Basic requirements for a lease

The three essential elements of a lease

The lease has been defined as ‘the grant of a right to the exclusive possession of land for a determinate term less than that which the grantor himself has in the land.’ This definition identifies three essential elements:

  1. Exclusive possession
  2. Determinate term
  3. Term less than that of grantor 

Exclusive possession

Exclusive possession is an essential ingredient of a lease; without exclusive possession there can be no lease. Exclusive possession is the right to use premises to the exclusion of all others, including the landlord himself.

If the occupier has no right to exclusive possession of the premises then his right to use the premises cannot amount to a lease, but may be some lesser right, such as a licence or possibly an easement. However the fact that a person had been given exclusive possession is not conclusive proof that he has a lease, for it is also possible to have a licence or certain other rights in land, without exclusive possession.

It should be noted that although exclusive possession normally gives the tenant the right to exclude everyone else, including the landlord, from the premises, the lease may reserve the right for the landlord to enter the premises on certain occasions, eg, to inspect the state of repair of the property. Such a right must be exercised at reasonable hours and in a reasonable manner and does not prevent the tenant having exclusive possession, though a right for the landlord to come and go as he pleases without the tenant’s permission would have this effect. Thus in Appah v Parncliffe Investments Ltd [1964] 1WLR 1064, in which the ‘landlord’ had reserved the right to come into the premises as and when he chose in order to empty meters and change linen, the arrangement was held to be a licence, since the occupier did not have exclusive possession.

Determinate term

The commencement of the period must be certain in a lease. Normally, if no mention is made in the agreement, it will be deemed to start immediately (Furness v Bond (1888) 4 TLR 457). If however, one has only an agreement for a future lease, it will be void unless it is clear at what date the lease is to start, either from an express term in the contract or by inference (Harvey v Pratt [1965] 1 WLR 1025).

It is not infrequently the case that a landlord will nonetheless wish to permit the use of his property for an uncertain period. This was the position with wartime lettings, where leases were made ‘for the duration of the war’ but were held to be invalid because they did not create a term for a certain period. (Lace V Chantler [1944] KB 368).  More recent cases have involved owners who intend to develop their land at some future date, and so want to avoid creating leases for fixed periods which might delay them when they are ready to start work. For a time it was thought that this could be achieved by creating a periodic tenancy with a provision that the landlord would not give notice to quit until he was ready to redevelop the land. This gave the tenant some measure of security, but enabled the landlord to regain possession when needed. 

There are however, ways of satisfying the parties’ wish to avoid being held to a fixed period. A lease may be granted for a certain term but with a provision for earlier determination on the occurrence of a certain event. Thus during the war a lease could have been granted for 10 years with a provision for determination if the war ended earlier, and this would satisfy the rule in Lace v Chantler. It is also acceptable for a period tenancy to restrict the landlord’s right to give notice, unless for a specified purpose, during a prescribed period.

The requirement that the maximum duration of the lease must be certain means that the grant of a lease ‘for T’s life’ or ‘until T marries’ would not under the general rules be capable of amounting to a legal estate, because it is not granted for a certain period. However, it used to be not uncommon for such leases to be granted and therefore the draftsmen of the property legislation provided a saving provision for such cases. 

Term less than that of grantor

An owner in fee simple is able to grant a lease of his property for any term because the fee simple is itself effectively perpetual. Thus there is nothing to prevent a fee simple owner granting a lease to a tenant for 9,000 years. In fact 99-year leases are common and 999-year leases, though hardly frequent, are to be found in practice.

Whilst there can only be one fee simple estate in one piece of land, there can be more than one term of years. A tenant may himself grant a lease of the premises (a sublease) to a subtenant, as long as this sublease will last for a shorter period than the original lease (the head lease). The subtenant may also grant a further lease of the same premises (an under lease) to an undertenant, as long as the under-lease is for a shorter period than the sublease. Thus if L, the fee simple owner, grants T a 99-year lease of a property on 1 January 1980, T may grant a sublease to S for any shorter period (e.g. 25 years) and S may grant an under lease to U for any period shorter than the sublease (e.g. a monthly tenancy).