1. home and garden

Leases
Cameron Stewart
(thanks to Jim Helman and Shae
McCrystal – errors are mine)
(c) Cameron Stewart 2009
Definition
• A lease is an agreement to allow someone to
use land for a period
• The granter of the lease is called a lessor (or
landlord); the person that takes the lease is
called the lessee (or tenant). The lessors
interest during the currency of the lease is
called a reversion. You may also come across
an older term used for lease and that is a
demise. This simply means a lease.
(c) Cameron Stewart 2009
Types of tenancies
• Fixed term – certain starting date and period
(c) Cameron Stewart 2009
Types of tenancies
• Periodic tenancies – for a term which continues
to roll over
• The maximum duration of the periodic tenancy is
unascertainable (will continue as long as the
tenant pays rent and the landlord accepts rent).
• Tenancy can be determined by the giving of
notice equivalent to the tenancy period the
tenancy is considered to be capable of being
rendered certain - and each tenancy period is
certain in and of itself.
(c) Cameron Stewart 2009
Types of tenancies
• The common law will recognise an implied
periodic tenancy if a tenant has gone into
possession of property and started paying rent.
This might arise where the parties have agreed to
create a tenancy (they may or may not have
agreed on a term) but have not complied with
the formalities or have created a void agreement,
or where a tenant ‘holds over’ - remains in
possession and pays rent after the expiration of a
fixed term lease.
(c) Cameron Stewart 2009
Types of tenancies
• The duration of a periodic tenancy will depend on how
often the rent is paid. If the rent is paid weekly, then you
will generally have a weekly periodic tenancy –which is
determinable through giving one weeks notice. The same
applies for fortnightly payments – notice equates with the
period for which rent is paid.
• However, if the method of calculation of the rental
payments incorporates a yearly measure, then the court
implies that the tenancy is yearly: Chan v Cresdon (1989)
168 CLR 242 per Mason CJ, Brennan J, Deane J and McHugh
J at 248 – “It is well settled that entry into occupation
followed by payment of rent … brings into existence a
common law tenancy from year to year, so long as the
payment of rent is referable to a yearly tenancy.”
(c) Cameron Stewart 2009
Types of tenancies
• Why? Landlord were ripping off tenants and
the common law judges became activist
• Eg Agricultural tenant at will – plants crops
and is ejected
(c) Cameron Stewart 2009
Types of tenancies
• The other circumstances in which a yearly
tenancy will arise is where the parties had agreed
on a fixed term lease exceeding a year but had
not fulfilled the requirements to enforce that
obligation in law. The High Court in Moore v
Dimond (1929) 43 CLR 105 held that in these
circumstances the courts will infer an intention to
create a yearly tenancy (so the yearly tenancy is
the longest, the common law will recognise
outside a legally enforceable contract).
(c) Cameron Stewart 2009
Types of tenancies
• The period of time for termination of a yearly tenancy is
different from other periodic tenancies. The common law
states that an implied yearly tenancy may be terminated by
six-months notice ending at the end of the year term.
However this position has been affected by the
Conveyancing Act 1991. Section 127(1) provides:
No tenancy from year to year shall, after the
commencement of this Act, be implied by payment of rent;
if there is a tenancy, and no agreement as to its duration,
then such tenancy shall be deemed to be a tenancy
determinable at the will of either of the parties by one
month's notice in writing expiring at any time.
(c) Cameron Stewart 2009
Types of tenancies
• The words ‘no agreement as to duration’ were
interpreted in the case Dockrill v Cavanagh
(1944) 45 SR (NSW) 78 to mean ‘no
agreement as to duration that complies with
legal formalities’. Therefore section 127
applies where the parties have agreed to a
longer term but have not created an
enforceable agreement.
(c) Cameron Stewart 2009
Types of tenancies
• Tenancy at sufferance - a tenancy at sufferance will arise if the
tenant holds over after the expiration of a fixed term lease without
the consent or dissent of the landlord, and will only last until the
tenant pays rent and the landlord accepts it or the landlord informs
the tenant that they must quit the premises.
• The tenancy at sufferance arises where the courts assume that
there is a lack of agreement to the continued occupancy of the
tenant (because the landlord has not consented or dissented to the
ongoing occupation of the tenant).
• This means that such tenants cannot be obliged to pay rent but
equally can be evicted at any time. Some authors suggest that the
tenancy at sufferance is a legal fiction to prevent a finding that the
tenant in occupation in these circumstances is a trespasser.
(c) Cameron Stewart 2009
Types of tenancies
• Tenancy at will - the common law will recognise an implied tenancy at will
if the tenant has gone into possession and the parties have impliedly or
expressly agreed that either party can terminate the tenancy at any time.
While the lessor is entitled to compensation for the period of occupancy,
generally speaking the tenant does not pay rent.
• Tenancies at will can be created by agreement, but they usually arise by
implication when for example a tenant holds over after the expiration of
their fixed term lease – with the consent of the landlord – but before they
pay rent; or where a tenant is let into possession before the creation of a
lease and payment of rent. These tenancies usually arise where the
parties are undergoing a period of transition from one state to another.
(c) Cameron Stewart 2009
Types of tenancies
• If a tenant holds over as a tenant at will after the
expiration of the lease, unless the lease expressly
provides for the terms that will apply to any tenancy
at will, the terms of that lease will apply to the
tenancy at will – as appropriate (covenant to
maintain premises; landlord to repair).
