Leases Lecture

INTRODUCTION

Many of the questions you will be dealing with in land law questions will relate to leaseholds rather than freeholds. By and large, the characterisation of an estate as a leasehold will not be the focus of a question. Typically, it is the other aspects of a problem question which are of more importance, whether it be easements, or a mortgage relationship, or covenants.

However, on occasion the question will be about one of two questions:

1. Is the relationship of the parties actually a lease?
2. If it is (or if it is not), what does that mean for the obligations of the parties?

If the issue is whether or not the relationship is a lease, it is usually in the context of whether it is a lease or a licence. This shall be discussed in the section below entitled ‘Key Characteristics of Leases.’ Further on, we shall address some of the obligations owed by landlords to leaseholders. As with all other chapters, there will be example problem questions at the end.

But first, some background:

BACKGROUND

A leasehold is defined in the Law of Property Act 1925 as an estate in the land for a term of ‘years absolute’ (Law of Property Act 1925, s.1(1)(b)). A lease (or as it is otherwise called, a leasehold) is conferred by a landlord (also called the lessor) on the tenant (lessee). The lease grants to the lessee a right of exclusive possession for a finite period of time. The period of time can be fixed or may be periodically extended. The period can be less than a year, from year to year, or for a fixed term of years (Law of Property Act 1925, s.205(1)(xxvii)). Any area can be designated as a leasehold so long as it grants, for a definite period, a right of ‘exclusive domain of a particular individual’ (AG Securities v Vaughan [1988] UKHL 8 per Lord Oliver of Aylmerton).

The leaseholder’s rights depend on the terms of the lease and the landlord retains a reversion. In one respect the tenant is in the same position as a freeholder: the right of exclusive possession ordinarily allows the tenant to exclude strangers and the landlord, subject to limited rights of entry (Street v Mountford [1985] 2 All ER 289 per Lord Templeman). 

A legal lease normally requires a deed. A lease taking effect in possession for up to three years at the best rent reasonably obtainable without a fine may be granted orally (Law of Property Act 1925, ss.52 and 54(2)). A specifically enforceable contract to grant a lease can create an equitable lease. Where s.2 of the Law of Property (Miscellaneous Provisions) Act 1989 applies, the contract must incorporate all expressly agreed terms and be signed by or on behalf of each party. A lease granted out of registered land for more than seven years must normally be registered to take effect at law. This also applies to leases taking effect in possession more than three months after the grant and to discontinuous leases (Land Registration Act 2002, s.27).

Key Points:

• A tenancy can exist between the parties even where the landlord has no estate out of which to grant a term of years absolute.
• Mr Bruton had exclusive possession under a weekly tenancy.
• The trust’s agreement with Mr Bruton did not give him a leasehold estate binding the council.

KEY CHARACTERISTICS OF LEASES

In the landmark case of Street v Mountford [1985] the court described the usual residential tenancy in the following terms:

• Exclusive possession;
• For a fixed or periodic term certain; and
• Usually in consideration of a premium - meaning a lump sum - or periodical payments. Rent is not essential to a lease (Law of Property Act 1925, s.205(1)(xxvii); Ashburn Anstalt v Arnold [1989] Ch 1).

We shall now deal with some of these requirements in detail, as well as several other aspects of the leasehold relationship.

Any given lease or tenancy must grant a right of exclusive possession

The right of exclusive possession over land is said to be the ‘proper touchstone’ of a lease or tenancy (Radaich v Smith [1959] HCA 45 per Windeyer J). A tenancy by definition must involve a granting by the landlord of exclusive possession, and so a tenancy without the right of exclusive possession is a contradiction in terms. Lord Templeman observed in Street v Mountford [1985] that the tenant is entitled to ‘keep out strangers and keep out the landlord unless the landlord is exercising limited rights reserved to him by the tenancy agreement to enter and view and repair.’ By contrast, a person holding a bare licence to occupy has no such right to ‘exclude other persons’ (AG Securities v Vaughan [1988] per Lord Oliver of Aylmerton).

