Leases & Licenses

06 July 2023

Leases

A lease, often called a tenancy in the lettings industry, is an agreement between a landlord(s) and a tenant(s) for the tenant(s) to live in a property for a period of time, subject to certain conditions placed on both parties. It is a contractual document.

Elements of a Lease:

There are three elements of a lease:

• Exclusive possession: for a lease to exist, the tenant must have been granted exclusive possession of the property, or part of it. Exclusive possession ensures the courts will see the occupation as a lease, even if it is given another name such as a licence. If a tenant is not given exclusive possession to either all or part of the property, they will not have a lease. They will most likely have been given permission to occupy as a licensee. However, sometimes an occupier may have exclusive possession but may not be considered a lawful tenant e.g. where a company takes a lease for a member of staff, they are the tenant but the member of staff is a permitted occupier under a licence.
• Rent: normally a rent must be charged which is usually payment of money but this payment can be of a form other than money.
• Stated period of time: leases are for a fixed period of time from a week or year to 99 or 999 years. Most residential lettings are for six or 12 months. If the initial period is short, say a week or a month, the lease or tenancy is a periodic tenancy. The fixed period is only, say, one month, but continues on a period-by-period basis, i.e. from month to month. The tenancy can go on like this indefinitely and can be ended at the end of a period by giving the correct notice.

A person may not be seen as a tenant even though they are staying at a property with exclusive possession and paying rent. If, for example, there was an agreement between friends and family with no intention of creating a tenancy, the person would not be seen as a tenant.

Licences

If a property owner allows someone to live at their property e.g. a lodger, without granting them exclusive possession, the lodger occupies under a licence, rather than a lease or a tenancy.

Tenancies (Leases) Created by Deed

Any land-related transactions for more than a three year period, including residential tenancies, must be created by a deed.

Oral Contracts

Tenancies of three years or less can be created orally. As residential tenancies are often for less than three years, great care must be taken not to enter into an oral contract. Always use the words ‘subject to contract’ in any correspondence relating to potential lets.

Joint and Several Liability

Tenants named on the tenancy are considered ‘jointly and severally liable’ for the obligations of the tenancy. This means each tenant is fully responsible for all conditions of the agreement.

Quiet Enjoyment

Leases may contain covenants - promises made by one party to another, e.g. to allow the tenant ‘quiet enjoyment’ – giving them the right to live in the property without interference from the landlord or anyone else. Even if this was not specifically included in the tenancy agreement, it would be considered an ‘implied right’.