(c) Cameron Stewart 2009
Types of tenancies
• Tenancy by estoppel – 2 kinds
• Tenancy by want of title – if the landlord discovers
that he/she has no title agreement is still binding
between landlord and tenant (but not against 3rd
parties
• Agreement to lease - Waltons Interstate (Stores) v
Maher (1988) 164 CLR 387
(c) Cameron Stewart 2009
Types of tenancies
• Concurrent tenancies – a lease of the reversion
A (lessor)
Reversion
3 years
B (tenant)
Leasehold
5 years
C (lease of reversion)
• During 3 yrs C is the landlord, then for next 2
becomes the tenant
(c) Cameron Stewart 2009
Types of tenancies
• Reversionary leases – a lease of the reversion that
comes into being at a future time
• S 120A(3) CA – cannot be longer than 21 year wait
(c) Cameron Stewart 2009
Types of tenancies
• Retail Leases Act 1994 s 3
• retail shop lease or lease means any agreement
under which a person grants or agrees to grant to
another person for value a right of occupation of
premises for the purpose of the use of the premises
as a retail shop:
• (a) whether or not the right is a right of exclusive
occupation, and (b) whether the agreement is
express or implied, and (c) whether the agreement is
oral or in writing, or partly oral and partly in writing.
(c) Cameron Stewart 2009
Types of tenancies
• retail shop means premises that:
• (a) are used, or proposed to be used, wholly or
predominantly for the carrying on of one or more of
the businesses prescribed for the purposes of this
paragraph (whether or not in a retail shopping
centre), or (b) are used, or proposed to be used, for
the carrying on of any business (whether or not a
business prescribed for the purposes of paragraph
(a)) in a retail shopping centre.
• Sched 1 - Adult books and toy shops thru to Writing
materials shops
(c) Cameron Stewart 2009
Types of tenancies
• 5 Certain retail shops excluded from the operation of this Act
This Act does not apply to any of the following retail shops:
(a) shops that have a lettable area of 1,000 square metres or more,
(b) shops that are used wholly or predominantly for the carrying on of
a business by the lessee on behalf of the lessor,
(c) any shop within premises where the principal business carried on
on those premises is the operation of a cinema, bowling alley or
skating rink and the shop is operated by the person who operates
the cinema, bowling alley or skating rink,
(d) any premises in an office tower that forms part of a retail shopping
centre,
(e) premises of a class or description prescribed by the regulations as
exempt from this Act.
(c) Cameron Stewart 2009
Types of tenancies
• 6A Application of Act to short-term leases
• (1) Generally, Act not to apply to short-term leases
Subject to subsection (2), this Act does not apply to a lease of a retail shop
for a term of less than 6 months without any right for the lessee to extend
the lease (whether by means of an option to extend or renew the lease or
otherwise).
• (2) Exception for successive, extended or renewed leases for more than
one year
If the lessee has been in possession or entitled to be in possession of the
retail shop without interruption for more than one year (whether by
means of a series of 2 or more leases or by means of an extended or
renewed lease or leases, or by any combination of those means), this Act
applies to: (a) the lease on and from the day on which the lessee has been
in possession or entitled to be in possession of the shop for more than one
year, and (b) any succeeding lease or leases of the shop to the lessee,
where possession or entitlement to possession is not interrupted.
(c) Cameron Stewart 2009
Types of Tenancies
• The Residential Tenancies Act 1987 sets out the rights and
obligations of landlords and tenants with respect to residential
premises. The definitions of “residential premises” and “residential
tenancy agreement” in section 3 should be noted. In particular that
the definition of “residential premises” is:
“Any premises or part of premises . . . used or intended to be used
as a place of residence . . .”
Sections 5 and 6 deal with the application of the Act and set out some
agreements to which the Act does not apply. In particular where
the tenant is a party to an agreement made in good faith for sale or
purchase of the premises, where the person is a boarder or lodger,
and, where premises are rented for purposes of holidaying. It
should also be noted that the Act does not apply to any part of a
hotel or motel, any part of a club, and some other premises and
institutions.
(c) Cameron Stewart 2009
Requirements for a lease
A leasehold interest is created in circumstances
where a landlord or lessor grants to a tenant or
lessee:
• for a term which is certain or capable of being
made certain
• the right to exclusive possession of the land
• for a period less than the term of the landlord’s
interest, and
• with the intention of giving the tenant an interest
in land rather than a personal privilege.
(c) Cameron Stewart 2009
Certainty of term
•
Leases must commence on dates which are certain or capable of
determination. Usually a date is set out in the lease, but this is not
necessary and the commencement date can be determined by
reference to some event. In the text Butt refers to several examples
in [1506]:
– “from completion of the building”
– “when the gas is connected”
– “when a certificate issues”
• The duration of the lease must be obvious from its terms. Usually
the term is expressed in years or sometimes in years and months or
days. The need for a certain term is not a requirement for leases for
life, tenancies at will, tenancies at sufferance or periodic tenancies,
e.g. a tenancy from week to week or month to month.
(c) Cameron Stewart 2009
Certainty of term
• The lease may be of any length so long as the length is capable of being
rendered certain and is less than the landlord’s estate.
• The requirement that the duration of the lease be ‘capable of being
rendered certain’ applies before the lease takes effect. This means that if
the duration of the lease is to be determined by reference to an external
event, that external event MUST have occurred before the
commencement of the lease.
• Lace v Chandler [1944] KB 368: A lease “for the duration of the war” was
invalid lease because the period of time was uncertain and not capable of
being rendered certain before the commencement of the rental term.
