#7586 - Introduction To Leases And Covenants - Property and Equity 2

Leaseholds are estates in land, carved out of a freehold but limited in time. But this was not always so; the rights used to exist in contracts but since leases generally arise in contracts they are a “curious hybrid which hovers between the world of property and contract”

The common law of leases has been substantially modified by statute since the middle of the 19^th century to deal with changing local conditions – e.g. the common law leases incompatibility with pastoral land

• Yet still the modern law of landlord-tenant retains common law influence – in particular with the laissez-faire philosophy dominating the law of contract (e.g. in the absence of specific legislation parties are free to dictate their terms however they want)

• However the inadequacy of this, captured by the inequality and hardship rather than the independence and autonomy that results from parties of unequal bargaining power, led to a political shift with the introduction of legislation that is protective of weaker parties in the marketplace – with the rejection of the laissez-faire approach

Residential Tenancies - mainly due to a shortage of satisfactory housing reformers emphasised the need to frame residential tenancy laws in terms of the protection offered to consumers. Other reform includes the role of public authority in providing public housing. In the private sector the law has established obligations on landlords which cannot simply be waived by ‘agreement’

• Some of the regulation includes payment and deposit of bonds, rental increases, termination etc.

Retail tenancies – the introduction of the TPA and legislation for retail tenants (especially shopping plaza leases)

Agricultural Tenancies – Protection of tenants as in retail but also things like giving longer notice periods to terminate

Leases under the Crown Lands Act – Introduction of things like perpetual leases

Other tenancies – this is where the common law applies; it does so in leases forming a predominant part of the rental sector economy

Lessor/Landlord – person granting the lease; their interest in the land is called the reversion (generally consists of the fee simple but can also be a life estate)

Lessee/Tenant – person taking the lease

• The lessor lets/leases/demises the premises

• If the lessor disposes of his interest, he does so by assigning the reversion

• The lessee can dispose of it by assigning the lease; with the new lessee stepping in the shoes of the old (if the purported sublease is equal to or in excess of the original lease it is an assignment – Milmo v Carreras)

  • He can also sublet the premises, giving the sublessee possession but receiving rent (if the sublease is less than the original it is a sublease – Lonsdale v Carra)

  • Yearly tenants has a sufficient reversion to sublease for a term of years

  • Protected tenants can sublet for a longer term than the contractual lease has left to run

Term of years – lease for a specified period that continues for this duration unless determined earlier

Periodic tenancy – continues for a designated period, and continues thereafter for that period unless appropriate notice is given. It is a tenancy for a specified period with a superadded provision that it is to continue for the same period unless determined by proper notice to terminate before the end of the first

• Hence the landlord can’t unilaterally determine rent – if the tenant doesn’t agree with new rent he has to give notice to terminate and offer a fresh tenancy at the proposed new rent

Landlord-tenant relationships are usually created by documentary formalities expressing agreement but they can also be created by implication, for example if:

• Tenant continues possession (‘holds over) after determination of the lease and landlord accepts rent, the lessee obtains a fresh leasehold by implication

• Tenant entering possession without concluding an agreement acquires a tenancy by implication of law if rent is paid and accepted

A valid lease must be of a duration that is certain or at least capable of being rendered certain

• Lace v Chantler – ‘for the duration of the war’ – invalid

• Bishop v Taylor – ‘the end of peanut crop or end of harvesting period’ – invalid

• Prudential Assurance Co v London Residuary Body – ‘until needed by the landlord for widening the highway’ – invalid

• Wilson v Meudon – tied to the duration of the ownership of shares – invalid

  • But this does not stop people from introducing a determinable limitation so long as a maximum period is specified. In Lace v Chantler statute modified all wartime tenancies into 10 years max determinable upon the end of the war; thus validating them

The requirement of certainty is taken to be met by the fact that they are deemed to be fixed-term leases with superadded provisions to continue unless brought to an end by notice

Parties can combine the features of a term of years and those in a periodic tenancies

• Amad v Grant – weekly rent, payable monthly in advance, not to be determined except upon one month’s notice and was in any event to continue for at least 3 years.

  • Held (HCA): Monthly tenancy created, determinable on one month’s notice with a proviso that notice can’t be given for at least 3 years

• Re Midland Railway Co’s Agreement – court upheld a clause in a lease from half-year to half-year where the landlords agreed not to terminate until they required the premises for the purposes of their own undertaken

But you cannot stipulate that only the lessee and not the lessor can determine – this is repugnant to the nature of the tenancy and therefore void (Centaploy v Matlodge)

Leasts until terminated by notice but can require a period of reasonable notice to be given (iLandale v Menzies)

• This is called a packing up period

Generally tenancies at will are created by implication of law (e.g. someone takes possession pursuant informal lease before rent is paid)

It is unlike other leasehold interests since it is determined by death, or by an attempt to assign by the tenant

The tenant at will is liable to pay, absent an agreement, a reasonable sum for use/occupation of the land (Zegir v Woop)

Arises when at the expiry of lease the tenant ‘holds over’ without the assent or dissent of the landlord

There must be a grant of exclusive possession. Case law has had to play around with this idea since people have tried to circumvent legislation by using shifty words

The approach in Radaich v Smith is widely followed in Australia and in Addiscombe Garden Estates v Crabbe the QB was clearly in favour of it

• Facts: Owner of tennis courts purpoted to license trustees of a club to use it in consideration of monthly ‘court fees’

• Held: This was in substance a lease due to exclusive possession, the court fees being rental payments

• Cf Somma v Hazle Hurst – unmarried couple each signed a ‘license agreement’ in respect of a bedsitter, giving the licensor use of the room and to nominate another who could use it too.

  • Held: Didn’t create a lease since neither licensee had exclusive possession and even if they had a ‘joint interest’ they didn’t have a right to exclusive possession of the room – hence they were licensees

If the document is a sham and conceals the true nature of the bargain stuck by the parties, the court looks to the substance of the relationship

• A ‘license’ that gave wide-5ranging rights to introduce other occupants, given the property was extremely small, was held to create a lease (Ag Seecurities v...