Therefore, if a freeholder seeks to retain an unlimited right of access to the property over the leaseholder - as opposed to the right of access in limited and prescribed circumstances - a genuine right of that breadth may show that no tenancy was granted. A pretence introduced to disguise a tenancy is disregarded. For example, requiring the tenant occupier to vacate the property for a prescribed period each day is inimical to the right of exclusive possession accorded to all lawful tenants (Aslan v Murphy (No. 1) [1989] EWCA Civ 2).

What should be borne in mind is that a right of occupation does not mean a right of possession. Certain parties, described as licensees, will have a right of occupation, as may be the case with students in university accommodation or residents in a care home. The result depends on the rights actually granted in each case (Mehta v Royal Bank of Scotland (2000) 32 HLR 45).

Key Points:

• The person claiming the tenancy was agreed to be an occupant.
• Taken together, the nature of the agreement of the occupation meant no tenancy could subsist given the ‘totality, immediacy and objectives of the powers exercised by the council’.
• The place occupied by him imposed several requirements, the totality of which were irreconcilable with a notion of exclusive possession on the part of the occupier.
• Examples of such requirements include the ability of staff to enter the rooms at any time, and no occupant could claim the right to occupy any specific room.
• The powers were said to be immediate because these powers could be exercised at any time by the council.
• The objectives were seen by the court as legitimate, namely controlling and supervising the occupants.

Distinction between lease and licence

As you will have seen, there is much discussion around whether a given arrangement is a lease or a licence, typically in the context of whether the occupant is claiming a right of exclusive possession and the person granting the right of occupation claims they had only granted a licence. Yet the importance of the distinction goes beyond the right of exclusive possession: a proprietary lease can bind successors and can generally be transferred subject to its terms and statute. A contractual licence is enforceable against the licensor but by itself gives no estate in the land (Ashburn Anstalt v Arnold [1988]).  Certain legislative protections apply only to tenants and not to licensees (Rent Act 1977, s.1 for surviving protected tenancies, Housing Act 1988, s.1 for assured tenancies in England, and the Landlord and Tenant Act 1954, s.23 for qualifying business tenancies). A qualifying business tenancy normally continues after its contractual term unless ended under the 1954 Act or validly contracted out (ss.24 and 38A). In Wales, since 1 December 2022 most tenancies and licences under which an individual occupies a dwelling as a home for rent or other consideration are occupation contracts, subject to the exceptions in Schedule 2 to the Renting Homes (Wales) Act 2016. An occupation contract may be secure or standard, and a standard contract may be fixed-term or periodic. The landlord normally has 14 days from the occupation date to give a new contract-holder a written statement (s.31). In the residential context, however, leases and licences can look very similar. Hence, in looking at ways to distinguish between the two categories, the courts have arrived at various principles:

1. Exclusive possession is necessary but not sufficient for tenancies: Although it is a given that leases will require exclusive possession, there are certain arrangements by which exclusive possession applies despite there being no relationship of landlord and tenant. A room can itself be leased even where facilities are shared. Sole occupation does not necessarily give a right of exclusive possession: a lodger receiving attendance may have only a licence, as may an almshouse resident occupying as a beneficiary of the charity (Gray v Taylor [1998] 1 WLR 1093). Where the accommodation is underpinned by some element of friendship or familial relations the court may find that there was no intention to create legal relations (Heslop v Burns [1974] 1 WLR 1241). An employee required to occupy the property for the better performance of their duties may be a service occupier (Street v Mountford [1985]). Outside such exceptions, if the agreement confers on the occupant a right of exclusive possession, unencumbered by control from the party owning the property, the court will find that the arrangement is a tenancy, even if the occupant is subject to certain onerous conditions under the occupation, such as in the case of a charitable housing trust (Bruton v London & Quadrant Housing Trust [1999]).
2. The status of the lodger: Typically, an occupant will be designated as a lodger and therefore a licensee, rather than a tenant, if the owner of the premises is contractually obliged to provide attendance or services ‘which require the landlord or his servants to exercise unrestricted access to and use of the premises’ (Street v Mountford [1985] per Lord Templeman). The lodger by definition is someone who cannot claim the right to ‘call the place [meaning the property] his own’ (Street v Mountford [1985] per Lord Templeman). This is because the lodger will never be able to lawfully resist intrusion by the owner of the premises, as the owner ‘retains possession’ in order to supply the contractually mandated services or attendance (Antoniades v Villiers [1990] 1 AC 417 per Lord Templeman).
3. The ‘tolerated trespasser’: Under the former law, a council tenant whose tenancy ended under a possession order could remain while paying arrears and future occupation charges. The occupant was then in ‘limbo’, neither tenant nor licensee (Burrows v Brent LBC [1996] 4 All ER 577 per Lord Browne-Wilkinson). From 20 May 2009 a possession order against a secure tenant no longer ends the tenancy before execution. Qualifying former tenants still in occupation received replacement tenancies (Housing and Regeneration Act 2008, Schedule 11).
4. Labelling by the parties is irrelevant: When ascertaining the nexus of legal rights and obligations, the courts will not take the labels given by the parties to themselves as conclusive. Instead, the courts will look at the substantive rights granted to each of the parties as they ascertain the ‘true bargain between the parties’ (Aslan v Murphy [1989] per Lord Donaldson of Lymington MR). The courts take the view that the parties may mistakenly, or intentionally, mis-label themselves in order to shape the legal relationship, whereas it is the terms of the agreement which are of greater significance. Examples include:
• Clore v Theatrical Properties Ltd and Westby & Co Ltd [1936] 3 All ER 436, in which the so-called ‘lease’ was actually held to be a licence; and
• Addiscombe Garden Estates v Crabbe [1958] 1 QB 517 in which the so-called ‘licence’ was found by construing the terms of the agreement to actually be a lease.

