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Leases and Licences

Leases

Leasehold estate: An interest that gives the owner a right to exclusive control over land for a period of
pre-determined length. It is usually granted in return for rent, and both parties tend to agree to do or
refrain from doing certain things for the duration of the estate. It is also known as a 'term of years
absolute'. Only a party with an estate in land (either freehold or leasehold) can grant a leasehold estate,
and the duration of the estate created must be less than the duration of the estate out of which it is
granted.
Lease: Until Bruton v London and Quadrant Housing Trust 2000, the term 'lease' would be used
interchangeably with the term 'leasehold estate'.

Licences

Licence: A licence is only a personal interest in land. It is a permission to use a land for some purpose.
Licences can be non-contractual, but many are the result of a contractual agreement, by which the
licensor allows the licensee to use his land for some purpose in return for consideration.

Leases Licences

A leasehold estate is a proprietary interest, A licence is a personal interest, so cannot bind


and thus can bind successors in title to the successors.
land affected by it.
As a personal interest, a licence cannot be
A leasehold estate is an interest that can in assigned to a third party.
principle be assigned to third parties.
Parties to a licence do not enjoy the same
Parties to a lease are subject to statutory statutory protection and are largely
regulation, which offers various rights and unregulated.
obligations.
As a general rule, licencees cannot bring
Leaseholders can bring forward actions in law forward actions due to their lack of real
in the tort of nuisance and trespass as they are possession.
based on possession.

Distinguishing Leases and Licences

It is important to distinguish leases from licences. Due to the lack of statutory protection for licencees,
freeholders or leaseholders may wish to grant licences rather than leases, as then they become immune
to statutory regulation such as that of the Rent Act 1977, Housing Act 1988, Landlord and Tenant Act
1954, etc. However, in many cases, the 'licences' granted by landlords and the like are in fact leases. A
test to prove the existence of a lease rather than a licence was given in Street v Mountford 1985:

There is a tenancy if:


1. The occupant has exclusive possession;
2. There is a 'term certain';
3. There is a rent; and
4. The case doesn't fall within the list of exceptions where exclusive possession for a term at a rent
doesn't make a tenancy.

Elements of the contract that don't reflect the true bargain of the parties will be eliminated. This
includes false labels, shams, and pretences.

False labels (i.e. "This is a licence") will be disregarded if there is doubt that the contract does in fact
amount to a licence rather than a lease.

Under the doctrine of sham, if the entire agreement doesn't reflect the intention of either party, it will
be void.

Under the doctrine of pretence, if a term in the agreement doesn't reflect the intention of either party,
that term will be void. This was the case in Antoniades v Villiers 1990, where a term was incorporated
into the contract that the landlord reserved the right to put another occupant into a one-bedroom
property so as to counter the 'exclusive possession' element of the Street v Mountford test. It was
obvious that this right would never be used and was thus a pretence.

For 'exclusive possession', it must be established that:


1. The occupant has exclusionary power; and
2. The occupant is immune from supervisory control.

Exclusionary power: the right to keep out strangers and the landlord, unless the landlord is exercising
limited rights reserved to him by the tenancy agreement to enter, view and repair.
If the occupier is subject to supervision and regulation of his/her activity on the premises, he/she will
not have exclusive possession.

For a 'term certain', it must be established that either:


1. There is a specified fixed period given at the beginning of the occupancy for which the occupier holds
an estate in the premises; or
2. There is a periodic tenancy, which means the occupier pays a rent every week or month, meaning
each period is the specified term, which is renewed every time the rent is paid. The tenancy is thus a
period of short terms, viewed upon ending as one unbroken term.

A rent is paid either every week, month, year etc. for occupation of the premises. This does not have to
be monetary. This rule is not strict: rent doesn't necessarily have to be there to constitute a lease.

The exceptions to which the Street v Mountford test doesn't apply are:
1. Where there is no attempt to create a legal relationship;
2. Where there is another relationship, which allows the occupant the premises but without the
intention of creating a lease: for example service providers, such as gardeners/security staff/caretakers,
etc. (i) The occupant must occupy the premises as part of his employment; and (ii) it must be materially
beneficial to the landowner to have the occupant on the premises in carrying out his duties. The
occupancy typically ends when the employment contract ends.

Surprisingly, temporary 'emergency' accommodation for homeless persons does not constitute an
exception to the Street v Mountford test: leases are still granted (Bruton v London & Quadrant Housing
Trust 2000).

Multiple Occupancy of a Property

Joint Tenancy Tenancies of Individual Rooms

 Unity of possession:  A claimant would have to show they


have their own room/unit assigned to
Occupants are collectively entitled to the area,
them.
with no individual having any right to exclude
another from any part of it.  They do not reserve to the landlord
any rights inconsistent with their
enjoying exclusionary power or
 Unity of title:
immunity from supervisory control
Occupants signed one document or over that area.
interdependently signed separate agreements.

 Unity of time:
If a claimant cannot prove there is a tenancy,
The occupants' interests commenced at the joint tenancy, or tenancy of an individual
same time. room, he merely has a licence.

 Unity of interest:

The occupants are collectively liable for rent


and do not hold agreements for different
lengths of time.

Formalities for the Creation of a Lease

LEGAL LEASES:

A lease created by a deed will be legal.


Some leases can be legal without a deed under s 54(2) Law of Property Act 1925, provided:
1. The lease is for a period of less than three years;
2. The lease takes effect 'in possession' (the term must start on the date the lease is completed); and
3. The lease is for the best rent that can reasonably be obtained without taking a fine.

Once these have been complied with, registration is the next step.
If the estate out of which the legal lease is granted is not registered, it must be registered within two
months. If not, it becomes an equitable lease.

If the estate out of which the estate is granted is registered:


1. Legal leases of more than seven years must be registered (unless/until registration occurs, it is
equitable only);
2. Legal leases of 3-7 years can optionally be protected by registration through a notice (purchasers are
bound automatically as they are overriding interests);
3. Legal leases of less than 3 years cannot be protected by registration (purchasers are bound
automatically).

EQUITABLE LEASES:

Equitable leases can arise under the Walsh v Lonsdale doctrine, which requires a specifically enforceable
contract. If there is an agreed fixed term, an equitable lease for the fixed term will prevail over any
implied tenancies.

If the title to the grantor's state is not registered, the equitable lease is classed as an estate contract. If
the leaseholder registers it correctly, it will bind any purchaser of the title. If not correctly registered, the
equitable lease will be defeated by a third party purchaser of the legal estate for money.

If the grantor's estate is registered, an equitable lease should be protected by inserting a notice in the
landlord's register of title, which would bind any purchaser of the freehold. If this is not done, the
equitable lease will be defeated by a sale of the landlord's title for valuable consideration unless the
lease is overriding.