Land Law Essay Help: Leases and Tenancies

Land Law Cases referred to in this section:
AG Securities v Vaughan (1988) 3 WLR 1205
Antoniades v Villiers (1988) 3 WLR 1205
Birrell v Carey (1989) 8 P & CR 184
Doe d Tucker v Morse (1830) 1 B & Ad 365 at 369, 109 ER 822
Lace v Chandler (1944) KB 368
Lewis v Bell (1985) 1 NSWLR 731
Royal Philanthropic Society v County (1985) 276 EG 1068
Say v Smith (1563) 1 Plowd 269
Street v Mountford (1985) Ac 809
Voli v Inglewood Shire Council (1963) 110 CLR
Westminster CC v Clarke (1992) 2 AC 288

A lease or tenancy will be granted where there is a fixed or periodic term, with exclusive possession, in consideration of a premium (lump sum) or periodical payments (rent). Such an agreement generally will create a relationship of landlord and tenant.

Rent represents the consideration which the tenant frequently agrees to pay in exchange for his continuing right of exclusive possession (United Scientific Holdings Ltd v Burnley BC (1978) AC 904 at 935A per Lord Diplock) and the repairing or other obligations which attach to the reversion (Muscat v Smith (2003) 1 WLR 2853 at (30) per Sedley LJ). The lease or tenancy, being contractual in nature, needs to be supported by consideration unless it is created by deed. However, recent case law has suggested that whilst the absence of rent suggests that a mere licence has been granted, it is possible to create a term of years without reservation of rent (Fatac Ltd v Commissioner of Inland Revenue (2002) 3 NZLR 648 at (41), (66)).

Rent is usually in the form of monetary consideration but there is no reason why it cannot be paid in some other kind - for example, through services (Doe d Tucker v Morse (1830) 1 B & Ad 365 at 369, 109 ER 822 at 824). Where rent is paid in money, there is no issue as to its adequacy as consideration (Royal Philanthropic Society v County (1985) 276 EG 1068 at 1072).

The term of years must be for a fixed period of any measurable length, including a mere fraction of a year (Law of Property Act 1925 s.205(1)(xxvii)), commencing at a time certain (either expressly fixed or readily ascertainable before the start of the term - Say v Smith (1563) 1 Plowd 269 at 272, 75 ER 410 at 415). The commencement of the lease may however be postponed to a date later than the instrument that creates the lease - this is known as a reversionary lease. Such a lease will be subject to a statutory penalty of voidness or a fine if it takes affect more than 21 years after the date of the document that purports to create it (Law of Property Act 1925, s.149(3)). Note that the shorter the term of the lease, the more likely it is to be construed as a licence (Voli v Inglewood Shire Council (1963) 110 CLR at 91 per Windeyer J).

The terms of the lease, in relation to the length, must be certain - either express, implicit or capable of being rendered certain. Where for example the terms have been fixed by reference to 'the duration of the war', such agreements have been held not to be a lease as in Lace v Chandler (1944) KB 368 at 370-371. Neither will phrases such as "as long as the company is trading", as in Birrell v Carey (1989) 8 P & CR 184 at 186 per Fox LJ, be accepted.

Where however a lease for life is granted, at a rent or premium, this is converted by statute into a 90 year term by the Law of Property Act 1925, determinable after the death of the lessee by giving one month's writtne notice. Similarly, a lease until marraige is converted into a 90 year term, determinable after the marraige of the original lessee by the giving of at least one month's written notice (s.149(6) Law of Property Act 1925).

Exclusive possession (not exclusive occupation)
It is intrinsic to the nature of a lease that exclusive possession is granted. The essence of this is the level of territorial control granted necessary for the tenant to carry out his purpose for which he took the letting. Exclusive possession means first that the tenant has the right to exclude others, including the landlord, from the property - the tenant in effect is exercising the right as if he were absolute owner of the property. The right to enter, view and repair is often reserved, but this is not inconsistent with exclusive possession - in fact, it further supports the notion that the tenant has in all circumstances the right to exclude people from the premises, reserving only limited rights for the landlord to view for limited purpose (Street v Mountford (1985) Ac 809 at 816C; Lewis v Bell (1985) 1 NSWLR 731 at 734F-G).

A tenant with exclusive possession is also immune from supervisory control or regulation of his behaviour on the premises by others.

Exclusive possession is not the same as exclusive occupation. Exclusive occupation refers to occupancy of the land - possession is far more than that. Students in university halls, residents in a hotel and persons living in old people's homes have exclusive occupation but they do not enjoy possession, to the exclusion of all others; neither do persons occupying a homeless hostel. One of the key features that is missing from such scenarios is that there is no right to exclude others, and there is no immunity from supervisory control; an occupant of a hostel or home must behave in accordance with the rules of the home, and is not free to carry out whatever activities he wishes unsupervised (see for example Westminster CC v Clarke (1992) 2 AC 288; tenant status of an occupant of a room in a council run hostel for homeless people - assertion that a tenancy existed is incompatible with the "totality, immediacy and objectives of the powers exercised by the Council and the restrictions imposed on the occupant".

Lease v Licence (this material is repeated in our licence study area)
It is often important to establish whether a lease or a licence is held, because the holder of a lease will have considerably more rights than the holder of a licence. In Street v Mountford (1985) Ac 809, Lord Templeman said that where exclusive possession is granted of premises for a term at a rent, then prima facie, a lease is granted. He warned against 'sham' agreements in which leases are disguised as something else - usually licences. In Street v Mountford, although a 'licence' was granted and the landlord reserved the right to enter the room to inspect it, maintain it and read meters, it was held that in reality the agreement was a lease because the tenant had exclusive possession. Exclusive possession means that the tenant may exclude everyone else, including the landlord, from the premises - howeverm many leases, particularly those of flats where there is a management company, will reserve the right for the 'landlord and his agent' to inspect the property for maintainance and repair, usually giving at least 48 hours written notice, but this does not mean that exclusive possession has not been granted.

Where a property is shared, it is necessary to consider whether all the occupiers have equal rights and interests in the property as a whole, in which case they would be joint tenants. In Antoniades v Villiers (1988) 3 WLR 1205, two occupiers of a small one bedroom flat paid equal amounts of rent. The landlord's 'right to occupy' which he attempted to reserve was held to be a sham - they had exclusive possession and were joint tenants. In AG Securities v Vaughan (1988) 3 WLR 1205, four occupiers signed different licence agreements on different dates, for different terms and payments. The four unities were not present to make them joint tenants and although they had each an exclusive right to occupy the flat with the other three, they did not have collective total exclusive possession - consequently they were held to be licencees.

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