In short, the definition given by the parties to the agreement is only relevant insofar as it correctly and accurately reflects the nature of the terms of the agreement. It is the terms which define the relationship, not the label. As Bingham LJ, dissenting in the Court of Appeal, observed in Antoniades v Villiers [1990]: ‘A cat does not become a dog because the parties have agreed to call it a dog.’

A lease or tenancy must have sufficient certainty of term

We have seen that the leasehold can be stated to last for any duration - whether one year or one million years - but it is crucial that an ascertainable period is given. For a fixed term its maximum duration must be ascertainable at the outset. The term need not be stated in figures, and a certain term may end earlier on an uncertain event. Examples of uncertain maximum terms include:

1. A purported lease that was said to last for ‘the duration of the war’ (Lace v Chantler [1944] 1 All ER 305); and
2. A hypothetical lease that would run ‘until Britain wins the Davis Cup’. The actual agreement in Prudential Assurance Co Ltd v London Residuary Body [1991] UKHL 10, [1992] 2 AC 386, provided for a road-widening scheme instead.

The courts have occasionally questioned the rationale of needing a certainty in the stated period. It has been said to have no ‘satisfactory rationale’ (Prudential Assurance Co Ltd v London Residuary Body [1992] per Lord Browne-Wilkinson), but the House of Lords upheld the rule and overruled the decision on certainty in Ashburn Anstalt v Arnold [1988] EWCA Civ 14.

Key Points:

• The tenancy was initially created on the basis of a certain event coming to pass.
• That event never materialised, nor was a term of years quoted in the tenancy.
• The road-widening clause did not prevent the landlord from giving notice to end the yearly tenancy.

Statute does provide for a number of exceptional leases that will automatically be converted into time-bound leases. A qualifying lease at a rent or for a fine for life, or determinable on marriage or formation of a civil partnership, takes effect as a 90-year lease. After the relevant event either side may end it by at least one month’s written notice expiring on a quarter day (Law of Property Act 1925, s.149(6)). In Berrisford v Mexfield Housing Co-operative Ltd [2011] UKSC 52 an agreement with an individual for an uncertain term took effect under the old rule as a tenancy for life and so as a 90-year term, subject to the agreed grounds for determination. A perpetually renewable headlease within the 1922 Act takes effect as a 2,000-year term, with provision for the lessee to end it at a renewal date (Law of Property Act 1922, s.145, Schedule 15).

Periodic tenancies

There is also the exceptional scenario of the periodic tenancy. A periodic tenancy may be granted from the outset or arise after a fixed term has ended. It continues from period to period. At common law it may be ended by a valid notice to quit, subject to any statutory protection. This may seem to conflict with the requirement of certainty of years, nevertheless periodic tenancies are recognised as valid (Law of Property Act 1925, s.205(1)(xxvii)).

