A summary of the formalities and registration of leases including legal leases and equitable leases. Used in the real estate exam on the LPC University of Law and in which a high distinction was obtained.
REGISTRATION OF LEASES
Formalities
A lease is an interest in land which grants exclusive possession of a property for a fixed period of
time (Street v Mountford [1985] 2 All ER 289, HL). Exclusive possession is crucial (the right to exclude
all others, including the LL, from the property). If the person doesn’t have exclusive possession then
it may be that he merely has a personal right to occupy, generally known as a licence.
- Licence doesn’t create an interest in land as such and may be revoked at any time (or
according to its terms).
Whether a lease or a licence has been created depends on the intention of the parties in so far as it
can be inferred from all the circumstances. The court will look at the substance of the agreement not
the form and, e.g. calling a doc a ‘licence’ won’t be conclusive in preventing it from being a lease.
- A lease doesn’t have to take effect in possession immediately and can be granted to take
effect at some future time, provided it is within 21 years of its grant (LPA 1925, s 149(3)).
Registration
A lease may be legal or equitable.
Legal leases: must be created by deed (LPA 1925, s 52(1) and Law of Property (Miscellaneous
Provisions) Act 1989, s 1) unless it falls within s 54(2) of the LPA 1925. s54(2) provides that a lease
which takes effect in possession for a term of years not exceeding 3 years (this includes a periodic
tenancy) at the best rent reasonably obtainable without taking a fine may be made merely in writing,
or even orally, and still be legal. A deed is always necessary to effect a legal assignment of a lease,
even if the lease itself has been created informally under s 54(2).
Legal leases are prima facie binding on all comers; however, this position is modified by the LRA 2002
and depends on the length of the original term of the lease as follows:
(a) Legal leases granted for a term of more than 7 years. Must be registered with their own
separate title number. Position then depends on whether or not the reversionary title is
registered. If rev is registered, grant of the lease amounts to a ‘dealing’ with the registered
title and the lease must be registered with its own title, and it must be noted on the rev title -
should be registered before expiry of the priority period granted by LR search. If rev title is
unregistered, grant triggers first registration of title to the lease but doesn’t affect the title to
the reversion, which will remain unregistered - register within 2 months of grant of the lease
(b) Legal leases for 7 years or less. If such a lease is granted out of a reversion with a registered
title, it takes effect as an overriding interest under Sch 3 to the LRA 2002 whether or not the
tenant is in actual occupation. No form of registration is required. If the reversionary title is
unregistered, the lease is automatically binding and requires no form of registration.
Equitable leases: A lease which hasn’t been created by deed and is not within s 54(2) of the LPA
1925 may take effect as an equitable lease (in effect as contract to create a lease), provided that it’s
for value and satisfies the requirements of the Law of Property (Miscellaneous Provisions) Act 1989,
s 2 (i.e. in writing, incorporating all terms expressly agreed and signed by or on behalf of each party).
E leases usually require some form of registration to make them binding on a purchaser of the
reversion. Rev title registered: lease must be registered as a minor interest on the charges register of
the reversionary title. If, however, the tenant is in actual occupation, the lease is an overriding
interest under Sch 3 to the LRA 2002 and binding without registration. Rev title unregistered: lease
must be registered as a Class C(iv) land charge against the name of the owner of the immediate
reversion. If unregistered - void against a purchaser of the legal estate for money or money’s worth.
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