Archive for the ‘lease definition’ Category

No lease of the bare surface of a wall

August 28, 2012

In Leung Kwok-Kau v Tam So-Wa ([1968] HKLR 673, Full Court) the question was whether there could be a lease of the bare surface of a wall (a lease having only a vertical dimension). The Full Court held that this was not possible and that the agreement could only take effect as a licence:

‘A corporeal hereditament, as its name implies, has always included an area of the surface of the earth or of some horizontal plane below, or in a building erected above, the surface of the earth. The area need not be large but it must have some substance.’ (Huggins J. at 680).

Certainty of term

June 22, 2012

In Tsuen Wan Trade Association Education Foundation Ltd v Chui Kam Ying ([2012] 2 HKLRD 1163) S agreed to sell P the lease of the ground floor of a four-storey 1930s building. The building was held under the terms of a memorandum of agreement made in 1937. A Crown Lease was deemed to have been granted when the conditions of exchange were complied with (New Territories (Renewable Government Leases) Ordinance, s. 3). The term was extended until the expiry of 30 June 2047 by virtue of section 6 of the New Territories Leases (Extension) Ordinance. In 1939, the lease of the building was held by four individuals as tenants in common. Each of them took a lease of one floor of the building from the co-owners for a term that mirrored that in the Crown lease (at that time no-one could have anticipated the statutory extension until June 2047).

The court had to consider, inter alia, whether there was a valid lease of the ground floor after 1997 (when the contractual term expired). This is a problem since the parties clearly had not given any thought as to what would happen after that date. A finding that the parties held over as, for example, periodic tenants or tenants at sufferance or at will would plainly be unsatisfactory. On the other hand, there was no clear expression of intention at the time of the grant as to what should happen. It is not clear whether the tenants of the individual floors were also the successors-in-title of the shares in the tenancy in common of the building as a whole.

The court found that, on a proper construction of the 1939 lease of the ground floor, the parties must have intended that the right to exclusive possession was to subsist as long as the term of the Government lease of the whole building lasted. This imputed intention does seem to raise a certainty of term problem.

No exclusive possession means no lease

June 19, 2012

In Tai Tung Industrial Equipment Ltd v Crown Honor Distinction Ltd ([2012] HKEC 852) T allowed C to use property under the terms of an agreement. When C fell into arrears with the fee payable for the use of the property under the terms of the agreement, T took out a warrant of distress. C argued that it had a licence, not a lease, and that therefore distress was not available as a remedy. The District Court found as a fact that C did not have exclusive possession (it only had access during specified hours and could not exclude the landlord). This was a licence and the warrant of distress was discharged.

Fixed term lease but landlord required to give one month’s notice to quit

March 29, 2012

林玉芬 v 姜滿盛 ([2012] HKEC 236) concerned an intended fixed-term lease for a term of three months expiring on 28 February 2011. The lease required the landlord to give one month’s notice to quit. The Lands Tribunal held that, on its true construction, this meant that the landlord would not be entitled to recover possession even after the expiry of the fixed term unless notice was duly served. L purported to serve a notice to quit by registered post on 9 March 2011. This attempt failed and the letter containing the notice was returned to the sender. The tenant paid rent for March and April. An application to court to recover possession was served on the tenant on 11 April 2011. The Lands Tribunal held that the application to court was premature since the landlord had no right to possession on 11 April; the landlord had not yet served the necessary notice to quit. It could have been argued that in fact no lease was created since there is a clear doubt as to certainty of term (no certainty as to when the landlord would serve the notice). This would probably have made no practical difference since the court could have given effect to the arrangement as a contractual licence (at least this is the current English view).

Courts give effect to the true bargain

March 19, 2012

Aslan v Murphy (Nos 1 and 2) ([1990] 1 W.L.R. 766, CA (Eng)) followed soon after A.G. Securities v Vaughan ([1990] A.C. 417). In one of the cases, there was an agreement (labelling itself a ‘licence’) for the occupation of a small room. There was a clause to the effect that the licensor could enter at any time or introduce others. The English Court of Appeal found that this was a tenancy. The true intention of the parties was that there would be exclusive possession. The other case concerned a similar agreement but this time in relation to a house with three bedrooms and two reception rooms. Sharing would have been possible but again the court decided that the true bargain was that there would be exclusive possession. The fact that the agreements provided that the landlord would have a key and that the lock would not be changed was ambiguous. Its significance would depend on why the landlord needed a key.

Reasonable notice to quit and certainty of term

January 26, 2012

In Joseph v Nettleton Road Housing Co-operative Ltd ([2010] EWCA Civ 228, CA (Eng)) L granted T a monthly periodic tenancy of a flat. The lease contained a term that allowed L to terminate the lease on 4 weeks’ written notice. Such a notice would only be served if T had been given written notice of a breach of covenant and had failed to remedy the breach within the time specified. L served such a preliminary notice but T took no steps to remedy the breach (keeping a dog in the flat). L therefore served a notice to quit. In his defence, T argued that there were implied terms that the procedure could only be invoked in the case of serious breaches and that the preliminary notice would give a reasonable time to remedy the breach. The English Court of Appeal decided that even if T’s proposed terms were implied, L had complied with the contractual procedure concerning notice to quit. T was ordered to give up possession.

