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Leases Notes

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LEASES The essence of a lease: the use of another's land, usually for a specific time, in return for the payment of rent. The Law Commission has described it as temporary ownership. A feature of all leases is that they can be sold and assigned to purchasers, though invariably the consent of the landlord is needed. Leases can be viewed as relationships as much as estates. A concept of an estate is enjoyment by time, whether a specified period (leases) or indeterminate (freeholds). There are two forms of tenancy that are not enjoyed by reference to time: they are tenancies rather than estates:

* Tenancy at will- If the owner of a land allows another into possession without stipulating any period, the courts regard the possessor as a tenant at will. This means that the possessor is not a trespasser.

* Tenancy at sufferance- Designed for a case where the tenant 'holds over' the termination of a lease. If the landlord objects to the holding over then former tenant becomes a trespasser. Both of these can be terminated by either party without prior notice. The lease is one of the two legal estates that are recognised by s1 Law of Property Act 1925. The reason is due to the essence of the lease itself. It would be impracticable if the lease could not bind subsequent purchasers. The better view is that the two types of tenancies are not estates and so outside the scope of s1.

A.

THE ESSENTIALS OF LEASES

1. Leases - contract or property?

*

Law of Property Act 1925 s 1: Only estates in land capable of subsisting or being conveyed or created at law is a fee simple absolute in possession or a term of years absolute (lease).

*

Hussein v Mehlman [1992] 2 EGLR 87 at 88f-90j: D granted P three year tenancy with benefit of covenant to repair. P treated breach of covenant as repudiatory breach of letting contract and sought to terminate by giving up possession and returning the keys. Sedley QC: o The estate in land is not the foundation of the landlord/tenant relationship but an incident of it; the foundation is the contract to give consideration in return for the exclusive right to occupy land. o Decisions of the Courts point in favour of termination of contract by frustration and repudiation; has been an express decision to the effect that can be rescinded where induced by fraud (CA). o Decides that a contract of tenancy can be repudiated by breach of contract. Appreciates implications:
? If the obligation to pay the rent is as fundamental as the obligation to keep the house habitable, it will follow that a default in rent payments is a repudiatory breach on T's part;
? That the above may follow is not a reason for ignoring binding authority;
? Effect of such acts may be modified by statute or a provision in the contract itself.

*

Hammersmith and Fulham LBC v Monk [1992] 1 AC 478: D & F were granted a joint periodic tenancy of a flat, terminable on four weeks notice. F moved out and made an agreement with council that if she terminated tenancy she would be re-housed by them; F terminated without knowledge or consent of D. Council sought possession. o Lord Bridge:
? Approached case on the footing that the answer was to be found in the law concerning contract; there to be no special treatment just because agreement gave rise to landlord/tenant relationship;
? Application of ordinary contract principles leads one to expect that a periodic tenancy granted to joint tenants must be terminable at common law by appropriate notice given by any one of them whether or not the other concurs; nothing in property law to refute this expectation.
? The fact that law regards period tenancy as one single term in no way affects the principle that continuation beyond the end of each yet depends on the will of the parties that it should continue, agreement being implied from the omission to serve notice to quit. o Lord Browne-Wilkinson:
? Noted that tension in this case was generated by the nature of a lease itself:

* Revulsion against unilateral termination is based in property law and the notion that one's proprietary right in an object should not be terminated without his consent;

* Contract based reaction is to require common intention for continuation of tenancy.
? Thought that nature of the contract not altered by the fact that they were trustees; F was therefore able to terminate the entire thing by giving notice to quit.

1 *

*

Chesterfield BC v Bailey [2011] EW Misc 18 (CC) at [37]-[66]: D & F were granted joint tenancy of property; relationship broke down, F doing nothing for a while. F then later terminated joint tenancy and council brought possession proceedings as against D (living in property with two sons). o Denied claim of the council on basis of insufficient notice, but considered Article 8 obiter. o Any person at risk of being dispossessed of his home at the suit of LA should in principle have the right to raise the question of the proportionality of the measure, and to have it determined by an independent tribunal in the light of article 8, even if his right of occupation under domestic law has come to an end. o If the court concludes that it would be disproportionate to evict a person from his home notwithstanding that he has no domestic right to remain there, it would be unlawful to evict hi. o Q: is whether the eviction is a proportionate means of achieving a legitimate aim; exceptionality is not the test. Where (as here) the person has no right in domestic law to remain in occupation of his home, the proportionality of making an order for possession at the suit of the local authority will be supported not merely by the fact that it would serve to vindicate the authority's ownership rights; in this case not proportionate.

