An agreement for a lease is as good as a lease?

1.0.         INTRODUCTION

Once a lease agreement is in place in respect of premises, obligations and duties arise for which both the landlord and tenant are responsible. These obligations and duties are normally set out in a written lease agreement but where these have not been recorded in writing, common law practice would apply[1]. Originally, a lease agreement is a contract for the occupation of land and it was only is the sixtieth century that leases were recognized as “interest in land’ so that the right and duties of the parties were no longer merely contractual, but become glued to the land. However, much of the law of leases still contract law, with statutory additions controlling residential, business and agricultural tendencies[2]. In this question, focus is directed to a discussion as to whether an agreement for a lease is as good as a lease. In this case thus, we will start with explanation on the meaning of lease and lease agreement (agreement for a lease), then essentials for a lease will be displayed in a nutshell, in the main body; we will see circumstances where agreement for a lease is as good as a lease and vice versa, then conclusion will be the ultimatum.

2.0. MEANING OF TERMS

2.1. LEASE

Lease is defined under Section 2 of the Land Act[3] to mean, “A lease or sub lease, whether registered or unregistered of a right of occupancy and includes a short term lease and agreement to lease.”

In other words, a lease is a form of contract. To be valid, a lease must meet essentially the same requirements as any other contract.

2.1. LEASE AGREEMENT

The lease agreement is the agreement between landlord and tenant which involves certain obligations by both parties, the lease generally provides for the tenant from disturbance by the landlord or any other tenant. The landlord usually pays any taxes, assessments and interest on mortgages on the property. In most estates, landlord must comply with a warrant of habitability that requires them to maintain decent, safe and sanitary dwellings. If the landlord fails to comply, tenants may seek rent abetments that reflect the diminished value of the premises. For their part, tenants must use the premises only as specified on the lease, exercise reasonable care of the owner’s property and pay rent as agreed in the contract. The lease provides for the amount of money to be paid[4].

3.0. ESSENTIALS OF A VALID LEASE

Normally a lease must meet essentially the same requirements as any other contract: these include offer and acceptance. The parties must reach a mutual agreement on all the terms of the contract. Consideration; the lease must be supported by valid consideration. Rent; is the normal consideration given for the right to occupy the leased premises. However, the payment of Rent is not essential as long as consideration was granted in creating the lease itself, sometimes, for instance, this consideration is labor performed on the property. Because a lease is a contract, it is not subject to subsequent changes in the Rent or other terms unless these changes are in writing and executed in the same manner as the original lease. Capacity to contract the parties must have the legal capacity to contract. Legal objectives the objectives of the lease must be legal.[5]

4.0. MAIN BODY

·        WHERE AGREEMENT FOR A LEASE IS AS GOOD AS A LEASE

In adhering to this, it is important to note that an agreement for lease has equitable interest while a legal lease has a legal interest. These was shown in the case of  WALSH V. LONSDALE [6] where there was an equitable 7 years lease of a mill. Since the tenant had moved in and was paid a yearly rent, this was also an implied legal periodic yearly tenancy. The Judicature Act of 1873 and 1975, Supreme Court act 1981 ruled that,

 “In equity specific performance may be granted of an imperfect lease which is treated as a contract. Once it has been granted the parties are in the position of having a lease by deed. Before it is granted but when the parties are entitled to ask for it, ‘equity looks on that as done which ought to be done was legal lease.”

This maxim is reflected in the often cited statement that, “an agreement for a lease is as good as a legal lease”[7]

Therefore, where with rule of equity and with common law completed on the some matter the equitable rules should prevail. The landlord of mill, was therefore able to enforce the rent in advance term in the equitable 7 years lease against the tenant. In general an equitable lease can be converted into legal lease through the equitable remedy of specific performance but it should be remembered that while the behavior of the plaintiff is not relevant if she is seeking a legal remedy equitable remedies are discretionary and unlikely to be available if she has believed badly and does not come equity with clean hands

Further more, it is vital to note that there are two types of lease which are equitable lease and legal lease. A legal lease is a lease for any period greater than three years. It can only be created by deed; which is an instrument for right of land occupation. No deed is required at law for a lease taking effect in possession for a term not exceeding three years.