• The simplest way to get around this problem is to have a length of time
attached to the external event. For example a lease that says - duration for
10 years or to the end of the war (whichever comes first). So here, the fact
that the maximum term is certain means that the fact that it could be
brought to an end sooner does not render it void. Examples of this are
where the lease contains provisions allowing either party to terminate the
lease earlier upon giving notice.
(c) Cameron Stewart 2009
Certainty of term
• The rule does not apply to:
– tenancies at will
– tenancies at sufferance
– periodic tenancies
(c) Cameron Stewart 2009
Certainty of term
• It is quite common, but not good practice) for tenants
to sign leases at a date much later than the date on
which possession was given by the landlord.
• The problem that arises in relation to leases under the
Retail Leases Act 1994 is highlighted by the case of
Aspromonte Pty Ltd v Zagari (1999) NSW ConvR ¶55916.
• Retail Leases Act, s 8 provides that a lease is entered
into when “a person enters into possession of the retail
shop as lessee under the lease or begins to pay rent
under the lease (whichever happens first).”
(c) Cameron Stewart 2009
Exclusive possession
• Wik Peoples v Queensland (1996) 187 CLR 1
per Toohey J at 116 – “the point is not so
much that a ‘lease’ confers exclusive
possession; it is that the conferring of
exclusive possession is an indication that the
arrangement in question is a lease”.
(c) Cameron Stewart 2009
Lease or Licence?
• The test of exclusive possession is important
because it allows the court to distinguish
between a person who has been granted a
licence to access property and a person who has
been granted a lease.
• A licence does not create an interest in land and
does not have the protective covenants
contained in a lease.
• Licences are in personam/contractual not
proprietorial
(c) Cameron Stewart 2009
Intention to create a lease?
• In the English decision of Errington v Errington
[1952] 1 KB 290, the English court said that
you need to find both exclusive possession
AND and intention to create the relationship
of landlord and tenant. This approach was
rejected by the High Court in Raidaich v Smith
and was also rejected by the House of Lords in
England in Street v Mountford [1985] AC 809.
(c) Cameron Stewart 2009
Exclusive possession
• In Radaich v Smith (1959) 101 CLR 209 the High Court was
asked to consider whether a document which was
expressed to be “the sole and exclusive licence and
privilege to supply refreshments to the public” was a lease
or not. The document provided for payment of a licence
fee, for the licensee to pay for gas and electricity connected
to the premises. The licence also contained a provision:
10. The License herein granted shall be deemed to be a Lease as
defined in the Landlord and Tenant (Amendment) Act 19481952
• The High Court came to the conclusion that if the right
conferred on the occupant of the premises is one of
exclusive possession for a set period of time then it creates
a leasehold interest, and not a licence.
(c) Cameron Stewart 2009
Exclusive possession
• Isaac v Hotel de Paris [1960] 1WLR 239 the Privy Council considered an
appeal from the Federal Supreme Court of Trinidad. The Hotel de Paris
owned an hotel and leased two floors of premises on the other side of the
road. At some point the company allowed Isaac to occupy the first of the
two floors across the road from their hotel premises to establish what was
referred to as a “night bar”. Isaac took out a liquor licence in his name and
purchased a stock of liquor at his own expense.
• At some point of time differences arose between them and no contract
between Isaac and the Hotel de Paris was ever concluded. Isaac paid rent
and all expenses in connection with the running of the night bar. He
retained all profits from the operations of the bar for his own use. The
question before the Court was whether the circumstances of the
arrangements entered into, despite the contract not having been
concluded were sufficient to create a tenancy rather than a licence. After
considering the evidence and the law the judgment of the Court was
delivered by Lord Denning.
(c) Cameron Stewart 2009
Exclusive possession
The circumstances and conduct of the parties
show that all that was intended was that the
defendant should have a personal privilege of
running a night bar on the premises, with no
interest in the land at all. It was at first only a
privilege to be there pending the execution of
a formal contract. Later, when the contract fell
through, and notice was given to him to
remove his belongings, even that privilege
came to an end.
(c) Cameron Stewart 2009
Exclusive possession
• Street v Mountford [1985] AC 809: Street granted
to Mountford the right to occupy two rooms at a
weekly payment and subject to conditions set out
in a document referred to as “Licence
Agreement”.
• The Court found that on its true construction the
agreement between the parties had the effect of
creating a tenancy despite the use of the words
“Licence Agreement”.
• In coming to this conclusion the House of Lords
accepted the High Court’s decision in Radaich
(c) Cameron Stewart 2009
Exclusive possession
• Fatac Limited (In Liquidation) v Commissioner of
Inland Revenue (2003) ANZ ConvR 243, the Court
of Appeal considered the distinction between a
tenancy and a licence. The facts are of no great
significance as they related to an argument about
whether a sale constituted a sale of a going
concern for the purposes of the GST legislation in
New Zealand. In determining that issue however
the Court found it necessary to determine
whether an arrangement for occupation of
premises was a lease or a licence.
(c) Cameron Stewart 2009
Exclusive possession
• Fisher J, the Court said:
[29] In its conventional sense a tenancy is an interest in land conferring
the right to possess it for a limited period. A licence is a mere permission
to be on the land, with or without additional permission to perform
specified acts there. The former creates an estate in the land; the latter
does not.
...
