Leases — essential characteristics & types

LL.07 — Leases: Essential Characteristics & Types

A lease (term of years absolute) is a legal estate in land (LPA 1925 s.1(1)(b)); a licence is only a personal permission, binding no third party.

The essential characteristics (Street v Mountford [1985])

The two hallmarks that are strictly essential for a lease are exclusive possession and a certain term; Street described the usual indicia as exclusive possession for a term at a rent:

1. Exclusive possession — the right to exclude all others, including the landlord.
2. A certain (fixed/ascertainable) term — start date and maximum duration known at the outset (Lace v Chantler; Prudential Assurance v London Residuary Body [1992]).
3. Rent — usual but not legally essential. "Term of years absolute" takes effect "whether or not at a rent" (LPA 1925 s.205(1)(xxvii)), so a lease can exist rent-free (Ashburn Anstalt v Arnold). Don't over-state rent as a requirement.

Key principle: substance over form. A document labelled "licence" is still a lease if it grants exclusive possession for a certain term — "the manufacture of a five-pronged implement for manual digging results in a fork even if labelled a spade" (Street v Mountford). Conversely, true lodgers/service occupiers with no exclusive possession are licensees.

Negating exclusive possession

• Genuine retained services (landlord provides cleaning, keeps a key for service) → licence.
• Sham/pretence clauses to dodge a tenancy are ignored (Antoniades v Villiers [1990] — bogus "sharing" clause). Contrast AG Securities v Vaughan (genuine independent occupiers = licences).
• Exclusive possession is not conclusive where there's no intention to create legal relations (family/charity/service-occupancy/no-rent arrangements) — Facchini v Bryson [1952].

Types of lease

• Fixed-term — certain duration (e.g. 99 years).
• Periodic tenancy — runs period-to-period; implied from possession + regular rent payments; certainty satisfied because either party can end it by notice.
• Tenancy at will / at sufferance — precarious; will determinable at any time, sufferance arises where a tenant holds over without consent.
• Reversionary, concurrent, and non-proprietary "tenancy" (Bruton v London & Quadrant [2000] — a lease binding only between the parties, no estate).

Common traps

• Exclusive possession ≠ exclusive occupation (lodger occupies but doesn't possess).
• Formalities: a legal lease >3 years needs a deed (LPA 1925 s.52); the parol exception (s.54(2)) allows a legal lease ≤3 years taking effect in possession at the best rent reasonably obtainable without a fine, with no deed. A specifically-enforceable contract for a lease creates an equitable lease (Walsh v Lonsdale) — but only if it satisfies LP(MP)A 1989 s.2 (signed writing, all terms).
• Registration: legal leases >7 years are registrable dispositions; leases ≤7 years usually bind as overriding interests.