Leases
Leases
The right to exclusive possession: Lease or License?
Ø Leases confer the right of exclusive possession [1511]
Ø the test of lease or license is whether the instrument gave the occupant the right to exclusive possession, intention notwithstanding [Radaich v Smith]
Types of Tenancies at Law
Tenancy at will
Ø A person with owner’s consent occupies land as tenant on terms that either party may determine at any time.
· Can be created by express agreement but are usually created by implication, most commonly where the tenant holds over an expired lease with the LL’s consent but without having paid rent on a periodic basis, or where a prospective tenant is let into possession pending a concluded agreement for the grant of a lease without having yet paid rent on a periodic basis.
· The landlord or the tenant has the right to terminate at will, without the need for prior notice (Cth Life Assurance v Anderson) (1518)
· Once rent is paid on a periodic basis, usually a periodic tenancy arises (same period as payment intervals). (Turner v York Motors)
Tenancies from year to year
Ø Before s127 of CA,
· Implied at CL where the landowner allowed a person into possession with no binding agreement yet existing between them for a grant of lease, and the T then paid rent by reference to a year or an aliquot part of a year. (Dockrill v Cavanagh)
· Similarly for where the T holds over after expiry of the lease, and pays rent yearly or yearly aliquot. There is a tenuous distinction between weekly payment of rent and weekly instalments of yearly rent. (Dockrill v Cavanagh)
· Determined by 6 months notice in writing
Ø Now read year to year tenancies with respect to s 127(1) of CA 1919 (NSW).
· Operates to create a tenancy at will only in situations where at common law a tenancy from year to year would have been implied by payment of rent. 1524
· ‘No agreement as to its duration’ = no agreement as to its duration which is effective to create a legal lease for the period agreed. (Larke Hoskins v Icher)
· such a tenancy at will is determinable by one month’s notice in writing.
· There are incorporated into a tenancy at will arising under s 127 those terms of the parties’ agreement that are applicable to a tenancy at will determinable by one months’ written notice. (Dockrill v Cavanagh). Also incorporated are those statutory obligations and powers implied into leases by the CA 1919, eg covenant to pay rent and to repair (Chan v Cresdon) 1525
Periodic tenancies (other)
Ø Most commonly arise by implication according to how rent is raised though they arise by express agreement too.
Ø Do not expire at the end of the period, but continue indefinitely, until det’d by notice. Notice must be no less than length of one period.
Formal Requirements for creating leases
Ø S23B of CA says you need a deed to create legal leasehold interests. There are 2 major exceptions.
1. S 23D(2) of CA: a legal leasehold interest can be created by parol if and only if it is at best rent that can reasonably obtained without a fine, taking effect in possession, for a term (including any option to renew) not exceeding 3 years.
2. Torrens Title: A lease exceeding 3 years should be in the ‘approved form’ (RPA s53). To obtain indefeasibility, it should be registered. Otherwise it is equitable at best.
· Registration gives priority over all later reg’d interests (s36(9) RPA), and this right extends to options to renew in the lease.
· Although an unreg’s Torrens title lease need not be in approved form, it must be in writing signed by LL or agent authorised in writing (s23C of CA). Otherwise it takes effect as an interest at will only (s23D(1) CA) unless within the exemption of s23D(2) of CA or supported by acts of part performance (CA s23E(d))
Equitable Leases
Ø Formalities of deed are unnecessary, but if no acts of part performance, there must be writing signed by the landlord or by the landlord’ agent authorised in writing (CA s23C(1)), otherwise the lease is a tenancy at will only (s 23D(1)).
Ø Writing not needed where there are sufficient acts of part performance 1540.
S54A CA: an agreement to grant a lease cannot be a subject of an order of specific performance (ie, not come under Walsh v Lonsdale) unless the agreement, or some note or memorandum of it) is in writing and signed by the party to be charged or his agent.
This is still subject to law of part performance.
Covenants at Common Law
Ø At common law, there are 6 covenants implied in a lease in absence of contrary agreement [1545]:
- for quiet enjoyment
- not to derogate from grant
- in the case of furnished dwellings, that they are reasonably fit for human habitation
- [tenant] to use premises in tenant-like manner
- [tenant] to yield up possession at the end of the tenancy
- [tenant], in the case of agricultural land, to cultivate in a husband-like manner
Ø where there is an express covenant, there is no room to imply a convenant.
Ø covenants can be made so important so that the lease is conditional upon them, or they can be intermediate terms, the breach of which will deny the substance of the consideration [Hong Kong Fir Shipping v Kawasaki]
For Quiet Enjoyment
Ø [1546] for examples
Ø According to Malzy v Eicholz, the landlord only breaches this covenant (via the activities of lessees and sub-lessees) if the landlord either participated in the nuisance himself or let the premises out to an activity that would necessarily constitute a nuisance [which includes a brothel: Nordern v Blueport]
Ø But this rule may be overturned by Aussie Travellor v Marklee (CA Qld)
· the landlord was found to be bound to abate the nuisance of one of its lessees which was interfering with the work of other lessees in premises.
· but the nuisance lease had to come after the plaintiff lease, otherwise caveat emptor.
Ø the landlord is liable for breach even if the interference has been compelled by law [Telex v Thomas Cook]
Ø repair work involving blocking up the plaintiff’s business is a breach [JC Berndt v Walsh]
Ø there is no breach where the interference is by someone with title superior to the landlord’s title (title paramount); where the interference is caused by exercise of title paramount [Jones v Lavington]
Implied Covenant of Fitness for Human Habitation
Ø there is no general requirement that the leased premised be suitable for the purposes proposed in the lease, or even that they can be lawfully used for the purposes for which they were let [Hill v Harris][1556]
Ø above covenant only applies to furnished dwelling houses [Cruse v Mount][1554]
Ø Following Northern Sandblasting v Harris, it may be that there exists a duty to make premises safe for its occupants. The existance of this duty as a covenant bypasses tort’s ex post facto requirement of actual damages
· the justices were divided as to whether this duty was delegable or not (by hiring an electrician to carry out repairs, does landlord delegate duty?)
