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LEASES & LICENSES

Barrister Hamid Azim Leghari

License – a Personal Right

u ‘Personal permission to use land belonging to another’ [Thomas v Sorrell
(1673)]
u Does not create an interest
u Allows Licensor to deal with property – specific purpose

Licensor (Granting License) Licensee (Obtaining License)

u Examples – parking a car [Colchester (2003)]; running a school [Re Hampstead

Garden Suburb Institute (1995)]; social club [Onyx (1998)]

u Personal Right to Use the Land – vests in Licensee

u Enforceability – against the Licensor – NOT 3rd Parties

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License

u Turns a trespass into permission to occupy or use

u Given by owner of the land
u No Formal Requirements for creation
u Can be created orally or in writing
u Contractual License – offer & acceptance – as based in contract
u Permission to use land that can never amount to a proprietary right (not
recognized category) or can amount to proprietary right had it been created
with proper formalities
u Types of Licenses
u Bare License
u Contractual License
u License by Estoppel

License

u Bare License:
u Enter land for a purpose – permission to enter / use land
u No consideration paid by Licensee
u Prevents a claim of trespass against Licensee - if stays within scope of
permission
u Two Types:
u Express
u Implied
u Can be terminated by Licensor by giving reasonable notice

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License
u Contractual License
u In exchange for consideration
u Contract law is applicable – Term of Contract
u No formalities for creation
u Flexible – covers wide range of dealings & relationships
u Remedies – damages - Specific performance / Injunction
u Contractual Licenses are not Proprietary Interests

License
u Enforceability – Parties privy to contract
u Lord Denning – Binions v Evans (1972) – followed in Re Sharpe (1980)
u In exceptional circumstances – Constructive Trust can be imposed (Lloyd v Dugdale
(2001)
u Contractual License is not to be treated as creating a proprietary interest
u No general rule for imposition of constructive trust – even if stipulated to purchaser
(adverse rights that are not binding otherwise)
u Court has to be satisfied purchaser’s conscience is affected – inequitable to allow the
purchaser to deny rights of claimant
u Purchaser has undertaken new obligations? – paid a lower price in acceptance of new
obligation
u Not desirable – to be imposed on inferences from slender materials

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License

u License by Estoppel
u Proprietary Estoppel – assurance made – upon which reliance is placed to detriment
– unconscionable to break promise

u Starts out as License – Then takes on a new nature of ‘Estoppel’

License

u Bare License: permission to enter upon and use the land – given voluntarily
without consideration
u Contractual License: consideration – normal remedies for breach of contract
are available
u Effect of these remedies can make license irrevocable between the parties
throughout the contractual period of the license
u Contractual Licenses are not interests in land
u Contractual Licenses can take effect against a purchaser of land by means of a
constructive trust
u Estoppel License: Proprietary Estoppel – transcends the existing relationship
of Licensor & Licensee

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Ownership Rights - Estates

u In England & Wales – Ownership vests in the Crown (Ultimate Absolute Owner)
u People own ‘Estate’ in the land – bundle of rights
u Estate confers a right to use and control land – tantamount to ‘Ownership’

u S.1(1)(b) of Law of Property Act, 1925 – Types of Legal Estates

u Fee Simple / Freehold
u Right to use & enjoy land for duration of life
u Freely Transferable
u During Life - (gift/sale)
u Upon Death – (will / intestate succession)
u Equivalent to Permanent Ownership

u Leasehold estate / Term of Years Absolute

Lease – a Proprietary Right

u Lease Holder enjoys benefits of exclusive physical possession and

occupation of property

Lessor – Landlord granting Lease Lessee – Tenant obtaining Lease

u Creates interest in Land

u Lessor and Lessee – Both have Proprietary Rights in the Land

u Rights against the world (including Lessor) – attached to land

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Lease

u Occupier exclusively possessing the land for a certain term in consideration of

a premium or periodic payment
[Street v Mountford (1985)] Lord Templeman

u Elements of a Lease
u Exclusive Possession
u Certain term
u Rent (a one off or periodic)

u Statutory Protection – S.1(1)(b) of Law of Property Act, 1925

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Elements of Lease
(1) Exclusive Possession
u Entitled to possess property to the exclusion of ‘the world’ – including landlord
u Landlord may only enter on specified terms – Cannot exercise property rights

u Test: ‘True Bargain’ [Street v Mountford (1985)]

u Intention of Parties
u Actions
u Labels do not matter
u Joint Tenancies – more than 1 tenant
u Sham Devices – Court appreciates content / substance of agreement – not form

u Presumption of Tenancy

u 4 Unities: possession; interest; title; time (AG Securities v Vaughan [1990])

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Elements of Lease
(1) Exclusive Possession
u Joint Tenancy – 4 unities (time, title, interest, possession) – right exists under
s.1(6) LPA 1925
u Time – Interest begins and ends at the same time
u Title – Estate is created by a single transaction
u Interest – All have same interest in property + rights / obligations are joint
u Possession – All have right to exclusive possession against the world
u Bruton Tenancy – Non-Proprietary Lease (only between the parties) - Bruton v
London & Quadrant Housing Trust (1999)
u Creates contract of tenancy – where some attributes of landlord and tenant cannot
be discounted

