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Characteristics and types of leases, formalities, and registration

Characteristics and types of leases formalities and registrationThis article discusses about leases in detail; its characteristics, types, formalities and registration.

Essential characteristics

A lease is an interest in the land that gives exclusive possession to the tenant for a fixed period of time. The most important aspect here is the grant of exclusive possession. Thus, the right of all others, including the landlord is excluded. If the person to whom the interest is given does not have the right of exclusive possession, then the interest may be a mere personal right to occupy; generally considered as licence.

A licence only gives right to occupy and does not create an interest in the land and can be revoked anytime. Whether the grant is a lease or licence depends on the intention of the parties making it. This can also be determined from the circumstances. In determining if the interest is a lease or not, the court usually interprets the content matter of the agreement and not its form. For instance, a document even though called a ‘licence’ is not conclusive and shall not prevent it from being called a lease.

A lease need not take effect (in possession) immediately and can also be granted to take effect at a later date.  However, this future date should be within 21 years of the grant. These are provisions of S144 (3) of the LPA Act 1925. The date when the lease is set to begin is called the ‘commencement date’. This date can also be backdated, i.e. designed to take effect at a date before the actual grant of lease. This is usually done when the landlord grants several leases in the same building, but wishes that all of them expire on the same day. Commencement date of all leases shall be expressed to be the same, irrespective of the date of grant of the individual leases.

Types of leases

Leases can be fixed or periodic. Fixed term leases are those that are granted for a specific period of time. This term can be of any length (one year or even ninety nine years). They automatically expire at the end of the term and at common law there is no need to serve any notice to determine them.

Periodic leases are those that are granted for a period and will renew from one period to another until there is ‘notice to quit’. These are often yearly, monthly, quarterly and even weekly. These may either be granted expressly or can be taken by implication (by law) where a person occupies a property and begins to rent on a regular basis. In such situations, the court may imply that a periodic lease has arisen. As for the tenancy period, this shall be determined by the frequency with which the rent is paid.  Periodic leases can also be implied when the tenant stays at the property even after the end of the fixed-term tenancy.

Formalities and registration

A lease can either be legal or equitable.

Legal Leases

LPA Act of 1925, s 52(1) and the Law of Property (Miscellaneous Provisions) Act of 1989, S1 stipulate that a legal lease should be created by a deed, unless the lease falls under the provisions of s54 (2) of the LPA Act 1925. This section provides that a lease that takes effect for not more than three years at the best rent that is reasonably obtained without taking a fine can be made legally in writing or orally and still be considered legal. Otherwise, a deed is always necessary to effect an assignment of lease, even if it has been created informally.

Legal leases are binding on all comers, but this can be modified under LPA 2002 and depending on the length of the original terms of the lease, the following should be considered;

a)      Legal Leases Granted for a term of more than 7 years: These leases should be duly registered with their own separate title number. When there is a reversionary title and it is registered, the grant of lease is the same as dealing with the registered title and the lease must be registered with its own title. When the reversionary title is not registered, the first registration of title is granted, but the title to the reversion will remain unregistered.

b)      Legal Leases for 7 years or Less: A legal lease granted for seven years or less, is granted out of reversion with a registered title, the lease takes an overriding effect irrespective of the fact that the tenant is in actual occupation or not. No registration is required. When the reversionary title is unregistered, the lease is automatically binding and does not require any registration.

Equitable leases

Leases that are not created under S54 (2) of the LPA 1925 or not created by deed are called equitable leases. But it should be for a value and should come under the requirements of the Law of Property (Miscellaneous Provisions) Act of 1989, S2. This section stipulates that the lease should be in writing and incorporate all terms expressly agreed upon by both parties and signed by or behalf of both of them.

These leases usually need some form of registration in order to make them binding on the purchaser of the reversion. When the reversionary title is unregistered, the lease should be registered as a Class C (iv) land charge and should be under the name of the owner of the immediate reversion. And when this lease is unregistered, it is considered void against the purchaser of the legal estate for money or its worth. When the reversionary title is registered, the lease must be registered as a minor interest on the charges register of the reversionary title. But if the tenant is occupying the property, the lease has an overriding interest and is binding even without registration.

Photo courtesy: Matthew Rutledge

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