Leasehold, Creation of Leases - Essay Example

? Leasehold Introduction Leasehold is the right of an exclusive control over a property or land for a limited term at a given price, without transfer of ownership based on a lease contract. It is usually a fixed asset. The leaseholder owns the property, but not the land it stands on. A legal agreement (lease) is put in place with the freeholder. The agreement shows the number of years the leaseholder will own the property. When the lease ends, the ownership of the property is returned to the freeholder. The leaseholders are also referred to as tenants or lessees while the freeholders are also referred to as a property owner or lesser. Laws usually govern granting a lease and certain order is followed when creating them (Great Britain parliament, 2000). Different leases require different sorts of agreements. A lease has specific elements that must be put in place for it to be valid. It also has specific requirements for creation of a valid lease. The elements of a lease A lease has specific elements that weigh heavily on the contracts overall acceptability. These elements must be considered during creation of an agreement between the property owner and the tenant as stipulated by the law. Exclusive possession This is a very essential part of a lease .It forms the backbone of a lease and therefore without it, there can be no lease. Exclusive possession is that right of the leaseholder to utilize the property with exclusion of all the other individuals including the property owner (John, 2000). The occupier must have a right to exclusive possession to use the premises leased, though this should not be a conclusive proof that the leaseholder has a lease. If denied exclusive possession then the leaseholder is right to use the premises, do not amount to a lease. Exclusive possession gives the tenant the right to exclude everyone else including the property owner from the premises except on an agreed case. The lease may reserve the right for the property owner to enter the premises on certain occasions like inspecting the state of repair of property. Such a right is done at reasonable hours and manner. Lessees obligation to keep in repair during the term and leave in good repair is implied unless agreed otherwise as stated in Law of Property Act , NT ,s 117 (1) (c). Certain/specific term/period The start of a period in a lease must be clear. It should be me4ntioned in an agreement if not it will be deemed to commence immediately. In cases where an individual has an agreement for a future lease, then it is void unless clear at what date it is to start from an express term in the contract or by inference. A periodic tenancy stating that the property owner would not give notice to quit until when ready to redevelop the land is stipulated. Through this, the tenant has a sense of security and the property owner has ability to regain possession of the premises when needed. It is acceptable for a period of tenancy to restrict the property owners right to give notice unless for a specified purpose during a stated period. The maximum duration of a lessee must be certain. The law of property act provides that, a lease stated to take effect more than two years from date of agreement is void and any contract purporting to create such a term is void. It is not enough to specify a period. A beginning date and exact ending date must be stated. The time to vacate should also be clearly stated. Term less than that of a grantor An owner in fee simple can grant a lease of his premises for any term since the fee simple is effectively perpetual. A fee simple owner has the right to grant a lease to a tenant for many years like up to 9,000 years. There can be more than one term of years in one fee simple estate in a single piece of land. A tenant can grant a lease of the premises called a sublease to a subtenant .This can only happen if the sublease will last for a shorter period than the original lease from the property owner. The subtenant can also grant a further lease of the same premises called under lease to an under tenant on condition that the under lease takes a short period than the sublease. A sublease occurs when a tenant transfers part of agreement of tenancy with the property owner to another tenant. It is usually offered for duration less than that specified by the head lease. A purported sublease for a duration, which is equal to or in excess of the balance of the term, is at law an assignment of the lease regardless of the description by the parties involved. In a sublease, the subtenant is also granted exclusive possession all the premises granted (John, 2000). The subtenant pays rent to the head tenant. Section 81 of the Residential Tenant Act, provides that a tenant must not assign or sublet the premises without the written consent of the property owner. Any attempt without the consent of the property owner is considered invalid. Tenants who believe that a property owner is withholding the consent apply to the tribunal for a determination that it is being withheld unreasonably. This may be granted without the property owners consent(s 82). This can only be done before commencement of the subletting. If a tenant purports to sublet without the property owners consent (s 82).if a tenant purports to sublet without the landlords consent then they risk receiving a notice to vacate under 253 of the Residential Tenancy Act which is a 14 day notice period. Creation of leases A lease is created when a property owner makes an offer to another person and the tenant accepts the offer. Leases are governed by statutes and by common law (Nigel, 2007). They are subject to state laws .the offer must authorize the tenant to posses and utilize the premises for a certain specified period without gaining ownership. A lease term begins when the lessee gets a copy of the lease. It is usually delivered via a third party acting on behalf of the lessee. Leases usually have to be created by deed .However, some are created under section 54 (2) Law of Property Act 1925 which requires no writing. Such leases must be for a term not exceeding 3 years .the present law considers the following aspects for leases more than three years. If it is verbal, a lease is created at will only and cannot be enforced even in cases of equity. If it is in writing, it does not give the tenants legal estate in the lease. The equity will grant the tenant specific performance of the property owner’s agreement. If by deed, the tenant acquires the legal estate for the term created by the lease. A lease must always be under seal. The law of property act provides that a lease stated to take effect more than 21 years from date of creation is void and any contract purporting to create such a term is as well void. It is necessary to comply with the formalities when creating leases and agreements for a lease. A contract not made by deed should comply with section 54(2) of the law of property act for it to be valid. If a lease for three years and more is in writing but not sealed, it is termed void by law. However, it may be enforced in equity as an agreement for a lease. The leases dealing with commercial goods and services are regulated by statute strictly. The commercial lease laws govern the rights and responsibilities of lesser and lessees involving commercial goods. The property owner and tenant laws govern the leases of real estate. Commercial leases contain certain warranties requiring that all leased property be fit for its intended purpose. A lease should contain a consideration, which implies that the tenant must give something valuable to the property owner. It is usually viewed in terms of monetary value. Other things of value may also be given in return. The property owner should also deliver the premises to the tenant. A lease may be written or oral. There are certain types of property that must be in writing and signed by both parties involved. Some must be written, signed, and recorded in a registry of deeds. A lease can be terminated either by notice, by lapse of time, forfeiture, surrender or merger. A tenancy at will may be determined at any time by notice. The one for a fixed period ends at the expiration of that period without any notice. The lessee surrendering his lease to the property owner may end the lease. This may be done by either express surrender or surrender by operation of law. A lease generally contains a provision that if the lessee commits a breach, the lease can be terminated. If the lease contains a proviso for re-entry, the property owner can remove a tenant who commits a breach only if he commits the following breaches: Inability to pay rent, subletting the premises without the consent of property owner and bankruptcy of the tenant. The property owner has to serve a notice to the lessee stating the covenant breached. Conclusion Leases have several elements and specific ways to be created .There are laws that govern the property owner and the tenant when creating leases .all tenants are obliged to maintenance and repair of the property during the period of use unless agreed otherwise. A lease should include names of the parties, date of commencement, duration of agreement, description of property, a record of the agreement, use rights and responsibilities, principal covenants in the agreement rent consideration, arrangements for compensation, and dispute resolution procedure. References Great Britain parliament, (2000). Parliamentary papers, house of commons& command. HM Stationary Office. John, D. (2000). The language of real estate. Dearborn Real Estate. Nigel, H. (2007). Leasehold enfranchisement. Sweet & Maxwell. Read More