Not to Derogate from Grant
Ø the landlord must not do anything or allow anything on the leased premises or on other land under the landlord’s control anything that is inconsistent with the purposes for which the premises are leased in absence of express or implied agreement or otherwise.[1551]
Statutory Covenants
Ø The main implied statutory covenants are [1562]:
· s84 CA pay rent and to repair [1563, 1564]
· s85 CA allows landlord to enter premises for certain purposes
Covenant to repair (implied)
Ø s 84(1)(b) the tenant will keep the premises in good and tenantable repair during the lease, and give up the lease in that condition at the end. [1574]
Ø where the tenancy is not in repair at the start of the lease, the tenant must put them into repair in order to keep them in repair [Proudfoot v Hart]
Ø the standard of repair is ‘such repair as having regard to the age, character and locality of the premises as would make them reasonably fit for the occupation of a reasonably mined tenant of the class who would be likely to take them’ [Proudfood v Hart]
· this applies where the previous tenant breached the covenant and left.
Ø ‘Repair’ extends to repair or replacement of subsidiary parts of the premises but does not extend to improving, renewing or reconstructing the whole or substantially the whole of the premises [1576] [, unless premises has fallen into such disrepair that repair would require replacement of a substantial replacement of structure, even if with modern, better replacement.
· structural alterations (even if improvement) without consent are a breach [Bailey v J Paynter (Mayfield) Pty Ltd], but not if these were committed by previous tenant.
Doctrine of Inherent Defect
Ø the covenant to repair does not extend to inherent defects in the premises (=original design defect) [Graham v Markets Hotel] [1577]
Ø Ravenseft v Davstone: English court finds no doctrine of inherent defect. Whether or not the covenant to repair covers the required work is a matter of degree: is it repair or is it giving the landlord something ‘wholly different’ from what was leased?
· where the defect causes further damage to the premises, there may be a requirement to cure the defect if only to not breach the repair covenant. Conversely, where the defect causes no further damage, there is no obligation to repair [Quick v Taff Ely Borough Council]
Wear and Tear
Ø Usually a term exempts the tenant from repairing damgage characterisable as ‘fair wear and tear’, and there is a short form tenancy 86 for this. This is subject to the rule in Regis Property v Dudley, (stitch in time rule), where there’s an obligation to repair wear and tear where further damage may flow consequently from fair and wear.[1578]
Ø The measure of damages is the decrease in the value of the landlord’s reversion caused by the breach [Conquest v Ebbets] [S&N 9.2.92] and can not exceed this amount [s 133A CA][1579]
Covenants against assignment or subletting
Ø the right to assign or sublease is a right incident to every leasehold interest except for tenancies at will and tenancies of sufferance.[1587]
· but a s127 tenancy ‘at will’ is assignable/subleasable since it is essentially a periodic tenancy from month to month [Metropolitan Trade Finance v Coumbis]
Ø to be effective at law, an assignment or sublease must be by deed to be effective at law [Conveyancing Act s23B] whether the term was created by deed or writing or parol
· to be effective in equity, mere writing will suffice [CA s23C][1588]
Ø Torrens: where the lease is not registered, the ass/sub must be by deed to be effective. [1589] since such an interest is outside s 23B(3) CA.
Ø [1590] for part performance, equity, estoppel for sub leases.
Ø There are almost always express covenants agains sub/ass, but will be construed quite strictly against the landlord. In the absence of such covenants, there is always a right to assign or sublet without consent [Commonwealth v Anderson]
Absolute Covenant
Ø the landlord can not be compelled to consent, no matter how unreasonable the refusal.
· s 120 and s 123 CA, landlord can consent to a breach- including an assignment or sublease in the face of an absolute covenant- without prejudicing future right to object to future ass/sub [1593]
Qualified Covenant
Ø s 133B(1)(a) CA specifies that the landlord can not unreasonably withhold consent, notwithstanding any expess provision to the contrary.
· applies only to a lease which contains a covenant by tenant not to sub/ass without the landlord’s consent [1594]
· where the tenant must first offer to surrender lease to landlord before ass/sub, the s 133B does NOT apply [Creer v P&O Lines Australia]
· what is reasonable? regard must be had to facts and circumstances of each case [Lee v K Carter]. But narrow test (judge by reference to personality of proposed assignee or sublessee, or by reference to the effect the proposed ass/sub will have on use or occupation of premises) has been applied in NSW [Cominos v Rekes n521 at 344 Butt], but S&N says overruled by Swanson v Forton [701 of S&N].[1596]
Ø where the landlord refused consent, two possible avenues for tenant.
- having been careful to seek consent first, the tenant may proceed to assign without consent and take the risk that if the landlord brings proceedings, the court will find that the landlord withheld consent unreasonably. If he gambled correctly, no liability but the tenant can not claimg damages against landlord [Yared v Spier]
- tenant may seek a declaration that the consent has been withheld or refused unreasonably, thereby removing any doubt. [1595]
Ø where the lessee seeks consent but is resfused or ignored, the lessee does not have the right to refuse tender of rent. the rent covenant is independent and enforceable separately [Haberercht v Chapman] [S&N 703 9.2.101]
Enforcement of Covenants after Assignment or Subleasing
Ø Privity of contract exists between the original landlord and the original tenant, and such covenants between them are enforceable under contract law.
· express covenants remain enforceable between them after they have disposed of their interests, but not implied covenants as between landlord and tenant [15104]