Sims v Dacorum BC [2013] EWCA Civ 12: Husband and wife had secured joint periodic tenancy of a property; they subsequently split and W gave notice to quit. Issue as to whether should be allowed to appeal to the Supreme Court to claim that should have right to sole tenancy because ECHR required it (and that Hammersmith v Monk is incompatible). Mummery LJ: o Incompatibility argument is ill-founded for several reasons:??

o o

In this case council has done nothing to interfere with his right given that it was W that gave notice; Not clear that the rule is incompatible anyway given that entered into a joint bargain; Termination of a joint bargain was allowed by the very nature of the bargain made; Margin of appreciation. If the law needs to be reviewed with a view to possible amendment, that is not a matter for the Supreme Court, whose proper constitutional function is to declare and apply the law. It is not so supreme that it can legislate for changes in the law; that is the function of Parliament. Basically thinks that the appeal would be a waste of public money.

*

National Carriers Ltd v Panalpina [1981] AC 675: Right to use warehouse was demised for 10 years. Only route of access was blocked up for 20 months due to demolition of another property. D claimed frustration (rejected). o In principle the doctrine of frustration is applicable to leases, although will be extremely rare:
? Lord Hailsham expresses hope that fact that no reported case has been decided in the affirmative on this point, that will be sufficient to deter those eager to litigate. o Have to accept that must apply because to refuse to do so seems out of sync with authority and encourages fine distinctions and perplexities,

*

Ingram v IRC [1997] 4 All ER 395 at 400-01, 419-427 (NB: Millett LJ affirmed in HL [1999] 2 WLR 90): J carried out a number of transactions in an attempt to reduce inheritance tax due upon death. Main question was whether she, as principal, could direct a nominee to grant a lease to her. o Nourse LJ:
? Cannot sensibly allow a person to assume the burden of an obligation to someone whose only function was to hold the benefit of it for the other. That is no less whimsical a transaction than the grant of a lease to yourself.
? A person cannot grant a tenancy to himself: for the simple reason that every tenancy is based on an agreement between two persons and contains covenants between them. o Millet LJ (minority):
? There is no doubt that a lease is property being a legal estate in land. It may be created by grant or attornment as well as by contract and need not contain any covenants at all.
? It is easy to make too much of the contractual nature of the relationship. The feature of a tenancy which distinguishes it from a licence or merely contractual right of occupation is the lessee's right to exclusive possession. But this right is a consequence of the ownership of the legal estate; it is not merely a contractual right, or it could not be the distinguishing feature.
? In so far as a lease is a conveyance, that is to say in so far as it lies in grant, there is no difficulty in the proposition that a man can vest a term of years in a nominee for himself. A trustee does not contract as an agent for a beneficiary, but a principal.
? Thus rejects the idea that no rational system of law could sensibly allow a party to assume an obligation to a party whose only function was to hold the benefit of the obligation for the benefit of the person subject to it.

2 *

Bruton v London and Quadrant Housing Trust [2000] 1 AC 406; cf Millett LJ in CA, [1998] QB 834: Housing trust was granted a licence to use properties as temporary homeless accommodation. Trust undertook to ensure that no occupier acquired security of tenure without approval and that no occupier should acquire rights when in occupation; granted them a 'license'. P tried to claim that he was a tenant; wanted to enforce covenant. o Lord Jauncey: Thought that did not matter what the agreement was called, as the effect was to give exclusive occupation, which, although regrettable in this case, meant that was a tenant. o Lord Hoffmann:
? Could not raise tenancy by estoppel as had not purported to grant a lease in the first place; it is for this reasons that the submission of Millet LJ in the Court of Appeal could not stand.
? 'Lease' describes a relationship; it is not concerned with the question of whether the agreement creates an estate or other proprietary interest which may be binding on third parties.
? It is putting the cart before the horse to say that whether an agreement is a lease depends on whether it created a proprietary interest; thus, foes not matter that trust did not have title.
? The question as to whether a lease exists is one of law to be determined by reference to Street v Mountford; in this case there was an agreement on terms which constituted a tenancy.
? The effect of this agreement is that the tenant can enforce covenants against the licensor.
? It is not the estoppel which creates the tenancy, but the tenancy which creates the estoppel. The estoppel arises when one or other of the parties wants to deny one of the ordinary incidents or obligations of the tenancy on the ground that the landlord had no legal estate.
? The basis of the estoppel is that having entered into an agreement which constitutes a lease or tenancy, he cannot repudiate that incident or obligation.
? It is the fact that the agreement between the parties constitutes a tenancy that gives rise to an estoppel and not the other way round. o Lord Hobhouse:
? Both parties knew that the housing trust was a mere licensee of the council and should have realised that for the housing trust to grant exclusive possession of the flat probably amounted to a breach of the housing trust's obligations to the council. But this cannot contradict what was actually agreed.
? The Court of Appeal understood that this case depended upon establishing a tenancy by estoppel. This was not a correct analysis. He needed to do no more than rely upon the written agreement he had with the housing trust and its legal effect.