The English Court of Appeal noted that there was a clash between the lease terms and the certainty of term requirement (since there is uncertainty as to when the right to serve a notice to quit might arise and as to the length of any reasonable notice that might have to be given before notice to quit could be served). It preferred not to resolve this question and to deal with the matter purely as a matter of interpretation of the contractual rights and duties of L and T. It was therefore taking the view (implicitly) that even if this agreement were not a lease effect could be given to it as a contract. It should be read in the light of the Supreme Court decision in Mexfield Housing Co-operative Ltd v Berrisford.

Article on Bruton in King’s Law Journal

December 14, 2011

My article ‘Bruton v London & Quadrant Housing Trust: Opening Pandora’s Box’ has just appeared in King’s Law Journal ((2011) 22(3) King’s Law Journal 403 – 413) – click here to go to the Journal’s web-page). The article considers the possible legal bases for the House of Lords decision in this case. Lord Neuberger has recently stated that relativity of title supplies the explanation (Mexfield Housing Co-operative Ltd v Berrisford [2011] UKSC 52, para. 65). London & Quadrant’s possession could be seen as giving them a relative title out of which to carve a lease. Similarly, Mr. Bruton’s own possession could be seen as conferring relative title. This explanation would allow the outcome to be compatible with the traditional idea that the lease is always an estate in land. I argue, however, that Lord Hoffman was careful to reject the idea that Mr. Bruton had any title at all (relative or otherwise).

‘Permanent’ tenancy: void for uncertainty?

November 17, 2011

Siew Soon Wah v Yong Tong Hong ([1973] 2 W.L.R. 713, PC) was an appeal to the Privy Council from the Federal Court of Malaysia. S granted Y a lease. The agreement provided that ‘the tenancy shall be permanent’. In the context of the agreement, the intention was that the term should last as long as the tenant liked. The question was whether the lease was void for uncertainty. The Privy Council held that it was not because of Malaysian statutory provisions that meant that S could not grant a lease for more than thirty years. These provisions supplied the necessary certainty of term. The Privy Council went on to ask whether specific performance should be granted. Here the Privy Council resorted to estoppel. Y had occupied the property and made payments to S. This gave rise to an equitable estoppel protecting the right of occupation.

A lease for an uncertain term granted to an individual is a lease for life

November 15, 2011

A lease for an uncertain term (or a periodic tenancy where the right to serve notice to quit is subject to an indeterminate, invalid fetter) created a lease for life at common law. This was so whether or not the parties intended a lease for life. In England, a lease for life takes effect as a lease for 90 years (Law of Property Act 1925, s. 149(6)). Contractual effect (binding only on the parties) is to be given to a licence agreement that cannot take effect as a lease (because of uncertainty of term). This is so even if the parties thought that they were creating a lease. Similarly, contractual effect (binding only on the parties) can be given to an invalid, indeterminate fetter on the right to serve a notice to determine a periodic tenancy.

In Mexfield Housing Co-operative Ltd v Berrisford ([2011] UKSC 52) M entered into an occupancy agreement with B. B could determine it by serving a month’s notice. M could only terminate it in the event of B’s default or in the event of her ceasing to be a member of M. M purported to terminate it by serving one month’s notice. It argued that the agreement was an ineffective attempt to create a lease. It was ineffective, it was argued, because of the lack of certainty attached to the landlord’s right to determine the agreement. M argued that the result was that B occupied under a periodic tenancy that could be brought to an end by notice to quit.

The Supreme Court reluctantly accepted (and B conceded) that this was a lease for an uncertain term. When granted to an individual, however, common law deemed this to be a lease for life. This seems to have accorded with the parties’ intentions in this case but the result would be the same even if this were not the case. The Law of Property Act 1925, s.149(6) converted a lease for life into a lease for a term of ninety years subject to the parties’ rights to bring it to an end in certain events by notice to quit.

Even if this had not been the case, the agreement could have taken effect as a contractual licence even if the parties had intended to create a lease. Lord Neuberger left open the question as to whether it could have taken effect as a periodic tenancy (had this accorded with the parties’ intentions) with contractual effect being given (as between the contracting parties) to the restrictions on the right to serve a notice to quit found in the agreement between M and B ([69]).

The Supreme Court was highly critical of the certainty of term principle but did not overrule earlier authorities that laid it down as an essential element of a lease.

Michael Lower

A periodic tenancy with an (uncertain) restriction on serving a notice to quit.

September 29, 2011

A restriction on the landlord’s right to serve a notice to quit in respect of a periodic tenancy is unenforceable (even between the original parties) if it offends the requirement for certainty of term. It may be different if the facts are such as to make it unconscionable to ignore the restriction.

In Mexfield Housing Co-operative v Berrisford ([2010] EWCA Civ. 811, CA (Eng)) M granted B a monthly periodic tenancy. Clause 6 of the agreement provided that M would not determine the tenancy unless B fell into arrears with the rent or ceased to be a member of the co-operative. Clause 6 could not be construed as defining the term of the lease at common law since then the lease would be void for uncertainty. B’s counsel accepted this but argued that the restriction, unenforceable at common law, would be enforced by equity. The majority of the English Court of Appeal in this case rejected the argument. Where the parties had granted a lease they could not contractually re-write the common law requirement for certainty of term. As Mummery LJ pointed out, equity follows the law. It could be different if the circumstances were such as to make it unconscionable for the landlord to ignore the agreement; here an estoppel could arise. In effect, the decision explores the interaction between the lease as contract and the lease as estate in land.

M had agreed to grant B a new lease in any case so as between these parties the appeal was academic. The court agreed to hear it because it was a test case: a great many tenancies had been granted using the arrangements in this case.