Licenses and Leases

Introduction to Licences

A license simply allows someone else other than the land owner to do something on the land, which without a licence would be treated as trespassing.

  • A license neither creates an interest in the land nor alters or transfers property in anything or to anybody.
  • It only makes an action lawful, which without a license would have been unlawful
  • A license is a (mere) permission granted by a landowner, for another to be on his land.
  • A licence does not create an estate or interest in the land – not a proprietary right,
  • It is only a personal right which is only enforceable against the person
  • There is no need for the licencee (the person to whom the license is granted) to have an interest in the land.
  • No formal requirements are needed to grant a licence

Example

John has allowed his son and daughter to live with him at number 10 Orchard Lane, John has effectively granted a license to his son. However, his son does not hold any proprietary rights in John’s house.

Types of License

  • Bare licence
  • Contractual licence
  • Licence coupled with an interest

Bare License

  • A bare license is granted gratuitously (no consideration, i.e. no money or favour is requested)
  • It can be an express license (by invitation)
  • A bare license can be implied as well (allowed as of assumption)
  • Bare licenses can be revoked at any time but the licensor must allow the licensee a reasonable period to leave. After that, the licensee becomes a trespasser
  • A license cannot be assigned to another person. It is a personal right which cannot usually be assigned, even if it is , it is easily revocable
  • Effect on third parties – a bare license is not binding on a purchaser as it is not a proprietary interest.

Contractual License

  • A contractual license arises where a consideration or value is given for the licence, for example, money or other favour in return for a license
  • Revocation; The contractual license can be revoked at any time as per the terms of the contract in case of breach of the term of the license. However, the licensor has to give reasonable notice to leave to the licensee
  • Assigning benefit; it is possible to assign a contractual license, but only, where a term of contract permits.
  • Effect on third parties; Contractual license does not bind a purchaser/buyer of the land as the right is personal right (please refer to the introductory chapter on land for further details)

Licence coupled with an interest

These are licences which comes with an interest in the land. In order to exploit these interests, a license is required for example the right to fish, the right to hunt, to collect wood etc.

  • A person is given the right over property, requiring them to enter land to take it:
  • The right to fish/hunt/gather wood etc.
  • Also known as profit à pendre
  • An interest exists over land in addition to the licence.
  • The interest is a proprietary one

Example

Ali has won a contract to extract minerals from Green Orchard, Ali’s interest in Green Orchard comes with a license to be at Green Orchard and extract the minerals

  • These licences to enter land with an interest in the land are not revocable while the interest in the land remains, for example, if someone is given a license to fish for three years the license to enter the river/canal banks cannot be revoked before the expiry of the fishing license
  • These licenses are assignable, the benefit of a profit can be assigned to another person
  • Effect on the third party – depends if protected as required under the rules on registered and unregistered land (please refer to Registered and Unregistered land)

Leases

  • A lease is an estate granted for a set period of time (please refer to types of Occupation under Landlord and Tenants)
  • It is ‘carved out’ of an owner’s estate
  • A freehold owner can grant a lease of any duration but a lease holder cannot grant a sublease for the period which is greater than his own lease/time period

Example

Albert is the freehold owner of Green Acre farm, he has decided to grant a lease to Berry for 30 years

Sub-Lease

  • A sub-lease is an entirely new leasehold estate
  • It must be for a shorter term than the lease out of which it is granted
  • There is no relationship between the head landlord and the sub-tenant

Example

Berry after two years at Green Acre is approached by John for a sublease of 7 years. Albert has granted a sub-lease to Ali. Ali has no relationship with Albert. Ali’s lease agreement is with Berry

Types of lease

  • Fixed Term Lease
  • Periodic Lease

Fixed term lease

It is created for a fixed term of years and at the expiry of the term, the land reverts back to the freehold owner of the land.

Example

Albert is the freehold owner of Green Acre farm, he has decided to grant a lease to Berry for 30 years. This is a fixed term lease and after the end of 30 years the property will go back/revert to Albert

Periodic leases

These leases are granted for a certain period of time, however, at the expiry of each term or time period, it renews itself automatically until a landlord or tenant gives notice to end the tenancy. A periodic lease also arises where a leaseholder still holds the land after the expiry of the fixed term lease.

Example

Albert is the freehold owner of Green Acre farm, he has decided to grant a lease to Clive on monthly bases. At the expiry of each month, the periodic lease will renew itself automatically until Albert or Clive give notice to terminate the lease.

Albert is the freehold owner of Green Acre farm, he has decided to grant a lease to Berry for 30 years. This is a fixed term lease and after the end of 30 years Berry is still in occupation of Green Acre Farm, this will give rise to periodic lease and it will continue until Albert of Clive give the notice to terminate the lease

Creation of lease

  • Express lease; a lease is normally created expressly through deed/contract
  • Implied lease; a lease can be implied as well where a person is in occupation with the owner’s consent and pays rent on a periodic basis e.g. an implied monthly periodic tenancy
  • A lease is created by a deed (in writing, clearly stating that it is a deed, signed by the landlord and leaseholder, witnessed by two people and must be delivered/handed over by the landlord to the lease holder)
  • The terms of the lease must be clear and certain
  • The lease must provide exclusive possession of the land to the leaseholder (please refer to types of occupation under landlord and tenants for further details on Exclusivity of Possession)
  • As a lease is a contract as well so there must be an intention on the part of the landlord and the tenants to create a legal relationship. Even where it is a family arrangement, for example, the landlord and tenant are family members or friends
  • In the absence of an intention to create a legal relationship, there will be no lease it will only be a licence
  • A lease can also be created orally or in writing, if it is for 3 years or less, it takes effect in possession, is obtained reasonably at the best rent and without payment of an initial premium or without paying any advance
  • A lease can be assigned to someone else
  • An equitable lease arises where a deed has not been created, either because the parties failed to comply with the correct formalities under s1 Law of Property (Miscellaneous Provisions) Act 1989, or they simply did not proceed to the deed stage and entered into a contract to grant a lease

Termination of Lease

A lease can be terminated by

  • Expiry of the time period (security of tenure/right to renew)
  • Notice (fixed term/periodic)
  • Surrender
  • Merger
  • Forfeiture (landlord’s right of entry)

Distinction between Leases and Licences

  • A lease provides/confers on the leaseholder:
  • A legal estate – proprietary interest
  • Capable of being assigned/transferred
  • Binding against purchaser/buyer of freehold
  • Security of tenure – cannot be terminated/revoked until term expires
  • Repairing obligations (of the landlord)
  • Standing in nuisance/trespass
  • A contractual licence provides or confers none of above stated rights

Disclaimer

While every effort has been made to ensure the accuracy of the information provided in this article, it does not constitute legal advice and cannot be relied upon as such. Each legal case and issue may have unique facts and circumstances, as a result legalally does not accept any responsibility for liabilities arising as a result of reliance upon the information provided. For further help and guidance, you can always rely on and seek advice from our experienced lawyers.

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