* The only relevant estoppel is that which arises from agreement. Where the relationship is contractual the estoppel arises from the agreement not the other way round.
? Case depends on establishing that the agreement 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. #

*

116 LQR 7, Casenote, Bright: In the House of Lords, exclusive possession was found on the basis of the contractual agreement between Bruton and the Housing Trust. The Housing Trust's lack of title is not relevant. o In contrast, Millett L.J. regarded exclusive possession as looking beyond the relationship between the two contracting parties.
? According to this view, exclusive possession, meaning possession to the exclusion of the whole world, is essential for a lease; if "the grantor has no power to exclude the true owner from possession, he has no power to grant a legal right to exclusive possession and his grant cannot take effect as a tenancy".
? This means that Bruton could not have exclusive possession and thus, he could not have a lease.
? If it is possible to have exclusive possession in the relational sense referred to in the House of Lords, the further question arises as to the nature of the resulting relationship. We are told that it is a relationship of landlord and tenant but not whether it is an "estate". o A lease, in the words of Lord Hoffmann "describes a relationship between two parties who are designated landlord and tenant. It is not concerned with the question of whether the agreement creates an estate or other proprietary interest which may be binding upon third parties." o If this is a correct reading of what Lord Hoffmann says and it is possible to have leases which are not estates, contractual rights of occupation will need to be classified as either;
? Proprietary leases giving an estate in land and enforceable against all third parties, or
? As contractual leases conferring exclusive possession and giving rights against all who interfere with possession other than those who can show a better right to possession, or as licences. o One further problem between the decisions made in HL and CA is the dispute as to whether estoppel comes first or the tenancy. Orthodoxy agrees with the CA but in future who knows.

3 *

[2000] CLJ, Casenote, Dixon: Lord Hoffman's reasoning is difficult as many would argue that it is inherent in the nature of lease that it is proprietary and a 'non-proprietary' lease is a contradiction in terms. o NB: The get out clause here may be to read the judgement as applicable only to s11 Landlord and Tenant Act 1985. This seems to be the approach of Lord Hope in his short but concurring judgement. However, even this still ignores that s11 is triggered by a recognised legal concept not merely some contractual arrangement having the characteristics of a lease.

*

Kay v Lambeth LBC [2006] 2 AC 465 at [143]-[144]: An analogous case to Bruton could arise where a person no the owner of a land, but in adverse possession, granted a tenancy. As between the contracting parties there would be a valid 'non-estate' tenancy, but until adverse possession period was up, the agreement would not bind the true owner of the estate.

*

Roberts, [2012] Conv 87: Seeks to explore the idea that the Bruton tenancy is a true proprietary tenancy, albeit of a very circumscribed type which would not satisfy all definitions of proprietary. Author takes proprietary to mean 'control over access'; it is this relativity of title which is at the heart of Bruton. o First discounts the view that the decision is confined to being on subject of s11 L&T Act only:
? Makes no sense to have different definition of lease for different purposes:
? Lord Hoffmann refers to other legislation in his judgement:
? Not consistent with the approach later taken in Kay v Lambeth. o Other writers seem to think that proprietary interest must be good against the whole world, yet prior to registration hardly any rights are of this nature, yet are still regarded as proprietary. o Some have disagreed with decision on basis of principle 'man cannot convey what he does not own'. Yet that rule should be explained as one which states that a man cannot give a better title than the one which he does not have; implication is that can give rights as against him and anyone else with lesser interest, but not as against the estate owner or anyone else who has a stronger claim to title. o If it is accepted that the Bruton interest is a leasehold then may constitute overriding interest; note that seems will only really operate where shorter tenancy is concerned.

*

Bridge, in Land Law; Leases, Debates, Policy (ed Tee) ch 4: The lease straddles the world of contract and property; it is an estate the duration of which is determined by the agreement of the landlord and tenant. Thus, one may perceive the landlord and tenant relationship in a number of ways, each of which can be briefly discussed. o The Lease as Property: A term of years absolute is one of only two legal estates capable of being created. Most (unless under three years in duration) must be created by deed. In the event that a deed is not executed, the lease will take effect in equity if it is specifically enforceable, under the rule in Walsh v Lonsdale. An equitable lease is then registerable as a land charge.
? It is an over-simplification to say that licences have no proprietary consequences, but the courts have been keen to accord full proprietary status to it in the post-Denning era. However, certain kinds of licence may bring the right to protect possession in the tort of trespass.
? The decision of the house in Street v Mountford can be seen on one level, as asserting the proprietary status over contract. The parties' intention is material, but only in so far as it relates to an intention to grant exclusive possession.

