Leases — Creation and Characteristics — SQE1 FLK2 Land Law

A landlord lets a woman into a self-contained flat. The written agreement is headed licence agreement. It reserves to him the right to put another occupier in at any time. It calls her weekly payment a licence fee. The flat has one bedroom and could not sensibly be shared. He keeps a spare set of keys and has never used them, has never sent anyone else round, and provides no services at all. She has lived there alone for two years. Lease, or licence?

Lease. Every word of that document points one way, and the law goes the other. This is Leases, Creation and Characteristics, and the whole topic turns on one idea. What the parties call the arrangement does not decide what it is. Keep that flat in mind.

Here is the route. The three things that make a lease, and the one that does most of the work. Then the leading case, and the trick landlords tried after it. Then the four kinds of leasehold estate. Then formalities: when you need a deed, when you do not, and when you need the register. Then licences. And finally what happens when a lease runs out.

Start with why the question matters at all. A lease is an estate in land. A licence is a personal permission. The tenant's right binds the world, so if the landlord sells the freehold tomorrow, the tenant stays. The licensee's right binds only the person who granted it, so the buyer can turn him out. Same room. Same money. Completely different outcome.

So what makes a lease? Three things. Exclusive possession. A certain duration. And an arrangement that passes an interest in land rather than a personal permission. Rent is usual, and it is good evidence, but it is not essential. A lease at a peppercorn rent, or at no rent at all, is still a lease.

Exclusive possession is the one that does the work. It means the right to exclude everyone, including the landlord. And it is not the same as sole occupation. A tenant who lets her brother move in has not lost her tenancy. She has exercised it. The question is who controls who comes in. If the landlord decides that, it looks like a licence. If the occupier decides, it looks like a lease.

Which brings us to the case this topic is built on. A woman signed an agreement calling itself a licence, at a weekly payment not called rent, which said in terms that she had no exclusive possession. The House of Lords held she had a lease. That is Street v Mountford, from 1985.

And Lord Templeman put it in a sentence you will not forget. The manufacture of a five-pronged implement for manual digging results in a fork, even if the manufacturer insists that he intended to make a spade. It is the substance of the rights granted that decides, not the label.

After Street, landlords did the obvious thing. They wrote clauses denying exclusive possession into agreements where it plainly existed. The courts call those pretences, and disregard them. Back to our flat. Look at the clause letting the landlord move a stranger into a one-bedroom flat that could not sensibly be shared. He has never once used it. That is not a term of the bargain. Strip it out, and she has exclusive possession for a weekly period.

Now the contrast the exam loves. A couple apply together for a one-bedroom flat. The owner has each of them sign a separate document, on the same day, in identical terms, each headed licence. Each says the occupier has no right to any particular part, and that others may be moved in. They move in together and live there as their home. Joint tenancy, or two licences?

Joint tenancy. Documents signed together, on the same day, in the same terms, are read as one transaction, and the denials are pretences. That is Antoniades v Villiers. Now change the facts. Four unconnected people, four agreements, signed on different dates at different rents, each free to leave, and the owner picks the replacement when one goes. Same question.

Licences, all four. Nothing was signed together, nothing was interdependent, and no two of them ever had exclusive possession of anything jointly. That is AG Securities v Vaughan, decided with Antoniades. The difference is not the wording. It is whether the documents were one bargain or four.

And sometimes the landlord's control is real, not a pretence. Take a resident of a council hostel for vulnerable men. He can be moved from room to room, made to share, and visited by staff at any hour. He has no tenancy, because he has no right to any particular room. Nor does a guest whose room is cleaned and whose linen is changed. Nor does an employee required to live on the premises to do his job better.

Four kinds of leasehold estate. A fixed term runs for a specified period, six months, a year, 99 years, and ends automatically when it expires. A periodic tenancy runs from period to period until somebody gives notice. A tenancy at will can be ended by either side at any moment, and dies if either party dies. And a tenancy at sufferance is what a tenant has when he simply stays on without consent.

Formalities now, and this is the most mechanical part of the topic. The rule is s.52 of the Law of Property Act 1925: a conveyance is void to create a legal estate unless it is made by deed. So the default is that a legal lease needs a deed. The exception is s.54(2), and it has three conditions, every one of which must be met.

The term must not exceed three years. The lease must take effect in possession. And it must be at the best rent reasonably obtainable, without taking a fine. Miss any one of the three and you are back to needing a deed. So hold this one. A two-year lease at the full market rent, in a signed document recording every agreed term, but the term is not to start for another six months. It comes back at the quick check.

What happens when the deed is missing? Not necessarily nothing. There may be a contract for the lease, in signed writing containing all the agreed terms, as s.2 of the 1989 Act requires. If there is, equity treats as done that which ought to be done. You have an equitable lease for the full term. That is Walsh v Lonsdale, from 1882.

But an equitable lease comes with equity's strings attached. Specific performance is discretionary, and he who comes to equity must come with clean hands. A tenant in serious and persistent breach of the very agreement he wants enforced is unlikely to get it, and without it there is no equitable lease either. And where there is no written contract at all, equity has nothing to work on.

Which is why the informal letting so often fails. A trader takes a lock-up shop orally for two years, pays a £5,000 lump sum on moving in, and then a deliberately reduced rent of £300 a month. The lump sum is a fine, and the rent is not the best rent, so the parol exception is gone. Nothing is in writing, so equity is gone too. What he actually has is a monthly periodic tenancy, implied from his possession and the landlord's acceptance of the payments.

