Case Analysis Example: Lease Agreements

Estate in Land (Freehold and Leasehold):

As had been mentioned before, estate in land exists in two forms: freehold or leasehold (leases). The term freehold refers to the ownership of land indefinitely granted through inheritance or any other legal means. The major forms of freehold estates can be exemplified by the fee simple or absolute proprietorship.

According to Blumberg, one of the most respectable law professors who wrote a number of books on property law, a lease refers to the creation of an agreement by the signing of a lease agreement between a grantor and a grantee that is similar to that of a landlord and a tenant. The leasehold will then denote the transfer of certain rights in form of secondary interests derived from the use of the land. The terms of agreement in a lease must have the certainty of the period of time agreed between the two parties, which could either be periodic or perpetually renewable. In a lease agreement, the involvement of the owner (landlord) in activities within the place is an issue raised under the concept of exclusive possession. This refers to the right of the lessee to exclude anybody from using the land, which should be differentiated with the provisions under a license. This is best shown in the case of Street vs. Mountford (1985).

Case Analysis: Kay v Lambeth London Borough Council [2009] 2 AC 465.

Facts of the case: The Lambeth Council was planning to demolish properties that had been put under a trust to redevelop the properties on behalf of the council. The houses would then be offered to homeless persons with the implication that the occupiers will have been granted licenses. This agreement was replaced with a lease contract that allowed the authority to terminate by choice of a written notice.

Issue: Were the leases enforceable against the fee simple owner?

Decision: It was held that the leases were not enforceable since the agreement lacked a proprietary interest upon which enforceability could be granted. This means that the lease did not bind the lessor to any obligations.

Types of Leases.

The different types of lease agreements are based on the specifications made on the duration of stay. For instance, a fixed lease is whereby the commencement and termination dates are expressly stated under the agreement, which will be void upon the expiry of the agreed period. When this period is exceeded without the landlords consent, the lease becomes a lease at sufferance operated under statutory laws. The tenant could be forced to pay rent on the exceeded period, however, the landlord retains the right to eject the lessee without notice. On a wider aspect, the categories can be divided into two: residential (personal use) tenancies or commercial tenancies which are used by business firms in the performance of a particular business process or service provision.

Obligations of the Parties: Duties of the Lessor/ Landlord.

Upon the agreement being made between the two parties, statutory provisions provide for both parties to uphold certain obligations which should be considered a breach if not met by either party. In an article published with the Journal of Corporate Real Estate, St Lawrence expounds on the obligations of the lessor, he/she is expected to always act in consistency with the agreement made to make sure the premises are fit for the purposes agreed with the lessee. The landlord is expected to provide serene environment as expected by the tenant and avoid any unlawful interruption. The landlord reserves the right to ensure repairs are handled and any damages suffered by the lessee due to the lessors negligence are adjusted from the agreed rent.

Duties of the Lessee/Tenant:

On the other hand, the lessee is also expected to uphold certain obligations as provided under statutory provisions. For instance, it is obviously expected that the rent agreed is paid within the stipulated time-frame provided under the agreement. Additionally, any rates and taxes expected by the government from the use of the land is obligated to be paid by the lessee. Unless agreed with the grantor, the lessee should not transfer his lease agreement to a third party without a written permission from the grantor. Any breaches or damages caused to the property arising from the lessees own negligence shall be paid for by the lessee, who is also expected to not erect any permanent fixtures not provided for under law. Some of the allowed provisions for new fixtures include agricultural structures.

To provide further clarification on the issue of obligations for parties in a lease agreement, a case study of Good Harvest Partnership LLP v Centaur Services Ltd explains the role of a tenants guarantor being limited to guaranteeing a new assignee the lease agreement.

Case Study: Good Harvest Partnership LLP v Centaur Services Ltd [2010] EWHC 330

In this case, a lease agreement between a landlord and his tenant as provided for in the Landlord and Tenant Act 1995 does not require a third party that had guaranteed to pay for the tenants obligations to extend the same guarantee to another assignee of the same lease agreement.

Facts of the Case: An agreement between Chiron Ltd and Centaur Services Ltd that during the assigning of the lease to a tenant, the two parties would be required to sign an Authorized Guarantee Agreement (AGA). As such, when Good Harvest leased the property but failed to pay rent, Chiron Ltd duly brought a case before the court to recover their debt from Centaur Ltd.

Decision: It was held that Centaur Ltd was not liable to pay for the deferred payments as the AGA was unenforceable under the provisions of the Act. The role played by Centaur as a guarantee was considered to complete after the tenant had been assigned the lease. This was to be considered true for agreements whereby the guarantor was expected to provide guarantees for successive tenants (impossible by law).

Termination of Leases:

The common end of various leases is the expiry of the agreed period between the landlord and the lessee. However, there exists special circumstances as provided for under the Landlord and Tenants Act 1995 which provide for applicable solutions to avoid discrepancies for either parties. For instance, the lessee could decide to surrender the agreement and return the keys back to the owner. However, in this situation both parties are still considered liable to carry out their obligations as provided for under the lease signed. Illegal occupation after expiry of agreed time or illegal transfer will bring a lease agreement to its end, with the landlord allowed to apply for a court order to evict. Situations whereby the tenant fails to uphold his obligations such breaching or damage to the landlords property without agreeing to repair the damages, then the landlord has the right to terminate the lease agreement. Mutual agreement and forfeiture are also allowed as legal means to terminating a lease agreement.

Law of Contracts

Introduction.

The second part of this discursive essay looks to analyze the intricacies of contract laws and real estate. The aforementioned real estate (property) transactions that either involve sale, exchange, or leasing to a third party involves the signing of a legal contract. The contract signing operates the same conditions that stipulate the legal conditions that a contract is held valid. Per se, this section will look to expound on the different concepts that pertain to the law of contracts, from the formation of a legal contract, different classifications, what entails a breach of a contract and the remedies, and finally the termination of a contract. This evaluation will look to analyze the different terms in these distinct scenarios based on precedence set by past court cases, Acts of Parliament and other statutory instruments to explain the various aspects.

Legal Status of Real Estate Contracts:

The two defining characteristics of a legal contract relate to the validity and enforceability that a court of law will use to resolve differences among the agreed parties. In the United Kingdom, the law courts have options to this feature: valid, valid but unenforceable, void, and voidable. Valid contracts refer to agreements made by both parties which satisfy every requirements of a valid contract. Statutory requirements for a valid contract include the need for both parties to be legitimately competent individuals by virtue of legal age, mental capacity and authentic authority to enter into a contract. As in the case of Millman v. Ellis , a valid contract will also have fulfilled the need for mutual consent, a valuable consideration being offered as compensation, and both parties intentions should be within the legal boundaries. If a contracts fails to meet any of these conditions, then it shall be considered to be void. This should be differentiated from a voidable contract, which arises when one of the parties in the agreement was in some type of disability which gives him right to rescission. Though a voidable contract could be viewed as valid, only the disabled party could disaffirm the contract or decide to continue with the performance of his obligation which will validate the contract.

Real estate contracts differ in stipulations depending on the statute of limitations that they operate under. For example, it is common for lease contracts that are expected to last for a period of one year or less to be considered valid if conducted orally between the lessor and the lessee. However, for contracts extending beyond the one year period, the contract should always be in writing, contain the signatures for both parties, and a legal description explaining the property being transacted. The statue of frauds require that real estate contracts should be in writing to be considered enforceable, however, if the said actions in the agreement have been executed, then validity is assumed.