[38] In our view first principles support the right to exclusive possession as
the litmus for tenancies. Exclusive possession allows the occupier to use
and enjoy the property to the exclusion of strangers. Even the reversioner
is excluded except to the extent that a right of inspection and/or repair is
expressly reserved by contract or statute. A tenant enjoys those
fundamental, if temporary, rights of ownership that stem from exclusive
possession for a defined period. . . .
[39] Because the tenancy/licence distinction turns on those substantive
rights granted to the occupier, it remains unaffected by the label which
the parties choose to place upon their transaction. . . .
(c) Cameron Stewart 2009
Exclusive possession
• Bruton v London and Quadrant Housing Trust [2000] 1 AC
406. This case involved a block of flats that was owned by
Lambeth Borough Council. They were going to tear the flats
down and redevelop the land, but until they raised the
money, they granted to London Housing Trust a licence to
use the building as short term accommodation for
homeless people. The London Housing Trust, acting
pursuant to this licence, entered into a contract with
Bruton. The contract stated that Bruton had a licence to use
the premises on payment of a set amount per week. It said
that he would vacate at any time upon being given four
week’s notice and that he would allow the Trust to have
access to the flat during business hours for the purposes of
the trust.
(c) Cameron Stewart 2009
Exclusive possession
• Bruton brought an action under UK tenancy
legislation to try and force the Trust to undertake
repairs. The relevant legislation relied upon the
common law definition of a lease and imposed an
obligation to repair premises on lessors. In
response to Bruton’s argument that he was a
tenant under a lease, the Trust pointed to the
licence document which said Bruton was a
licensee, that they had all intended for Bruton to
be a licensee and any other outcome would be
absurd because the Trust itself only had a licence.
(c) Cameron Stewart 2009
Exclusive possession
• The court found that the Trust had, in effect,
made a grant of exclusive possession to Bruton as
against the Trust; that despite their stated
intentions re licence, they had still intended to
make a grant of exclusive possession and that the
clauses in the lease about access for the Trust
supported this – because if it was only a licence,
you didn’t need such clauses. This meant that Mr
Bruton could force the Trust to effect repairs
under the relevant Statute.
(c) Cameron Stewart 2009
Exclusive possession
• Problems with Brunton:
• How can the Housing Trust create a lease
when it only has licensee rights?
(c) Cameron Stewart 2009
Exclusive possession and Residential
Tenancies
• It should be noted that a “residential tenancy
agreement” means “any agreement” under
which a person occupies premises for
residential purposes:
– (a) whether or not the right is a right of exclusive
occupation,
– (b) whether the agreement is express or implied,
and
– (c) whether the agreement is oral or in writing, or
partly oral and partly in writing, ...
(c) Cameron Stewart 2009
Exclusive possession and Retail Leases
• Retail Leases Act 1994 s 3
• Exclusive possession not necessary
(c) Cameron Stewart 2009
Creation of leases
Legal Leases under Old System
Section 23B of the Conveyancing Act
Section 23D (2) of the Conveyancing Act allows for the creation of parol (or
oral) interests in land by way of lease if the conditions in 23D are met.
These conditions are:
1. that the lease must be at the “best rent which can reasonably be obtained
without taking a fine”
2. the lessee has taken effect in possession
3. the term of the lease including any option does not exceed 3 years.
A fine is a lump sum.
Taking effect in possession includes a right to immediate possession:
Haselhurst v Elliiot [1945] VLR 153.
The term must include any options eg 2 yrs +2 yrs = 4 year lease
(c) Cameron Stewart 2009
Creation of leases
• Equitable Leases
• Part performance, Walsh v Lonsdale (1882) 21
Ch D 9.
• Agreement
• Consideration
• Specific Performance
(c) Cameron Stewart 2009
Example
Sam, the owner of the fee simple in Blackacre (old system) agrees to
lease it to Dean for 5 years for a monthly rental of $1000. No deed
is executed. Dean goes into possession and pays the agreed rent.
After 2 years Sam discovers that he can earn higher rent, and serves
notice of termination of the lease on Dean. Advise Dean of his
rights.
To enter this question use a three-step process:
Is the agreement to lease legally enforceable?
If it is not legally enforceable, will equity specifically enforce the lease?
If it is not legally enforceable and equity won't specifically enforce it,
what type of lease will the common-law recognise? (ie - what is left
over?)
(c) Cameron Stewart 2009
Example
Is the agreement to lease legally enforceable? Deed? –
No; s23D(2) – No – longer than three years.
If it is not legally enforceable, will equity specifically
enforce the lease? - we don't know if they have created
a written agreement which equity would enforce; if
they haven't, then Dean’s act of going into possession
may be considered to be a sufficient act of part
performance for equity to enforce the agreement. If it
is not specifically enforceable (tenant has delayed or
not ‘done equity’) go to the third point:
(c) Cameron Stewart 2009
Example
If it is not legally enforceable and equity won't specifically
enforce it, what type of lease will the common-law
recognise? (ie - what is left over?)
Here on the basis of Dean’s possession of the premises
and his payment of rent there will be an implied
periodic lease. The least will be for a period of one year
due to the rule in Moore and Dimond because they had
agreed on a fixed term of years. In New South Wales
Section 127(1) of the Conveyancing Act makes legal
yearly leases terminable on one months notice, so Sam
may terminate this agreement with one month’s
notice.
(c) Cameron Stewart 2009
Creation of leases
•
Torrens – s 53 RPA
• 53 Land under the provisions of this Act—how leased
• (1) When any land under the provisions of this Act is intended to be
leased or demised for a life or lives or for any term of years exceeding
three years, the proprietor shall execute a lease in the approved form. ...