In England, from 1 May 2026 most existing and new private assured tenancies are periodic. Before entering into a new private assured tenancy the landlord must normally give the tenant a written statement of prescribed terms and information (Housing Act 1988, s.16D and SI 2026/324). Landlords can no longer serve a new section 21 notice for those tenancies. A landlord seeking possession against the tenant’s wishes must establish a statutory ground and obtain a court order. The tenant can normally end the tenancy with two months’ written notice expiring on a rent day or the day before. A shorter period can be agreed in writing. Transitional rules preserve certain earlier possession proceedings. The May reforms did not extend to assured tenancies of social housing let by private registered providers (Renters’ Rights Act 2025, ss.1-4 and Schedule 6; SI 2026/421). In Wales, a landlord under a periodic standard occupation contract may, subject to statutory restrictions, give notice under s.173 of the Renting Homes (Wales) Act 2016. The usual minimum notice period is six months, and notice cannot normally be given in the first six months of occupation. If the contract-holder stays, the landlord must obtain a possession order (ss.174, 175 and 178).

The courts have provided various means of explaining the common law position. For example, the court has suggested that:

1. An indefinite restriction on the landlord’s right to give notice was once upheld for a periodic tenancy (Re Midland Railway Co’s Agreement [1971] Ch 725 per Russell LJ). Prudential overruled that decision.
2. In an alternative explanation, the court has recognised periodic tenancies as a continuing and subsisting active agreement between the parties that they wish to remain in a leasehold relationship (Hammersmith and Fulham LBC v Monk [1992] 1 AC 478).
3. The life of the periodic tenancy is contingent entirely on the parties’ mutual agreement, and thus the tenancy has ‘no greater life than the period up to the time when the next notice can be given and would terminate’ (Crawley BC v Ure [1996] 1 QB 13 per Hobhouse LJ).
4. Upon expiry of an effective common law notice to quit, the periodic tenancy is said to have reached ‘the end of its natural life’ and thereby reaches its ‘predetermined end in accordance with the terms of the tenancy agreement’ (Barrett v Morgan [2000] 2 AC 264 per Lord Millett).

The parties cannot contract away their legal status

We mentioned above how the parties are not free to define their relationship solely by the label they accord to the relationship. On a similar, connected point, the parties cannot reduce or erode the status of their relationship where the status on a construction of the terms is already defined and set by the common law or statute. In other words, the parties cannot exclude mandatory tenancy protections simply by agreeing that the occupier is a licensee.

Key points:

• The agreement to grant exclusive occupation used such language as ‘licence fee’ and ‘licence agreement.’
• The agreement included a term amounting to a waiver by the occupant of all status and rights of a tenancy.
• However, given the terms of the agreement as a whole, the court saw the agreement was in fact a tenancy.
• The court underlined that labels for terms does not decide the legal effect of terms, and the supposed waiver was null and void.
• Given the above, the occupant retained the rights of a tenant.
• A similar line of reasoning was adopted in Bruton v London & Quadrant Housing Trust [1999] where the court held that the party, designated by the court as the landlord, could not contract out of obligations to conduct repairs on the property.

Identifying sham or pretence terms

Given the above, certain landlords will want to avoid the effects of a tenancy. After all, the rights accorded to an occupant under a tenancy are far more onerous for a landlord than are those accorded to an occupant under a licence. Depending on the statutory regime, notice requirements may be more stringent. Some residential licensees also have protection against eviction without a court order (Protection from Eviction Act 1977, ss.3 and 3A). A tenant will have the right to exclude the landlord in most circumstances, and the landlord is thus far less able to oust the occupant under a tenancy. Therefore, some landlords have sought to include certain terms that erode the legal status of the tenant.

In response, the courts are vigilant for such ‘sham’ or ‘pretence’ terms. Where the court finds that a term was never intended to operate, it disregards it when identifying the true bargain. The act of discarding such terms - ‘pro non scripto’ (Antoniades v Villiers [1990] per Lord Templeman) - enables the court to properly direct the parties as to the legal effect of the agreement, and prevents vulnerable persons seeking accommodation from being exploited.

