Leases Problem Question

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Leases are relationships between a landowner and someone they have allowed to occupy the land. The definition of a lease can be found in s.1 (1) of the Law of Property Act (LPA) 1925 in which it is described as ‘a term of years absolute’. The case of Bruton holds that not all leases have to be estates or interests in land. If there is no lease but permission to occupy then Fifoot will more likely have a licence. Licences do not have much statutory protection and cannot bind third parties. Leases are more important as the rights become attached to the land.

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Details of a term of years absolute can be found in s.205 (1) (xxvii) LPA 1925, but most rules about what does/does not constitute leases are found in case law (Lord Templeman in Street v Mountford).
A term of years absolute requires:
 A capable grantor and a capable grantee
 A fixed beginning and an end date that is capable of being fixed
 Exclusive possession

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According to Lord Templeman in Street v Mountford [1985] AC 809, a grant of exclusive possession for a term at a rent will normally create a lease.

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A lease can either be a fixed term lease (Lace v Chandler- ‘until the end of war’ converted into a fixed term) or a periodical lease (Prudential- implied periodic tenancy based on regular payment), which, certainty of term is fundamental for both.

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There are no formalities for a lease made for three years or less so long as it takes effect in possession and is at the best rent reasonably obtainable (s.52 (2) (d) and 54 (2) LPA 1925)). Therefore in this situation there is no need for a deed, however an equitable interest may have been created (Walsh v Lonsdale).

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There may be an implied periodic quarterly tenancy following Prudential as Fifoot will be paying quarterly. The case of Walsh v Lonsdale involved a periodic yearly tenancy. The period of tenancy is usually decided by the period of rent (Richardson v Langridge).

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The issue with this situation is whether Fifoot has exclusive possession as the term ‘take over’ seems to imply that there would be exclusive possession. In situations as commercial cases like the one at present, it is known that the wording and intentions of the parties are significant (National Car Parks Ltd v The Trinity Development Company). However this may be a sham as seen in the case of Antoniades v Villiers in which the lessor had never intended to exercise the rights. If the term is a sham then the agreement will be looked at again without that term.

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Exclusive possession means that the tenant can exclude everyone from the premises, including the lessor (the lessor still has reasonable access to carry out responsibilities).

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The case of Cameron Ltd v Rolls-Royce plc is similar to the case at present. In this case a commercial premises was sub-leased for three years, and the claimant was given what was described as a licence. All the necessary elements of Street v Mountford were present, however on evidence is was held that the parties could not have intended the grant of a tenancy and that the purpose of the agreement was to give the benefit of a tenancy but without the protection of the Act. The claimant’s interest was expressly said to be a licence.

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The facts of this case are very similar to the one of Fifoot’s in which from the wording, it may be implied that Maitland had attempted to expressly state that this interest was merely a licence.

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The case of Dellneed v Chin is also similar, however came to a different conclusion. This case held that an agreement which confers exclusive possession at a rent for a term will create a tenancy. The agreement in this case was a management agreement (like in Fifoot’s case) and Dellneed took over, running it for its own account as to profits and losses and paying a weekly fee. It was held that Dellneed had exclusive possession. A right was inferred to enter the premises in order to use fixtures and fittings. The difference between this case and the case of Cameron is that this case involved an inferred right to enter the premises to use the fixtures and fittings and it was this factor that was the key element in deciding that there was a tenancy as opposed to a licence.

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If it can be shown that ‘taking over the running of the shop’ inferred the same rights in this case as it did in Dellneed, then it may be possible that Fifoot has a lease.

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To conclude, even if Fifoot has all the necessary elements present under Street v Mountford, his interest may be a licence following Cameron because it is a commercial case and the wording and intentions of which are essential (National Car Parks). However, more information will be needed to ascertain what rights have been inferred that may imply Fifoot has a lease (Dellneed), although the case of Dellneed was an older case than Cameron, so may not be used as readily.