Leases

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					                                                                                          Leases


Leases
The right to exclusive possession: Lease or License?
 Leases confer the right of exclusive possession [1511]
 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
 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
 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
 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)
 Most commonly arise by implication according to how rent is raised though they arise by
   express agreement too.
 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
 S23B of CA says you need a deed to create legal leasehold interests. There are 2 major
   exceptions.




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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
 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)).
 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
 At common law, there are 6 covenants implied in a lease in absence of contrary
   agreement [1545]:
   1. for quiet enjoyment
   2. not to derogate from grant
   3. in the case of furnished dwellings, that they are reasonably fit for human habitation
   4. [tenant] to use premises in tenant-like manner
   5. [tenant] to yield up possession at the end of the tenancy
   6. [tenant], in the case of agricultural land, to cultivate in a husband-like manner
 where there is an express covenant, there is no room to imply a convenant.
 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
 [1546] for examples
 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]
 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.
 the landlord is liable for breach even if the interference has been compelled by law [Telex
   v Thomas Cook]
 repair work involving blocking up the plaintiff’s business is a breach [JC Berndt v Walsh]

 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]



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Implied Covenant of Fitness for Human Habitation
 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]
 above covenant only applies to furnished dwelling houses [Cruse v Mount][1554]

 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
 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
 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)
 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]
 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]
 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.
 ‘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
 the covenant to repair does not extend to inherent defects in the premises (=original
   design defect) [Graham v Markets Hotel] [1577]
 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
 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




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    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]

 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
 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]
 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]
 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.
 [1590] for part performance, equity, estoppel for sub leases.

 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
 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
 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]
 where the landlord refused consent, two possible avenues for tenant.
   1. 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]
   2. tenant may seek a declaration that the consent has been withheld or refused
        unreasonably, thereby removing any doubt. [1595]
 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]




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Enforcement of Covenants after Assignment or Subleasing
 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]
    covenants relating to land shall be deemed to be made by the covenantor on behalf of
        himself or herself and successors in title, unless contrary intention appears in
        instrument [s 70A CA], so original tenant is liable for breach during the whole term
        of entire lease, or where option has ‘extended’ term [Baker v Merckel]
 Privity of estate exists between parties who stand currently in relationship of landlord &
   tenant [15105]
    an assignee has privity of estate with landlord, but a sublessee does not have privity
        of estate with landlord since sublessor is giving something less that the tenant’s whole
        interest and sublessor retains leasehold interest.
Rule in Spencer’s Case and benefit/burden
 upon assignment of the lease, both the burden and the benefit of covenants which
   ‘touched and concerned’ the land passed to the assignee as well.
 a covenant ‘touches and concerns’ the leased land if it affects either the landlord qua
   landlord or tenant qua tenant, or it affects ‘the nature, quality or value of the thing
   demised or the mode of using or enjoying the thing demised’ [15108]
 s 70A(1) CA provides that a covenant ‘relating to any land of the covenantor’ is deemed
   to be made by the covenantor ‘on behalf of himself and successor’s in title’

 where the assignee breaches a tenant’s covenant, the landlord can sue both tenant and
  assignee but not recover twice over.
 where the landlord sues the original tenant for a breach of covenant by an assignee, the
  original tenant is liable [s 70A], but since the tenant has been compelled by law to
  discharge someone else’s primary obligation, one is entitled to compensation by the
  defaulter of the primary obligation. [Moule v Garrett]

Assignment of the Reversion
 s 117 Conveyancing Act deals with the benefit of covenants when the reversion is
   assigned, but can be ousted [15516]
    s 117(1) first: rent reserved by a lease, and the benefit of every lessee’s covenant
       ‘having reference to the subject matter’ of the lease is annexed to and goes with the
       reversion and may be enforced by the personn from time to time entitled to the
       income from the land. ‘having reference’ = touching and concerning [re Hunter’s
       Lease] secondly: the benefit of every condition of re-entry and other condition therein
       contained is annexed to and goes with the reversion, and may be enforced by the
       person from time to time entitled to the income from the land.[touch and concern?]
    s 117(2) the benefit of every condition of re-entry or forfeiture for breach of condition
       can be enforced by the person from time to time entitled to the income of the land,
       even where the person did not become entitled to that income until after the condition
       of re-entry or forfeiture became enforceable.
    Result: the assignor loses all right to sue the tenant for breaches of covenant,
       including for breaches occurring before assignment.[Ashmore v Eaton]
        where rent in arrears and there is a sale from landlord to reversioner, the
            reversioner must sue [Ashmore v Eaton], but where the assignee assigns the right
            to sue on those breaches that preceded assignment to the assignor, the tenant must
            be give notice, but in a suit, the assignor should join the assignee as a plaintiff
            and then sue assignee in contract. [Ashmore v Eaton]
 s 118, the burden of a covenant by the landlord ‘with reference to the subject matter of the
   lease’ (touch and concern) is annexed to and runs with the reversion and may be enforced
   by the person in whom the lease is vested from time to time (tenant) [15117]



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