Key Points:

• The residents were being granted rights of occupancy under a so-called ‘licence agreement.’
• The agreement included terms to the effect that the owner could also share occupation with the occupants, and could introduce further occupants at any time.
• Such terms were not exercised by the owner of the property.
• The portion of the property occupied by the occupants was very limited: an attic flat.
• The court held that the limited physical space gave the lie to the terms, as did the fact that they were not exercised.
• The court held that such terms were pretence terms, intended merely by the landlord to ‘avert the ordinary legal consequences’ which flowed from a landlord and tenant relationship.
• As such, given the nature of the remaining terms that were held to be valid, the court determined that the agreement was in fact a tenancy.
• In a similar case - Aslan v Murphy (No. 1) [1989] - the court held that when construing the ‘true bargain of the parties’, the bargain could not sensibly be said to require the tenant to vacate the property every day between 10:30am and midday, as the agreement had purported to include in its terms.

That all being said, a label will not necessarily be irrelevant. Although the courts are certainly concerned with preventing the exploitation by dishonest landlords of vulnerable tenants by drafting terms to evade statutory protection (for a rent increase intended to defeat security of tenure, see Bankway Properties Ltd v Penfold-Dunsford [2001] 1 WLR 1369), sometimes the label can actually be a useful ‘pointer.’ Arden LJ observed in the Court of Appeal that it would be ‘a strong thing for the law to disregard totally the parties’ choice of wording and to do so would be inconsistent with the general principle of freedom of contract’ (National Car Parks Ltd v Trinity Development Co (Banbury) Ltd [2001] EWCA Civ 1686).

Examination Consideration: You will have noticed that certain cases have been referred to again and again in this section. They include Street v Mountford, Antoniades v Villiers, Bruton v London & Quadrant Housing Trust, and AG Securities v Vaughan. These are the classic cases on questions of leases versus licences, and it is important that you remember what each case contributes to this area of the case law. It is recommended that as a minimum you can recall what legal principles these cases represent, as well as some of the pithy phrases used by the court, such as the “spade” speech from Lord Templeman.

OBLIGATIONS

Aside from the requirement that a lease entitles the leaseholder to exclusive possession of the property in a term of years, a lease also entails other obligations which ‘remain outstanding on both sides throughout its currency’ (National Carriers Ltd v Panalpina (Northern) Ltd [1981] A.C. 675 at 705 per Lord Simon of Glaisdale). There are various express obligations that a landlord will owe to their tenant. Here we shall discuss some of the implied obligations owed by a landlord to a tenant.

1. Covenant for quiet enjoyment: Upon granting a lease to a party, the landlord thereby also agrees, both on his part and on the part of those claiming under him, to refrain from doing anything which ‘substantially interferes with the tenant’s title to or possession of the demised premises or with his ordinary and lawful enjoyment of the demised premises’ (Southwark LBC v Mills [1999] 3 WLR 939 per Lord Millett). This effectively means the tenant will be free from harassment either by the landlord or by others when done with permission from the landlord. It extends also preventing the removal of the tenant’s belongings, as well as the cutting off of utilities supplied to the property (Perera v Vandiyar [1953] 1 All ER 1109). It is not an absolute right: the landlord must take reasonable steps to minimise disturbance when exercising a reserved right to carry out works (Goldmile Properties Ltd v Lechouritis [2003] EWCA Civ 49). Statutory requirements may also limit a tenant’s rights, as in Jones v Cleanthi [2006] EWCA Civ 1712, concerning access to a bin store.

Key Points:

• The tenants each experienced a great degree of noise from adjacent flats. The lack of privacy caused distress, but the ordinary use of the flats did not on these facts breach the covenant for quiet enjoyment.
• However, the interference was the result of the structural design and was not the result of actions by the landlord.
• Given the nature of the structure, and given that the flats were being let out for multiple occupation, the court held that it was within the contemplation of the parties that the adjacent properties would be let out for residential purposes.