• (3) A right for or covenant by the lessee to purchase the land therein
described may be stipulated in such instrument, and in case the lessee
shall pay the purchase money stipulated and otherwise observe the
lessee’s covenants expressed and implied in such instrument, the lessor
shall be bound to execute a transfer of the said land to such lessee.
• (4) A lease of land which is subject to a mortgage, charge or covenant
charge is not valid or binding on the mortgagee, chargee or covenant
chargee unless the mortgagee, chargee or covenant chargee has
consented to the lease before it is registered.
• (5) Subsection (1) does not apply in relation to land the subject of a social
housing tenancy agreement within the meaning of the Residential
Tenancies Act 1987.
(c) Cameron Stewart 2009
Creation of leases
• Leases of more than 3 years must be
registered.
• Leases for less can be registered
• Unregistered interests for more than 3 years
may be equitable
• Unregistered lease for less than 3 years are
legal but not indefeasible
(c) Cameron Stewart 2009
Creation of leases
• RM Hosking Properties Limited v Barnes [1971] SASR 100.
The registered proprietor of the piece of land entered into
a lease with Mr Barnes. The lease was for a 2 year period
with an option to renew for a further 2 years. The lease was
not registered on the title. Before the expiry of the first 2
year period under the lease, the registered proprietor sold
the land to Mr Hosking. Hosking allowed Barnes to stay in
the property and accepted rent from Barnes after the sale.
But when Barnes sought to exercise the option to renew
the lease for a further 2 years, Hosking sought to evict
Barnes. Barnes defended the action arguing that Hosking
was subject to the lease and was therefore subject to the
option to renew.
(c) Cameron Stewart 2009
Creation of leases
• Is the lease registered?
No - unregistered lease.
Does the lease fall within the express lease exception to
indefeasible title?
• No – option not yet exercised – 4 years (exceeds 3 in NSW).
What was left at law? Legal lease based on possession;
failed four year term – Moore v Dimond – 1 month notice.
Is there another exception that might apply?
• Fraud - notice of a prior interest does not amount to fraud
(s 43) and no evidence of dishonesty in the time leading up
to the transfer.
• No in personam
(c) Cameron Stewart 2009
Implied Covenants in leases
• Common law Implied covenants on the lessor:
– Quiet enjoyment
– Not to derogate from grant
– (for furnished dwellings) that the premises be fit for
human habitation
• Common law implied covenants on tenant:
– To use the premises in a tenant-like manner
– To yield up the premises
– (for agricultural land) to use the premises in a husband-like
manner
• No others will be implied: Warren v Keen [1954] 1 QB
15
(c) Cameron Stewart 2009
Quiet enjoyment
• Right to occupy without disturbance
• Karaggianis v Malltown Pty Ltd (1979) 21 SASR 381. In this matter,
premises on the sixth floor of a city building were leased to the tenant
with access being provided by four lifts and by two escalators. The
common areas which included the lifts and escalators remained under the
control of the landlord with the lease providing that the tenant should
have the use of the lifts and escalators subject to the other terms of the
lease. After carrying on the business of a cafeteria on the sixth floor for
nearly a year the landlord reduced the access to the sixth floor by
stopping the escalators at the second floor and reducing the lifts service
from four lifts to two. The landlord indicated that this had occurred
because the third, fourth and fifth floors of the building were vacant and
there was a risk of vandalism if members of the public had access to these
floors. The tenant argued that by ceasing to operate the lifts and
escalators as he had done at the commencement of the lease that a
breach had been committed of the covenants in the lease and sought a
mandatory injunction requiring the landlord to restore the services.
(c) Cameron Stewart 2009
Quiet enjoyment
• After considering the matter in detail Wells, J
held that a covenant should be implied in the
lease that the landlord would maintain and
operate the lifts and escalators substantially as
they were when the lease was executed. He came
to this conclusion for three reasons:
– (a) Upon the terms of the lease itself.
– (b) Upon the ground that such a covenant was
necessarily to be implied to give business efficacy to
the transaction between the parties.
– (c) Upon the ground that the landlord should not be
permitted to derogate from his grant.
(c) Cameron Stewart 2009
Quiet enjoyment
• In Kazas and Associates Pty Limited and
Multiplex (Mountain Street) Pty Limited (2003)
ANZ ConvR 302 the plaintiff (Kazas) sought a
declaration to restrain the defendant from
carrying on a redevelopment arguing that it
would be a breach of the covenant for quiet
enjoyment contained in the lease.
(c) Cameron Stewart 2009
Quiet enjoyment
• Palmer, J referred to the implication of terms in a Contract and said:
• Translated into the context of a lease, the test will be: in the light of all
relevant factual circumstances at the time of grant of the lease:
– • is the alleged term reasonable and equitable;
– • is it necessary to give business efficacy to the lease, “business
efficacy” in this context meaning implementation in a practical and
businesslike way of the intended use of the demised premises by the
lessee consistently with the reasonable use of the whole property by
the lessor and any other occupiers;
– • is the term so obvious that it goes without saying;
– • is it capable of clear expression;
– • does it contradict any express term of the lease.
(c) Cameron Stewart 2009
Quiet enjoyment
• In the present case, the implied term is said to be: the lessor will not,
during the term of the lease, remove or change the loading dock, the
goods lift, the first floor corridor, the passenger lift or the foyer as they
were at the commencement of the lease in such a way as will substantially
interfere with the conduct of the plaintiff’s business in the demised
premises, without first providing alternative facilities to substantially the
same standard. In the light of the circumstances existing at the
commencement of the lease, does this term satisfy the test for necessary
implication?
