Basic requirements for a lease

The three essential elements of a lease

According to the House of Lords case of Street v Mountford [1985] UKHL 4, a lease is 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:

  • exclusive possession;
  • determinate term;
  • 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, although it 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.

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 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).

A landlord will sometimes 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).

One way of satisfying the parties’ wish to avoid being held to a fixed period is by granting a lease 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 periodic 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 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 common 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.

While 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 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 (eg, 25 years) and S may grant an under lease to U for any period shorter than the sublease (eg, a monthly tenancy).