#17078 - Leases - Property Law

Leases

• Lease - a recognised estate in the land i.e. a property right - because it transfers possession

• Terminology

• The person who grants a lease is a lessor or landlord

• The person who receives the lease is a lessee or tenant

• When leasing, the landlord owns the reversion (the land which will revert back to the after the lease had ended - because L has the fee simple)

• The terms in the lease contract are called covenants

• Anatomy of a Lease

• Definitional Core

• Transfers exclusive possession

• For a specified time (can be fixed or periodic)

• Usually the tenant pays rent

• Terms and Conditions

• Rights and obligations - can be determined by law or by choice (either common practice or ad hoc)

• Remedies - can be reached by law or by choice

• Leases vs Licences and Other Rights

• Not all bargains between landowners and others allowing entry onto or possession of land are leases

• Easement - a right of possession that is not a lease (but still a property right)

• License - a personal right to do something in relation to land (not a property right, so doesn’t bind third parties and can’t be given or sold)

• Legal Consequences of a Lease

• Tenant can sell or give the lease to another

• They can mortgage it

• They can do anything else that the property right enables them to do

• Raises question - can the tenant, alter property, sub-lease, how do different rights interact?

• In law

• Landlord and tenant can enforce covenants upon one another (adheres to common sense)

• Often standard lease contracts are used (like one from the ADLS)

• If standard lease contract is not used, certain covenants are still implied through the Property Law Act 2007 e.g. tenants have right to quiet enjoyment, tenant must pay rent, can’t alter buildings without consent, must keep property in existing condition

• Legally Binding Obligations of a Lease

• The written lease agreement is a contract, so it bind the parties involved to it

• But leases also carry property rights which bind third parties

• Issue - what happened if the landlord transfers the reversion or the tenant transfers the tenancy - who owes obligations to whom?

• Old Common Law Rules

• Prior to the Property Law Act, the common law split obligations into two types:

• Privity of Contract (applies to original L and T)

• Original landlord and tenant are mutually bound by everything in the contract they signed

• They still remain bound even when the property is transferred

• Privity of Estate (applied to original and subsequent Ls and Ts)

• Only asserts binding obligations that touch and concern the land

• This is what binds a subsequent L and T to each other

• Things that don’t touch or concern the land are only binding to the original L and T

• If T2 transfers lease to T3, privity of estate ends between T2 and the landlord, meaning they are not liable if T3 does not meet obligations

• New Rules under the Property Law...