* The consequential restriction on the parties' contractual autonomy is often justified by reference to the imbalance of negotiating strength and the desirability of ensuring that rental of homes is properly regulated.
? It is important to appreciate that which Street v Mountford did not decide:

* The central question of land law: the extent to which an interest, whether or not derived from a contract, is binding on a purchaser of an estate in the land.

* The true meaning of exclusive possession. Any attempts at definition by Lord Templeman were rather dogmatic and have since been rejected. o The lease as a status: The status conferring dimension of the landlord and tenant relationship is often neglected, yet it has been the basis of most modern litigation. That is because the status brings with it a number of significant rights and obligations.
? Within this 'status' dimension it should be appreciated that there are different types of tenancy, to which different benefits accompany; private, public housing, commercial. o The lease as contract: The contractual flavour of the lease was traditionally of less flavour than its property dimension. Once the tenant had been granted legal estate it was felt that the contract had been completed, and so the estate, rather than the contract, governed the ensuing relationship.
? However, the application of contractual doctrine was hesitantly introduced into English case law in the following instances: Liverpool CC v Irwin; National Carriers v Panalpina; Hammersmith
& Fulham LBC v Monk. The advantages of applying contractual doctrine were clear in terms of

4 o

flexibility, allowing the parties' to dictate the terms of their relationship, and enforcing those terms in the most effective way.
? The most startling case came in the decision of Bruton v London Quadrant Housing. A lease is a contract, and it may be nothing more than a contract. It need not be an estate at all.

* Lord Hoffman advanced two arguments in support of the outcome: o The term 'lease' refers only to a bilateral relationship between the landlord and tenant, and nothing more.
? This has been described as the relational concept of exclusive possession, pursuant to which court simply asks whether the occupier has exclusive possession as against their immediate landlord.
? The undoubted effect is to recognise that an agreement which does not confer legal estate in the property can nevertheless be a lease. This kind of lease, being non-proprietary is unique. o A tenancy arose by virtue of estoppel 'it is not the estoppel which creates the tenancy, but the tenancy which creates the estoppel'.
? The facts of Bruton do not fit this, given the clear express intention not to create a tenancy by deed or representation.

* Lord Hobhouse: more orthodox analysis stating that the existence of the relationship of landlord and tenant triggered the statutory implication of the repair covenant. However, this also creates a proprietary interest of a seemingly hybrid nature. NB: The popularity of the lease may also be attributed to the fact that covenants which touch and concern the land will run because of privity of estate.

2. "Exclusive possession, rent, term"

*

Law of Property Act 1925 s 149(3): Lease to take effect more than 21 years from the date of the instrument purporting to create it will be void; however, does not apply to any term taking effect in equity under settlement, mortgage, indemnity or other like purposes.

*

Street v Mountford [1985] AC 809: S granted M right to occupy two rooms on weekly basis, subject to termination by 14 days notice; agreement called a licence. M was made to sign a declaration to the effect that she understood no tenancy was created. S moved in, having exclusive occupation. Lord Templeman: o A tenant armed with exclusive possession can keep out strangers and the landlord unless latter is exercising limited rights reserved by agreement to enter, view and repair. If lack exclusive possession then cannot be said to own an estate in land. o If residential accommodation is granted for a term at a rent with exclusive possession, the landlord providing neither attendance not services, the grant is a tenancy; these three hallmarks are decisive as they operate to distinguish a lease from a licence. o If above is the effect of the actual agreement which is made it does not matter what it is called; the only relevant intention is that to grant exclusive possession. o May be cases where there is exclusive occupation but no tenancy because intention to create a tenancy is negated. Examples:
? Where parties did not intend to enter into legal relations at all;
? Where the relationship between the parties was that of;

* Vendor/Purchaser;

*

*

Master/Service Occupier; Where owner has no power to grant a tenancy;

o Disapproves of decision in Somma v Hazelhurst; because there was in fact exclusive occupation, it should not matter that agreements were entered into separately. It is the effect which matters.

o The Court should 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.

*

[1985] Conv 328, Casenote, Street: An important question is whether, as a result of Street, all sharing arrangements are automatically to be treated as joint tenancies (owing to the disapproval of Somma v Hazelhurst). o The author suggests not, because some arrangements clearly should not surmount to tenancy e.g. students in shared accommodation with separate agreements. It is clear that Rent Act avoidance has now been curtailed by the decision, and that in future the only methods which landlords may successfully employ are those noted in the Act itself e.g. holiday lets, landlord living in the accommodation.

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