• His Honour went on to find that “the term is reasonable and equitable.”,
and that the term “is necessary to implement, in a practical and
businesslike way, the use of the demised premises by the plaintiff.”, and
that the term is capable of clear expression and does not contradict any
express term of the lease. For these reasons his honour went on to say:
– In the present case, I am firmly of the view that removal of the goods lift and any
obstruction to the first floor corridor will be a substantial interference with the plaintiff’s
rights, in breach of the implied term
(c) Cameron Stewart 2009
Non-derogation from grant
• Did the landlord undermine the prupsoes for which the
property was let?
• Similar to quiet enjoyment in many cases
• Harmer v Jumbil (Nigeria) Tin Areas Ltd [1921] 1 Ch 200
– lease for area to store explosives derogated from
when landlord rented out adjoining area which
jeopardised license for storage
• Kazas – goods lift
• Karaggianis – escalator
• No breach if no knowledge of use
(c) Cameron Stewart 2009
Fit for habitation
• Only implied into lease of furnished dwellings
• Issues – the elements, pests
• Overridden by Residential Tenancies Act to a large degree, for eg
25 Landlord’s responsibility for cleanliness and repairs
(1) It is a term of every residential tenancy agreement that: (a) the
landlord shall provide the residential premises in a reasonable state
of cleanliness and fit for habitation by the tenant, and (b) the
landlord shall provide and maintain the residential premises in a
reasonable state of repair, having regard to the age of, rent payable
for and prospective life of the premises.
(2) In this section: residential premises includes everything provided
with the premises (whether under the residential tenancy
agreement or not) for use by the tenant.
(c) Cameron Stewart 2009
Tenant-life use
• Act like a reasonable tenant
• Duties to clean, small repairs
• Duties to refrain from damage, apart from fair
wear and tear
(c) Cameron Stewart 2009
Fair wear and tear
• In Warren v Keen [1954] 1 QB 15 the English Court of
Appeal was asked to consider whether covenants were
implied into the arrangement between the landlord and
tenant. The tenant occupied premises on a weekly tenancy
and during the time of the occupation the landlord had
carried out various repairs to the property. The landlord
was served with a notice by a local authority requiring work
to be carried out to make the premises “wind and water
tight” and after the work was performed sued the tenant
arguing that there was an implied covenant that the tenant
would keep the premises in a good and tenantable repair.
• No implied covenant except for use in tenant-like manner
• Tenant not liable for natural wear and tear caused by
seepage through brickwork, underlying natural forces
(c) Cameron Stewart 2009
Fair wear and tear
• In Haskell v Marlow [1928] 2 KB 45 a widow who occupied
premises pursuant to a life estate was responsible for
allowing the house to fall into disrepair. The argument in his
case was slightly different as the house had been occupied
by her pursuant to a life estate for 42 years. The provision
in the Will obligated the widow to keep the house insured
against loss by fire and “in good repair and condition
(reasonable wear and tear excepted)”. The widow did
nothing active to damage the premises but did nothing to
counteract the natural processes of decay.
• She had failed to replace a broken tile and water damage
was caused
• So fair wear and tear can include some small active repairs
(c) Cameron Stewart 2009
Yielding up
• More than just leaving but making sure that
there is vacant possession
• The landlord can claim costs of evicting subtenant: Anderson v Bowles (1951) 84 CLR 310
(c) Cameron Stewart 2009
Husband-like manner
•
•
•
Cultivate in accordance with local usage
Overridden by Agricultural Tenancies Act 1990
19A Compensation for deterioration
(1) It is a term of a tenancy that the tenant must pay the owner fair compensation
for any deterioration of the farm during the tenancy owing to the failure of the
tenant to manage the farm in accordance with good farm management or the
provisions of any agreement creating the tenancy, or both.
(2) For the purposes of determining the compensation payable for any
deterioration of the farm, the amount of compensation is an amount representing
the decrease in the value of the farm as a result of the deterioration.
(3) The compensation is payable when the deterioration is evident.
(4) The rights of an owner under this section are displaced by an agreement:
(a) to the extent that those rights are expressly waived by the agreement, or
(b) to the extent that the management of the farm (being management that is
material to any claim for compensation under this section) is expressly authorised
by the agreement.
(c) Cameron Stewart 2009
Conveyancing Act Implied Covenants
• In addition to the common law there are
terms implied by the CA
– Covenant to repair
– Covenant to pay rent
– Covenant to allow the landlord to inspect and
repair
– Covenant to re-enter for non-payment of rent
– Covenant to re-enter for breach of non-rental
covenants
(c) Cameron Stewart 2009
Repair
• Section 84 CA:
• (1)(b) That the lessee or the lessee’s executors,
administrators and assigns will, at all times during
the continuance of the said lease, keep and, at
the termination thereof, yield up the demised
premises in good and tenantable repair, having
regard to their condition at the commencement
of the said lease, accidents war damage and
damage from fire, flood, lightning, storm and
tempest, and reasonable wear and tear excepted.
(c) Cameron Stewart 2009
Repair
• In Proudfoot v Hart (1890) 25 QBD 42 a house
had been let for three years under a written
agreement with a covenant that the tenant would
“during the said term keep the said premises in
good tenantable repair, and so leave the same at
the expiration thereof.”. At the expiration of the
term the landlord commenced an action to
recover the cost of repairs carried out to repaper
walls, repaint internal woodwork, whitewash
ceilings and staircases, and replace a kitchen
floor.