The term possession includes receipt of rent and profits from a sub tenancy.[8] On the other hand, when we talk of equitable lease; in this case if a lease is void at law, it may still be valid in equity provided it is for valuable consideration and is evidenced by an act of part performance. Equity treats an unenforceable legal lease as contract to create a lease and may grant specific performance of its terms. What is required is a written evidences of a contract, not necessary a complete written contract. The evidence must extend to at least parties, premises, duration of the lease, rent or other considerations and date of commencement together with every other material term. Evidence need not to be in any particular form and joinder of documents is possible.

Also, if a contract is unenforceable the equitable doctrine of part performance may still apply. It should be established that, the person seeking to enforce the contract has carried out some act which on the balance of probabilities was carried out because the contract was in existence. In STEADMAN vs. STEADMAN[9] the test of unequivocal referability was rejected in favor of the balance of probabilities test.

On the other hand taking possession of property is a good act of part performance but remaining in possession on expiry of a lease is not. It was originally held in CHAPRIONIERE vs. LAMBERT[10] that payment of money can not amount to part performance.

Nonetheless, equity treats an imperfect or unenforceable legal lease as a contract to which equity may grant specific performance, an agreement for a lease is similarly treated so that the remedy may equally be available. Before an agreement can be enforced final and complete, agreement must have been reached. This means the parties are beyond the stage of negotiation. An agreement subject to contract is not enforceable, though a provisional agreement until a full legalized agreement is signed as binding.[11]

Not only that, but also in equity specific performance be granted of an imperfect which is treated as a contract. Once it has been granted the parties are in the position of lease by deed. Before it is granted but when the parties are entitled to ask for it, “equity looks on that as done which ought to be done”, and all terms of the agreement are enforceable as if it was a legal lease. Thus, the maxim often cited statement that an agreement for a lease is as good as a lease.[12]

To summarize on that, the contention that “an agreement for a lease is as good as a lease” is to the effect that, where a person who has not yet attained a legal lease and is faced with inconveniences in the course of landlord and tenant relationship, he can be able to seek remedies in court. And the court in this case invokes the Doctrine of Equity to redress that. But it is essential that, the one alleging must come with clean hands.

·        WHERE AGREEMENT FOR A LEASE IS NOT AS GOOD AS A LEASE.

However, an agreement for lease is not good as legal lease for the following circumstances:-

Firstly, a contract is dependent on specific performance which is a discretionary remedy and may not be granted if, if, for instance a tenant is in breach of obligation as shown in the case of COSTWORTH vs. JONSON[13].

Secondly, a legal lease creates an estate enforceable against all third parties, whereas a contract is not enforceable against certain purchasers of a legal estate. An agreement is an estate contract, which, if created after 1925, is registrable as a land charge. If is not registered it is void against a purchaser of a legal estate for money or money’s worth.

Thirdly, the burdens of certain covenants do not pass on an assignment of an agreement for lease.

Fourthly, a contract is not “conveyance” for the purpose Land Provision Act of 1925, S. 62.

Also, the holder of an agreement can never claim to be bonafide purchaser for value of a legal estate with no notice of an equitable interest.[14]         

5.0. CONCLUSION

Therefore, it is now settled in our minds that, an agreement for a lease is also not as good as legal lease, bearing in mind the above points. Here it is of paramount importance to remember that, under strict application of the law, there is not equitable lease as enforceable per se. That is to say, just like the way it is in relationship between contracts and other agreement; that, all contracts are agreements, but not all agreements are contracts. So in our case is suffices to say that, all leases embody agreement for a lease, but not all agreements for leases are leases. However, in order to set a mechanism so that equitable leases may have legal redress, the courts of law accept equitable leases that basically are agreements to leases or imperfect leases, with the caution that, whoever comes to equity, must come with clean hands.

---

[1] http://www.answers.com 23/04/2009

[2] Green, K and Cursley J. Land law p.52

[3] Cap 113, R.E 2002

[4] En.wikipedia.org/wiki/lease_44k_  24/04/2009

[5] http://www.wiki.answers.org.    23/04/2009

[6] (1882) 21CHD 9d

[7] Howarth, W, Land Law in Nutshells, p. 26

[8] William Howorth (1987), Land Law in a nutshell, p. 25

[9] (1976) AC 536

[10] (1917)

[11] William Howorth (1987), Land Law in a nutshell, p. 25

[12] Ibid, at p 26

[13] (1886), p.26

[14] (1987) William Howarth, p 26