Understanding the Dual Nature of Leases

Question 1

A lease is created as a contract between the landlord and tenant with the former granting

exclusive possession of property for a defined period of time, in exchange of a specified rent. The dual nature of the lease is that is creates both contractual and proprietary interests for the tenant. Leases therefore have a dual nature and are characterised as something of a hybrid of contract and estate in land. This was the understanding of the nature of a lease until the decision in Bruton v London & Quadrant Housing Trust, decided that the ‘hybrid’ lease was a legal reality. The court’s decision has disregarded the dual nature of the lease as understood for a long time and created a new kind of lease.

In Bruton, the agreement between a charitable organisation and the local authority granted a licence by the latter to use a block of flats for temporary housing accommodation for homeless persons. No proprietary interest or estate was granted to the charitable organisation. The organisation further entered into an agreement termed as a licence with Bruton who later claimed tenancy rights in the property as a lessee. The House of Lords held in his favour based on the characteristics of tenancy as explained by Lord Templeman in Street v Mountford, which include exclusive possession for a fixed or periodic term in consideration of a premium or periodical payments. In so doing, Lord Hoffman also defined lease or tenancy in terms of a relationship between two parties designated landlord and tenant and not concerned with whether the agreement creates an estate or other proprietary interest. This denies the duality of a lease as creating both contractual as well as proprietary interests and instead emphasises only on the contractual nature of the interest. Lord Hoffman noted that agreement is a lease which creates the proprietary interest and that it is not appropriate to assess whether an agreement is a lease depending on whether such agreement creates a proprietary interest. Clearly, Lord Hoffman diverges from the established understanding of what a lease means in its dual character. Not only that, the House of Lords further goes on to construct a hybrid within a hybrid by saying that lease is part contract and part property. The problem with this approach and why it will likely not provide clarity in future is that the court has decided to allow an agreement with the occupant to create proprietary interest in the property when the owner did not have the power to grant a lease. The agreement was allowed to create a lease without creating property relationship and while binding third parties. When a lease is defined in Law Property Act 1925, Section 52 as a proprietary right, it can be argued that Lord Templeman’s analysis that there is no need for the agreement to create a proprietary right in order for it to be a lease is not in line with the statutory law as well as the established understanding on the law of lease.

Question 3

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1. Mark Pawlowski, and James P. Brown, ‘Bruton: a new species of tenancy’ (2000) 4(6) Landlord and Tenant Law Review 119.
2. Bruton v London & Quadrant Housing Trust [1999] UKHL 26.
3. Street v Mountford [1985] UKHL 4.
4. Bruton v London & Quadrant Housing Trust [1999] UKHL 26.
5. Edward Burn and Ronald Harling Maudsley, Maudsley and Burn's Land Law: Cases and Materials (OUP 2009)
6. Ibid.
7. Ibid.

The Protection from Eviction Act 1977 was enacted to add to the common law protections that are given to the tenant against their unlawful eviction and harassment in connection with the property. The law does not allow the landlord to evict the tenant the property without the order of the court. Under Section 3, tenant is protected against forceful eviction without a court order. Section 5 provides that tenants (both lease or a licence), are required to be given four weeks’ notice of eviction. Unlawful eviction of persons from the properties is an offence under Section 1(2) of the Act. Furthermore, Housing Act 1988, Section 27 allows damages for unlawful eviction.

With these protections under the law, the question still arises as to whether the law on unlawful eviction and harassment places adequate burden on a landlord or whether the landlord is protected unless he has behaved ‘in cynical disregard’ of the tenant’s rights. It can be argued that the protection offered to tenant in such cases is to be seen vis a vis the nature of their occupancy and based on this, the landlord may be given less burden if the tenancy is of the nature that does not create long term interests. Generally, fixed tenancies cannot be disrupted unlawfully and the landlord has greater burden to establish some ground for eviction in the Section 21 notice. The cases discussed below illustrate this point.