(c) Cameron Stewart 2009
Repair
• The English Court of Appeal considered the obligations
of tenants under covenants to keep in “good
tenantable repair” and came to the following
conclusions:
– Such a state of repair that the premises might be used and
dwelt in not only with safety, but with reasonable comfort,
by the class of persons by whom, and for the sort of
purposes for which, they were occupied.
– “Good tenantable repair” is such repair as, having regard
to the age, character, and locality of the house, would
make it reasonably fit for the occupation of a reasonablyminded tenant of the class who would be likely to take it.
(c) Cameron Stewart 2009
Repair
• The extent of the repair extends to the repair or
replacement of "subsidiary parts" of the premises
but not to the renewing or reconstructing of the
premises themselves. It is common for covenants
in leases to refer to the obligation to repair in
some detail but to then exclude any obligation for
"structural repairs". This can be different if the
use of the premises is such as to require the
tenant to make structural alterations to the
premises for the tenants use.
(c) Cameron Stewart 2009
Rent
• Section 84• (1)(a) That the lessee or the lessee’s executors, administrators and assigns
will pay the rent thereby reserved at the time therein mentioned:
Provided, however, that in case the demised premises or any part thereof
shall at any time during the continuance of the lease be destroyed or
damaged by fire, flood, lightning, storm, or tempest or shall suffer war
damage so, in any such event as to render the same unfit for the
occupation and use of the lessee, then and so often as the same shall
happen, the rent thereby reserved, or a proportionate part thereof,
according to the nature and extent of the damage sustained shall abate,
and all or any remedies for recovery of the rent or such proportionate part
thereof shall be suspended until the demised premises shall have been
rebuilt or made fit for the occupation and use of the lessee, and in case of
any dispute arising under this proviso the same shall be referred to
arbitration under the provisions of the Commercial Arbitration Act 1984.
(c) Cameron Stewart 2009
Inspection
• (a) That the lessor, the lessor’s executors, administrators or
assigns, or the agent of the lessor, the lessor’s executors,
administrators or assigns, may, twice in every year during
the term at a reasonable time of the day upon giving to
the lessee two days’ previous notice, enter upon the
demised premises and view the state of repair thereof, and
may serve upon the lessee, the lessee’s executors,
administrators, or assigns, or leave at the lessee’s or the
lessee’s executors, administrators or assigns last or usual
place of abode in New South Wales, or upon the demised
premises, a notice in writing of any defect, requiring the
lessee or the lessee’s executors, administrators or assigns,
within a reasonable time, to repair same in accordance
with any covenant expressed or implied in the lease.
(c) Cameron Stewart 2009
Re-entry
• Section 85
• (d) That, in case the rent or any part thereof is in arrear for the
space of one month (although no formal demand therefor has been
made), or in case default is made in the fulfilment of any
covenant, condition, or stipulation, whether expressed or implied
in the lease, and on the part of the lessee to be performed or
observed, and such default is continued for the space of two
months, or in case the repairs required by such notice as aforesaid
are not completed within the time therein specified, the lessor or
the lessor’s executors, administrators or assigns may re-enter
upon the demised premises (or any part thereof in the name of the
whole) and thereby determine the estate of the lessee, the lessee’s
executors, administrators, or assigns, therein, but without releasing
the lessee or the lessee’s executors, administrators or assigns from
liability in respect of the breach or non-observance of any such
covenant, condition, or stipulation.
(c) Cameron Stewart 2009
Covenants against Assignment or
Subletting
• Absolute or qualified?
• Interpretation against the landlord
• An absolute covenant bars the right to assign or
sub-lease –
• S10 an 123 allow a landlord to permit and
assignment or sublease in the face of an absolute
bar
• S 133B – applies to qualified covenants eg
without the landlord’s permission
• Permission cannot be unreasonably withheld
(c) Cameron Stewart 2009
Covenants against Assignment or
Subletting
• In Re Gibbs and Houlder Brothers & Company, Limited’s,
Lease [1925] Ch 198 the English Court of Chancery laid
down what is referred to by Butt as the “narrow test”. The
reason for the landlord refusing consent to an assignment
was set out in a letter as:
– My sole reason for withholding my consent is on the reasonable
ground that by the assignment I should lose Roneo, Ld., as good
tenants of No. 12, and because I shall have great difficulty in
finding any tenant for No. 12.
• The Court found that the reason for withholding consent
was unconnected with the person of the assignee or the
user occupation of the premises and was not reasonable.
• Narrow test: must relate to use of premises or new lessee
(c) Cameron Stewart 2009
Covenants against Assignment or
Subletting
• Broad test: Bickel v Duke of Westminster
[1977] QB 517
• Lord Denning – court should not restrict the
number of factors that may be relevant
• What was the purpose of the clause and what
are the surrounding circumstances?
(c) Cameron Stewart 2009
Covenants against Assignment or
Subletting
• Intermediate test
• In International Drilling Fluids Ltd. v. Louisville Investments
(Uxbridge) Ltd. [1986] Ch 513 the English Court of Appeal set out
the following propositions (quoted from Butt page 348 at [15126]):
• 1. The purpose of a covenant against assigning [or subleasing]
without the landlord’s consent, such consent not to be
unreasonably withheld, is to protect the landlord from having the
premises used or occupied in an undesirable way, or by an
undesirable assignee.
