relationships at all.
b) Where occupation is required in connection with services provided or duties owed by
the tenant to the landlord, for example pursuant to a contract of employment or the
holding of an office.
c) If the relationship between the parties is that of vendor and purchaser and occupancy
takes place under a contract for the sale of the land.
d) If the owner has no power to grant a tenancy.
, Where the landlord provides attendance or services which require the landlord or their agents to
have unrestricted access to the premises, there will not be exclusive possession by the occupier.
AG Securities v Vaughan - The House of Lords held that in this case the agreements were
independent of each other and did not confer a right of exclusive possession on any one party. The
agreements had different dates and referred to different rents. The bedrooms were occupied on a
rolling basis by incoming occupiers. The parties did not enjoy exclusive possession of the flat jointly
under the terms of their agreements. As a result, the occupants only had licence agreements.
Antoniades v Villiers, reported together at [1990] 1 AC 417- In this case the agreements were held to
be interdependent and meant to be read together as a single agreement. As the agreements were in
identical terms, signed on the same day and the intention was that Mr Villiers and Miss Bridger were
to acquire joint and exclusive occupation of the flat, they therefore acquired a tenancy jointly. The
clause allowing for the owner, his agents or invitees to share occupation of the flat was held to be a
sham. Accordingly a tenancy had been created.
For rent?
In Street v Mountford, Lord Templeman referred throughout his judgment to the need for ‘exclusive
possession for a term at a rent’ in order to establish a tenancy. However, the Court of Appeal has
since held in Ashburn Anstalt v Arnold [1989] Ch 1 that a tenancy may still arise even where no rent
was payable. In particular, the Court of Appeal referred to s 205(1)(xxvii) of the Law of Property Act
1925, which defines ‘term of years absolute’ as meaning ‘a term of years (... whether or not at a
rent)’. Where rent is paid, this supports the view that the parties had intended a formal
relationship of landlord and tenant to arise, rather than an informal/ family relationship. Where you
have all three elements – certainty of duration, exclusive possession and payment of a rent – then a
tenancy certainly exists. Lack of rent does not prevent a tenancy from existing, but it may have a
bearing when determining whether it was the intention of the parties to grant a tenancy.
LICENCES-In the absence of certainty of duration or exclusive possession there cannot be a lease or a
tenancy. However, there may be situations in which one party occupies premises with the permission
of the lawful owner. This is merely a licence – a way in which someone may enjoy some right or
privilege over the land of another. The essential thing about this type of licence is that it does not
give the licensee an estate or an interest in the land, but it does make the licensee’s presence on
another’s land authorised. A bare licence is automatically revoked by the death of the licensor or a
transfer of their land. It can also be revoked by the licensor at will, ie by giving reasonable notice to a
licensee. A contractual licence will be enforceable against the original licensor in accordance with its
terms, so cannot be revoked by the licensor until the contractual period has expired. However, as it is
not a proprietary interest, it will not bind a successor to the licensor.
1.2 Decide what type of lease it is. (This is important if, say, the landlord wants to terminate the
lease or if the freehold has been sold, where the new freeholder wants to know if lease binds
him.)
1.2.1 Duration of lease:
(a) fixed term;
Lease for a fixed term. Such a lease must be created expressly. An express grant of the lease is
needed to identify the length of the term. The parties to the lease know from the outset the
maximum duration of the agreement.
Structure
1. Leases
1.1 Determine whether the right is a lease (rather than, say, a licence), unless the question tells
you that it is a lease, by considering and applying to the facts the essential characteristics of a
lease. If you decide it is merely a licence, this is not a proprietary interest in the land and will not
generally bind a purchaser.
CERTAINTY OF DURATION AND EXCLUSIVE POSSESSION = ESSENTIAL, RENT = NOT
Certainty of duration
S205(1)(xxvii) of LPA 1925 defines a ‘term of years absolute’ as a term of years certain or liable to be
determined by notice. A lease must be for a term. This can include either a lease granted for a fixed
period of time – a fixed-term lease or a lease granted for a basic period of time, either expressed, or
implied by a regular payment of rent – a periodic lease. For there to be certainty of duration, the
date of commencement of the lease must be known to both parties at the start. In the absence of a
date specified in the lease, it will be deemed to start immediately. The term must be less than that
held by the grantor.
In Lace v Chantler [1944] KB 368- lease for the duration of the war was not valid, as it was not
possible to say when the war would end. A lease granted for an uncertain period of time is not a
term certain and, therefore, not an estate in land.