One more layer. Under LRA 2002 s.27, the grant of a lease for more than seven years is a registrable disposition, and it does not take effect at law until it is registered. So a long lease granted by deed but never registered is an equitable lease, not a legal one. Deed above three years. Register above seven.

Licences now, briefly, because you need to be able to name the three kinds. A bare licence is gratuitous permission, revocable at will, like permission to cross a field. A licence coupled with an interest is irrevocable until the interest is exhausted, like a right to come on and take timber you have bought. And a contractual licence is granted by contract, and binds only the grantor.

That last point matters. A contractual licence is not an interest in land, so a purchaser takes free of it, with notice or without. And one oddity worth a line. A body with no estate of its own can still grant exclusive possession, creating what the books call a Bruton tenancy. It binds the two of them, but not the freeholder, and it dies with the grantor's own right to occupy.

Finally, endings. A fixed term ends by effluxion of time, automatically, with no notice needed from anyone. If the tenant stays on, he is a tenant at sufferance, which is a polite way of saying trespasser. But if the landlord then accepts rent, a periodic tenancy may be implied, and he has bought himself a new tenancy he may not have wanted. Mesne profits, not rent, is the safer demand.

Two refinements on that. First, the period follows the way the rent is calculated, not the way it happens to be paid. An annual rent paid quarterly gives a yearly tenancy. Second, do not treat the inference as automatic. Where the tenant was let in while terms were still being negotiated, the answer is usually a tenancy at will instead. Accepting rent raises a periodic tenancy only, in the phrase, failing more.

And now the change that dates every older book on this topic. Since 1 May 2026 the Renters' Rights Act 2025 has abolished the assured shorthold tenancy, and s.21 of the Housing Act 1988 with it. That applies to existing tenancies as well as new ones. An assured tenancy can no longer be granted for a fixed term. They are all periodic, and tenancies that were assured shortholds became assured periodic tenancies.

So for a residential letting there is no fixed term left to expire, and holding over does not arise for it at all. A landlord who wants the flat back cannot hand the tenant a letter giving two months and no reason. He must serve a notice under s.8, rely on a ground in Schedule 2 to the Housing Act 1988, and if she does not go, obtain a court order. Everything we covered before this applies outside the residential codes.

A word on how SQE1 tests this. You will not be asked to recall a case name. You get a set of facts, five answers, and one job, which is to pick the best one. So learn the test, not the citations. The names in this episode are memory pegs, nothing more.

If you keep only three. Street v Mountford, for substance over label, and the fork that is not a spade. Antoniades v Villiers, for the pretence clause that gets struck out of the agreement. And Walsh v Lonsdale, for the lease that fails at law and survives in equity.

Three traps. One: notice on a yearly tenancy. The usual rule is that a periodic tenancy needs a full period's notice ending on a period boundary, but the yearly tenancy is the exception. It needs at least half a year's notice, expiring at the end of a completed year of the tenancy. A quarter's notice expiring mid-year is bad twice over.

Two: paying rent does not make you a tenant. Rent is evidence, not a requirement and not a guarantee. The employee who lives on site to do his job better pays every month and is still a licensee. What he lacks is exclusive possession, and no amount of rent supplies it.

Three: a sublease cannot outlive the lease it came out of. When a head lease ends by effluxion of time, any sublease carved out of it ends with it, however much of the subtenant's own term is left to run. The subtenant's remedy, if he has one, is against the person who granted it to him.

Quick check, and you were told to hold this one. A landlord and a woman sign a single written document for a two-year lease of a flat, at the full market rent. It records all the terms they have agreed, and it is not executed as a deed. The term is to begin six months later, when the present occupier moves out. Does it take effect as a legal lease?

Three candidate answers. One: yes, because the term is under three years and the agreement is in writing. Two: no, because the term does not begin immediately, so the grant had to be made by deed. Three: no, because the rent is reserved monthly rather than annually. Pause here if you want a moment.

The answer is two. The exception needs all three conditions, and this lease fails the second. A term that is not to begin for another six months does not take effect in possession, so a deed was required, and there is none. She is not left with nothing, though. It is a contract in signed writing, so she has an equitable lease.

Why the others fail. One takes the first condition and stops there. That is exactly the trap: three years or less is necessary, but not sufficient. Three invents a rule. How the rent is reserved bears on the period of an implied tenancy, not on whether a deed was needed.

Five things to take away. One: exclusive possession for a certain duration is a lease, and the label on the document is worth nothing. Two: a clause denying exclusive possession that nobody ever meant is a pretence, and the court strikes it out. Three: deed above three years, registration above seven, and the parol exception needs all three of its conditions.

Four: a lease that fails at law may still bind in equity, but only while equity would enforce the contract. Five: since 1 May 2026 there is no assured shorthold and no notice without a reason. And our woman in the one-bedroom flat has a weekly periodic tenancy. A spare set of keys he never used, and a clause he never meant, could not take it away from her. Next time, Leasehold Covenants and Enforceability.

Practise this topic with exam-style questions at sqe1prep.co.uk. This episode is for education and exam revision only, not legal advice, and we are not affiliated with or endorsed by the SRA or Kaplan.