• 2. As a corollary to 1, a landlord is not entitled to refuse consent on
grounds unconnected with the relationship of landlord and tenant
as it relates to the leased premises.
• 3. The tenant bears the onus of proving that consent was refused
unreasonably.
(c) Cameron Stewart 2009
Covenants against Assignment or
Subletting
• 4. The landlord does not have to justify the conclusions which led to
consent being refused, if they were conclusions that a reasonable
person in the landlord’s position could have reached in the
circumstances.
• 5. It may be reasonable for a landlord to refuse consent on the
ground of the purpose for which the proposed assignee intends to
use the premises, even though the lease does not forbid that
purpose.
• 6. Usually, landlords need consider only their own interests; but
there may be cases of such imbalance between the benefit to the
landlord and the detriment to the tenant if consent is refused, that
for the landlord to refuse consent would be unreasonable.
• 7. Subject to the above propositions, whether the landlord’s
consent is withheld unreasonably is a question of fact, depending
on all the circumstances.
(c) Cameron Stewart 2009
Covenants against Assignment or
Subletting
• In this case property was leased with a proviso that it
was not to be used “for any purpose other than as
offices”. The lease also contained a provision against
assignment without consent but that consent would
not be unreasonably withheld. The premises were
vacated and the tenant sought an assignment of the
lease to a company intending to use the premises as
serviced offices. The landlord formed the view that this
would be detrimental to the investment value and
refused consent. The judge held that the evidence did
not justify a refusal of consent and the Court of Appeal
dismissed an appeal.
(c) Cameron Stewart 2009
Covenants against Assignment or
Subletting
• Creer and Another v P. & O. Lines of Australia Pty. Limited (1971)
125 CLR 84. In this case the lease provided that if the lessee desired
to assign the lease then “the lessee shall before doing so offer in
writing to the lessor to surrender this lease . . . without any
consideration on any subsequent monthly rent day within two
months of the making of such offer as shall be selected by the
lessor . . .”
• The lessee sought consent from the lessor to an assignment but did
not offer to surrender the lease as required by the clause. The
lessor refused an assignment and advised that if an offer of
surrender was made then the offer would be accepted.
• The Court held that consent was not unreasonably withheld in the
circumstances of this case as the lessee had not offered to
surrender the lease as required by the lease provision.
(c) Cameron Stewart 2009
Covenants against Assignment or
Subletting
• S 132 CA No fine can be made payable for
consent – may be overridden by express clause
• RTA s33 – tenant may assign or sublet with
permission but no implied term that consent
cannot be unreasonably withheld
• RLA s 39 – consent can be withheld on basis of
use, financial resources and retail skills.
• RLA s 40 key money is banned
• RLA s 42 lease may contain an absolute bar to
subletting
(c) Cameron Stewart 2009
Enforcement of covenants in
assignment
• Privity of contract: Beswick v Beswick
• Privity of estate : the relationship of landlord
and tenant
(c) Cameron Stewart 2009
Enforcement of covenants in
assignment
L
R
T
A
ST
AST
L and T –privity of contract and estate
Assignment of reversion to R – privity of estate bw R &T
Assignment of lease to A – privity of estate between A and R
Sublease from A to ST – privity of contract and estate bw A and ST and R and A srill have privity of
estate
Cameron Stewart 2009
ST assigns sublease – privity of estate bw A(c)and
AST
Assignment of the leasehold and the
question of the tenant’s covenants
• Burden of covenants; Spencer’s case –
covenants will run if they touch and concern
the land
• Covenants which effect use value or the
relationship of landlord and tenant
• EG pay rent, repair, insure, not to assignment
without consent
• S 70A and intention for the burden of
covenants to pass
(c) Cameron Stewart 2009
Assignment of the leasehold and the
question of the tenant’s covenants
• Benefit of covenants: Spencer’s case
• Benefits also pass if they touch and concern
the land
• Section 70 – intention for the benefit to pass
to successors
(c) Cameron Stewart 2009
Assignment of the reversion and the
question of the tenant’s covenants
• No equivalent of Spencer’s case
• Benefit s 117 – rent and benefit is annexed to
the reversion and goes with it
• All benefits of re-entry or forfeiture also
annexed to person entitle to the income fro
the land
• Must touch and concern the land – “ having
reference to the subject matter of the lease”
(c) Cameron Stewart 2009
Assignment of the reversion and the
question of the tenant’s covenants
• Burden – s 118
• Touch and concern
• No liability for breaches prior to assignment
(c) Cameron Stewart 2009
Torrens title and assignment
• Section 117 and 118 apply to RPA land
• S 51 RPA – on registration of transfer
transferee is subject to same liabilities
• S 52 – right to sue on instrument passes to
transferee
• S 53 – an option to purchase freehold does
not ordinarily touch and concern the leased
land, but s 53 enables this to happen in
registered leases.
(c) Cameron Stewart 2009
Remedies for breach
• Damages
• Injunction
• Termination
• Clauses for re-entry on breach
• Repudiation
• Recovery of possession – not possible for
dwelling house Landlord and Tenant Act 1899,
s 2AA
(c) Cameron Stewart 2009
Relief against forfeiture
• For non-payment of rent – equity jurisdiction
• Need to show ability to repay
• S 129 – for brach of covenant other than to
pay rent
• Court will consider applicant’s conduct, gravity
of breaches and difference between value of
lease and damage caused
(c) Cameron Stewart 2009