In Tagro v. Cafane, the tenant of the property was locked out by the landlord who also changed the locks to prevent her entry into the property. In a suit for damages, she was awarded damages against the landlord for her eviction in an unlawful manner. However, this case does show the landlord behaving in a manner that can be described as cynical disregard for the rights of the tenant. In Mayor and Burgesses of the London Borough of Lambeth v Loveridge, Mr Loveridge was a council tenant on a visit to Ghana and in his absence, the Lambeth Borough Council forced entry to his flat and let it to a new tenant on the fears that he had passed away. The Supreme Court decided that as Mr Loveridge’s rights of occupation were always vulnerable to being downgraded on a sale to a private landlord, therefore, he did not have the right to a higher amount of compensation for the unlawful eviction. In this case, we can see the landlord being given more flexibility in determining burden. In R (on the application of ZH and CN) v London Borough of Newham, the Supreme Court decided that the local housing authorities are not required to apply for possession orders where the occupant has temporary accommodation pending a homelessness review decision. Thus, in the case where the tenancy was a temporary accommodation the burden on the landlord may be said to drop down to almost nil because even the possession orders did not have to be taken in this case.

In the case of harassment, the tenant is not just required to establish the acts that amount to harassment but also the intention, or the reasonable cause to believe.

Question 4

The term “enfranchisement rights” comprises of two specific rights that lessees have in the leased property: first, they can purchase the freehold of their property; second, they may choose to obtain an extended lease. In order to obtain these rights, leaseholders have to meet

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8. Edward Hector Burn, Geoffrey Chevalier Cheshire and John Cartwright, Cheshire and Burn's Modern Law of Real Property (OUP 2017) 349.
9. Tagro v. Cafane[1991] 2 All ER 235.
10. Mayor and Burgesses of the London Borough of Lambeth v Loveridge [2013] EWCA 494.
11. R (on the application of ZH and CN) v London Borough of Newham and others [2014] UKSC 62.

certain qualifying criteria. There is a criticism of this existing regime of enfranchisement in that it is thought to be complicated, confusing and convoluted. The process is thought to be lengthy, costly and confusing, which leads to at times uncertain and arbitrary outcomes

The Leasehold Reform Act 1967 sets out the criteria for the application of the enfranchisement rights. However, there are a number of other legislations that also set out the criteria for enfranchisement, leading to a situation where the regime of enfranchisement is contained in a number of laws. These include Leasehold Reform, Housing and Urban Development Act 1993 which allows enfranchisement of a qualifying tenant of a flat; Law of Property Act 1925, which applied to long leases; the Landlord and Tenant Act 1987, which applies in the specific situation where the at least two flats are held by qualifying tenants; and the Housing Act 1980, which relates to a secure tenant of a house where the freeholder is the council.

The relevant provisions are scattered across several statutes and subject to many exceptions, provisos and qualifications. The criteria can also be difficult to apply in practice.

Specific problems that may be associated with the enfranchisement regime are the difficulties associated with finding historic rateable values, the need for leaseholders to satisfy the “low rent test, and uncertainty on definition of certain terms like “house”. For instance, the Supreme Court defined house for the purpose of LRA 1967 as a place to live and not concerned with an architectural feature. This is a very broad definition of the term house and it is not clear if this will relate only to LRA 1967 or will also inform the assessment of criteria under other legislations. Indeed, the court itself has noted that the term house can be interpreted with a degree of flexibility. Because of these problems, the leaseholders seeking to enfranchise, may face hurdles and find that the regime is difficult for them to navigate. Discover additional insights on Beneficial Interest in Property by navigating to our other resources hub.



In Freehold Properties 250 Ltd v Field, the Court considered whether the right in the LRA 1967 to enfranchise a long leasehold applied to a lease where only part of the house was demised. The court held that only the tenant “of substantially the whole of a leasehold” can have the right to enfranchisement. While this allows the avoidance of situation where freehold of only part of the house is transferred, it also may create a situation where landlords start to reserve part of the dwelling in order to frustrate the enfranchisement claims of tenants in future. This case exemplifies the problems associated with the regime as it is today. Due to this, there have been calls for reform in the regime.

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12. Day and another v Hosebay Ltd; Howard de Walden Estates Ltd v Lexgorge Ltd [2012] UKSC 41.
13. Grosvenor Estates Ltd v Prospect Estates Ltd [2008] EWCA Civ 1281.
14. Freehold Properties 250 Ltd v Field and others [2020] EWCH 792 (Ch).
15. Law Commission, Leasehold enfranchisement: A summary of proposed solutions for leaseholders of houses (OGL 2018).