In Prudential Assurance Co Ltd v London Residuary Body [1972] 2 AC 386- the ability of either party to
end a periodic tenancy by notice was essential to meet the requirement of certainty.
Berrisford v Mexfield Housing Co-operative [2011] UKSC 52- held that s 149(6) of the Law of Property
Act 1925 operates to convert a tenancy for life into a 90-year lease, determinable either on the death
of the tenant, or as provided in the agreement itself.
Exclusive Possession
Street v Mountford [1985] AC 809- The actual intention demonstrated by the agreement was to grant
Mrs Mountford exclusive possession of residential premises for a term at a rent. It was necessary to
look at the effect of the agreement rather than at any labels given to the agreement. The
circumstances and the conduct of the parties showed that what was intended was that Mrs
Mountford should be granted exclusive possession at a rent for a term with a corresponding interest
in the land which created a tenancy. Any express reservation of rights to the landlord to enter and
view the premises for the purposes of repair emphasises the fact that the occupier is entitled to
exclusive possession of the premises.
There would not be a tenancy when:
a) Where the parties clearly do not intend to enter into legal relationships at all.
b) Where occupation is required in connection with services provided or duties owed by
the tenant to the landlord, for example pursuant to a contract of employment or the
holding of an office.
c) If the relationship between the parties is that of vendor and purchaser and occupancy
takes place under a contract for the sale of the land.
d) If the owner has no power to grant a tenancy.
, Where the landlord provides attendance or services which require the landlord or their agents to
have unrestricted access to the premises, there will not be exclusive possession by the occupier.
AG Securities v Vaughan - The House of Lords held that in this case the agreements were
independent of each other and did not confer a right of exclusive possession on any one party. The
agreements had different dates and referred to different rents. The bedrooms were occupied on a
rolling basis by incoming occupiers. The parties did not enjoy exclusive possession of the flat jointly
under the terms of their agreements. As a result, the occupants only had licence agreements.
Antoniades v Villiers, reported together at [1990] 1 AC 417- In this case the agreements were held to
be interdependent and meant to be read together as a single agreement. As the agreements were in
identical terms, signed on the same day and the intention was that Mr Villiers and Miss Bridger were
to acquire joint and exclusive occupation of the flat, they therefore acquired a tenancy jointly. The
clause allowing for the owner, his agents or invitees to share occupation of the flat was held to be a
sham. Accordingly a tenancy had been created.
For rent?
In Street v Mountford, Lord Templeman referred throughout his judgment to the need for ‘exclusive
possession for a term at a rent’ in order to establish a tenancy. However, the Court of Appeal has
since held in Ashburn Anstalt v Arnold [1989] Ch 1 that a tenancy may still arise even where no rent
was payable. In particular, the Court of Appeal referred to s 205(1)(xxvii) of the Law of Property Act
1925, which defines ‘term of years absolute’ as meaning ‘a term of years (... whether or not at a
rent)’. Where rent is paid, this supports the view that the parties had intended a formal
relationship of landlord and tenant to arise, rather than an informal/ family relationship. Where you
have all three elements – certainty of duration, exclusive possession and payment of a rent – then a
tenancy certainly exists. Lack of rent does not prevent a tenancy from existing, but it may have a
bearing when determining whether it was the intention of the parties to grant a tenancy.
LICENCES-In the absence of certainty of duration or exclusive possession there cannot be a lease or a
tenancy. However, there may be situations in which one party occupies premises with the permission
of the lawful owner. This is merely a licence – a way in which someone may enjoy some right or
privilege over the land of another. The essential thing about this type of licence is that it does not
give the licensee an estate or an interest in the land, but it does make the licensee’s presence on
another’s land authorised. A bare licence is automatically revoked by the death of the licensor or a
transfer of their land. It can also be revoked by the licensor at will, ie by giving reasonable notice to a
licensee. A contractual licence will be enforceable against the original licensor in accordance with its
terms, so cannot be revoked by the licensor until the contractual period has expired. However, as it is
not a proprietary interest, it will not bind a successor to the licensor.
1.2 Decide what type of lease it is. (This is important if, say, the landlord wants to terminate the
lease or if the freehold has been sold, where the new freeholder wants to know if lease binds
him.)
1.2.1 Duration of lease:
(a) fixed term;
Lease for a fixed term. Such a lease must be created expressly. An express grant of the lease is
needed to identify the length of the term. The parties to the lease know from the outset the
maximum duration of the agreement.