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Elements of Lease
(2) Certain Term
u Lease must exist:
u Commence at a certain time
u Exist for a definite period

u ‘Certainty’ – At commencement or by reference to something which can

u Lace v Chantler (1944) – Reference to duration of 2nd World War – Uncertain

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Elements of Lease
(2) Certain Term
u Periodic Tenancy – succession of periodic tenancies – all are for a certain Term
money paid weekly / power to give notice

u Maximum duration of term should be known in advance

u Lack of Power to give notice – fails the ‘Certainty’ rule

u Prudential Assurance Co Ltd v London Residuary Body (1992) 2 AC 386

‘indeterminate term’ – ‘Periodic Tenancies’
u Conceptual difference between a succession of certain periods with simple
uncertainty about the no of periods and a ‘term’ that is from its outset defined by
reference to uncertainty

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Elements of Lease
(2) Certain Term
Exception to General Rule – ‘Life Term’

u Common law rule – Agreement could be treated as a lease for life, terminable
if the uncertain event occurred

u Mexfield Housing Co-operative Ltd v Berrisford [2011] UKSC 52

‘Lease for Life’ – month to month but terminable by Landlord
Corporate entity cannot hold lease for life
u Formalities for creation of leases are not affected – has to be in writing

u Southward Housing Co-operative Ltd v Walker [2015] EWHC 1615 (Ch)

Only apply where parties originally intended a lease for life

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Elements of Lease
(3) Rent
u Strictly – existence of lease does not depend on payment of rent
u S. 205(1)(xxvii) of the LPA 1925 provides that a term of years means a ‘term of years . . .
whether or not at a rent’

u Absence of Rent – Increases the presumption of a license

u Leases – Falling under Rent Acts – MUST be supported by rent

u To obtain statutory protection

u Form – payable in monetary / goods / services

u Peppercorn / Flour

u Amount – ‘Certain’
u Bostock v Bryant (1990) – fluctuating utility bill payments cannot be regarded rent

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Legal Leases
u (s1(1)(b)) LPA 1925
u Formality Requirements
u 3 years or less (including periodic lease): term 3 years or less (includes periodic),
takes effect in possession (commence on the day the lease is granted), and must
be granted at prevailing market rent (Fitzkriston LLP v Panayi [2008] EWCA Civ 283)
u Cannot be entered on charges register (s33 LRA 2002)

u Over 3 years up to 7 years: must be created by deed (s52) LPA 1925

u Constitution of deed (s1) LP(MP)A 1989
u Protected by entry on notice (s32/33 LRA 2002)
u Overriding (para.1 Schedule 3 LRA 2002) – before Oct 2003 – overriding under LRA 1925
(para.12 Schedule 12)

u Over 7 years: Trigger for registration under (s27) LRA 2002, and the deed must be
registered - having its own substantive entry on the Land Registry

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Equitable Leases
u Failure to fulfill the requirements – Equitable Lease

u Agreement must satisfy requirements of estate contract (in writing, signed,

contains all terms) – (s2) LP(MP)A 1989

u Remedy of specific performance must be available - discretionary, and a

court under equity will require a party seeking an equitable remedy to come
with clean hands.

u May also arise out of Proprietary Estoppel

u Unreg Land: Entry as land charge

u Reg Land: notice / actual occupation

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Distinction
u Lease: grants statutory protection and creates estate in land
u License: personal right, based on contract or permission

u License
u Personal Right – enforceable only against landlord
u Vests in Individual
u Contractual or Permission
u Three Types

u Lease
u Proprietary Right – enforceable against the world (including the landlord)
u Vests in Property
u Statutory Protection
u Three Elements

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Legal v Equitable Leases

u Equitable leases appear vulnerable to sale of freehold or leasehold estate out

of which they area created
u Unregistered land – no protection per se for rights of persons in actual occupation
u Right of re-entry can be implied into an equitable lease – degree of
uncertainty – as no express covenants
u Equitable tenant cannot avoid being bound by pre-existing property rights –
even if such rights do not comply with protective mechanisms of LCA 1972
(Unreg) & LRA 2002 (Reg)
u Not considered a purchaser of legal estate (Unreg)
u Not considered to have made a registrable disposition under s.29 LRA 2002 (Reg)

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Termination of Lease

u Effluxion of Time: contractual term has expired

u Forfeiture: right of Landlord to reenter the premises because of tenant’s

breach

u Notice: termination by giving notice

u There are other modes as well: surrender, frustration, breach etc.

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Termination of Lease
Forfeiture
u Right of Landlord to reenter the premises because of tenant’s breach
u Breach of conditions of Lease

u Lease should contain a forfeiture clause – may waive breach

u Right of re-entry must be provided in the agreement

u Non-payment of rent – formal demand

u Other breaches – must serve a statutory notice in writing under s146 LPA 1925
u Specify breach
u Require it to be remedied if possible – reasonable time
u Require tenant to pay compensation (if possible)

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Termination of Lease
Forfeiture
u Tenant / subtenant may apply for relief;

u Forfeiture is disproportionate penalty for the specific breach? (Bilson v Residential

Appointments Ltd [1992])

u Relief may be granted even for a breach which is irremediable

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Termination of Lease
Notice
u ‘Break Clauses’ – are common in leases and intrinsic in periodic tenancies

u Fixed Term Lease: Termination by notice – if expressly agreed

u Periodic Tenancy: Notice of termination is a full period expiring at the end of

a completed period

u Notice must be an unambiguous exercise of the term in the lease

u Requirements pertaining to notice and its mode must be complied with

u Minor errors do not invalidate notice – sufficient clarity

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Thankyou
Modern Land Law
Chapter 6 – Lease – 220 – 287
Chapter 9 – Licenses to Use Land – 371 – 387

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