A lease is a Legal Interest in Land. Section 1.1 LPA defines that is it is a Term of Years Absolute. There are different types of tenancy; Fixed term tenancy which is the most common. This is where there is an agreement for a fixed period of time. After this period of time, the property will transfer to back to the freeholder and the Leasehold will be Expired. A periodic tenancy is an ongoing agreement, typically used in commercial settings where there is an agreement that the land is owned for a shorter period of time, on a rolling basis. This means that their tenancy renews at the end of the period. In order to terminate a periodic tenancy, the freeholder must give notice at least 1 period in advance.
The case of Walsh V Lonsdale implies a periodic tenancy to any lease that ended but the tenancy carries on occupying and paying rent, and the landlord does not act on this.
In order to identify a lease, case law must be consulted. It must have:
- A determinate term, and
- Exclusive possession
The case of Lace v Chantler sets out determinate term, and allows there to be the existence of a periodic tenancy.
Street V Mountford is a very important case in regard to lease, determining whether exclusive possession is present. It was decided that in this case, in order to have exclusive possession, the lessor must have the rights of an absolute owner. This includes the right to exclude another from the property, including the tenant. It also stated that the lease must be for a term less than the grantor, for example of a lessor sublet a property, they can only grant a lease for a shorter period of time than they have left on their lease.
The requirements to create a lease, as it is a legal interest in land must be created by way of Deed- section 51 LPA. This means it must comply with Section 1 LP(MP)A, which sets out the formalities of a deed:
- Must be clear on the face that it is a Deed
- Must be validly executed; signed witnessed and delivered.
It was held in the case of Ashburn V Arnold that rent is not a requirement of a lease. It is evidence of an agreement, and can be seen as good consideration for the agreement on a contractual level, but is not a requirement of a lease.
If these requirements are not present, then equity may step in and grant a lease. An equitable lease must comply with section 52 LP(MP)A and must be:
- Signed by or on behalf of both parties
- In writing
- Include all terms
A lease can also be made by oral agreement. This is called a Parol Lease, covered in sections 52.2D and 54.2 LPA which must be:
- A term of 3 years or less and,
- Market rent paid to landlord/best rent with no lump sum payment or rent,
- And the occupation must commence immediately.
In order to make leases enforceable on any future buyers of the land, and to make the leasehold legal, they generally must be registered. If the lease is for a term of over 7 years it must be registered as it is a registerable disposition. If they are 7 years or under, they do not have to be registered, as they are enforceable as an Overriding interest- Schedule 3 LRA 2002 Paragraph 1. All Equitable Leases must be registered as they are an Interest affecting a registered estate.
A license is a permission to use the land of another, but does not amount to a lease. It does not have to actually be in regard to occupation of land. It could be a simple allowance of a child on to your land to recover a football, or having friends over for dinner. However, it can be used in the sense of allowing someone onto the land to use the land. It can even amount to a contractual agreement at times. The difference is that a license is not a interest in land, it is only a personal interest, and will never be enforceable on any future buyers of land.
By looking at the case of Street V Mountford, discussed earlier, the criteria is looked at when deciphering whether it is a lease. This is further defined in the cases of Antoniades V Villiers and AG Securities V Vaughan. In these cases, many indicators were discussed in order to prove whether an agreement is more of a lease or a License:
- When an agreement says it is a license, it will be disregarded if the agreement has the criteria of a lease.
- If the property is made for a specific number of people, stating that more parties could occupy the same area is a sham and will indicate that it is a lease
- If the Landlord has access to the property to grant services at any time then it will be evidence of a license, however if the landlord is only allowed in with the permission of the tenants or at specific times it will indicate a lease.
- If there are no areas of exclusive possession, for instance when one party moved out, the other could occupy the other bedroom, it will indicate a license.
- If the rent differs from tenant to tenant and the agreements were made at different times it will indicate a license
- If the rent is the same for all occupants, and the agreement was signed at the same time, it will be a lease.
The case of AG securities was held to be a License and the case of Antoniades was held to be a lease.