2. Covenant against derogation from grant: Having granted the lease for a particular purpose, the landlord must not substantially deprive the tenant of the benefit granted through the use of land retained by the landlord. Expressed differently, the landlord cannot engage in conduct which is inconsistent with the purpose for which the lease was granted, or undermines the exercise of that purpose (Chartered Trust plc v Davies [1997] EWCA Civ 2256). For example, a landlord had granted a lease for the storage of explosives and then allowed his adjoining land to be used for mining operations (Harmer v Jumbil (Nigeria) Tin Areas Ltd [1921] 1 Ch 200).
3. Obligations in respect of repair, maintenance and general amenity: Classically, the common law has seen fit to impose only the bare minimum on landlords as to what they may let out. For example: ‘fraud apart, there is no law against letting a tumble-down house’ (Robbins v Jones (1863) 15 CBNS 221 per Erle CJ). In Southwark LBC v Mills [1999] the common law did not require the landlord to improve the existing sound insulation. Statute imposes wider obligations for residential lettings.

In England, s.11 of the Landlord and Tenant Act 1985 normally requires the landlord under a residential lease of less than seven years to keep the structure and exterior in repair and the installations for water, gas, electricity, sanitation and heating in repair and proper working order. Where the defect is within the tenant’s possession, liability for breach of the repairing covenant normally arises only after the landlord has notice and a reasonable opportunity to act (Edwards v Kumarasamy [2016] UKSC 40). Sections 9A-10 separately require dwellings under qualifying leases to be fit for human habitation at the outset and throughout the tenancy. This applies to unfurnished as well as furnished homes.

For qualifying social housing tenancies in England, s.10A and the Hazards in Social Housing (Prescribed Requirements) (England) Regulations 2025 also set deadlines. A landlord who becomes aware of a potential emergency hazard within the Regulations must investigate and, if it is confirmed, make it safe within 24 hours. Potential significant damp and mould hazards must ordinarily be investigated within ten working days, with safety work within five working days of the investigation concluding. If the home cannot be made safe in time, the landlord must secure suitable alternative accommodation at the landlord’s expense. From 30 November 2026 the 2026 amendment Regulations extend the significant-hazard duties to specified further hazards, including excess cold, excess heat and fire.

In Wales, ss.91-97 of the Renting Homes (Wales) Act 2016 impose duties of fitness and repair under secure and periodic standard occupation contracts and fixed term standard contracts of less than seven years. The landlord must ensure fitness from the occupation date and throughout the contract and keep the structure and exterior in repair and service installations in repair and proper working order. The Renting Homes (Fitness for Human Habitation) (Wales) Regulations 2022 also require smoke alarms, carbon monoxide alarms in specified rooms, and periodic electrical safety inspections. For defects arising during the contract the landlord normally has a reasonable time to do the work after becoming aware of the need for it.

At common law, the following obligations may also arise:

1. Implied condition of fitness for human habitation: The premises must be reasonably fit for habitation at the commencement of the lease (Smith v Marrable (1843) 11 M&W 5) provided that the premises is residential and furnished.
2. Implied duty of care: The landlord must take reasonable care to keep in repair certain facilities used by the tenant(s) e.g. the lifts in a block of flats. The duty is imposed where its breach renders ‘the whole transaction… inefficacious, futile and absurd’ (Liverpool CC v Irwin [1976] UKHL 1). This extends only to those facilities which are essential.
3. Liability in negligence: A landlord may be liable for damage caused by negligent work. Where the landlord has a repairing obligation or a right of entry for maintenance or repair, s.4 of the Defective Premises Act 1972 also requires reasonable care to prevent personal injury or property damage from a relevant defect which the landlord knew or ought to have known about. This can include defects existing at the start of the tenancy. Compare the earlier common law claim (Sharpe v Manchester CC (1977) 5 HLR 71, CA).
4. Liability in nuisance: In certain instances, certain acts or omissions of the landlord may be taken to unduly interfere with the tenant’s comfortable and convenient enjoyment of the premises (Sharpe v Manchester CC (1977)). However, a landlord is usually not liable for the nuisance caused by other tenants (Chartered Trust plc v Davies [1997]), unless the landlord authorised or participated in the nuisance (Coventry v Lawrence (No. 2) [2014] UKSC 46). Article 8 of the European Convention on Human Rights does not impose a general duty on a public landlord to improve housing (Lee v Leeds CC [2002] EWCA Civ 6).

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