LAND LAW 2.2. CREATION OF LEASES
Who can create or take a lease?
– The owner of a right of occupancy.
– A tenant: (not a tenant at will or sufferance) can create a tenancy of a lesser duration.A donee of Power of Attorney: not more that the authorized period else surplus be void.
– A person in loco parentis creates on behalf of an infant. See Section 14 Rivers Law. At common law, a lease created by an infant is voidable at his instance within a reasonable time upon attaining majority.
– Persons of Unsound Mind can create a lease provided the lessee was ignorant of his insanity at the time of creating the lease-Molton V Camroux. Under the Law of Landlord and Tenant, A person of unsound mind can be granted a lease but cannot be sued unless the tenancy/lease is a necessary for him. See Section 22 Rivers State Law.
– Married women by virtue of the Married Women’s Act 1882 can validly grant and take a lease.
– Corporations may grant a lease under its corporate seal. If the lease is not under seal but the tenant enters and pays rent, he holds the tenancy on the terms of the instrument-Ecclesiastical Commissioners V Meral.
– A company registered under the CAMA can create or take a lease as authorized by its memorandum of association-Pan Asian African Co Ltd V Nicon. Where lease is taken in an unauthorised manner, it would not be void but may form the basis for an application for injunction by third parties.
– Members of a partnership may jointly create or take a lease provided it is NOT done in the business name. Else void because a business name does not qualify as a juristic person in law.
– Associations: Registered trustees of an association under the CAMA can create or take a lease on behalf of the association.
– Trustees holding land on trust for sale can create leases-Settled Lands Act 1882, Section 34 PCL 1959.
How can a lease be created?
The relationship of landlord and tenant is created by a lease OR an agreement for a lease in law and equity respectively. There is no hard and fast rule as regards formalities provided that a lease exceeding 3 years must be created in writing (by deed)-Section 3 Statutes of Frauds. Section 79 PCL. Note however that under Section 3 of the Lagos state Tenancy Law, a tenancy agreement may be made orally or in writing.
However, equity can still enforce an oral lease which is above 3 years in the interest of justice. Especially if the plaintiff has changed his position in furtherance of the contract and would be unconscionable for the defendant to take undue advantage of statute-Ekpanya V Akpan. For example; Payment of rent and entry into possession with the permission of the lessor has been held to be sufficient act of performance.
Again, the rule in Walsh V Lonsdale may kick in to enforce an agreement to create a lease. Notwithstanding that the lease has not actually been created. This is couched on the rationale that equity regards that which ought to be done as done. Therefore, equity regards an agreement to create a lease as if the lease has actually been created. Jessel MR noted that specific performance can be ordered to compel the actual creation and completion of the lease. In the Walsh’s case, the plaintiff was estopped from circumventing rent payment on the ground that the lease of 7 years was not created by deed. This rule may however be inapplicable where:
- It would produce and unjust/inequitable result: In Coatsworth V Johnson, the order was not granted to the tenant because he had committed a breach of the agreed covenant to cultivate the farm properly.
- Where certain easements exists.
- It relates to a third party. In essence, the rule in Walsh V Lonsdale shall only apply to parties to the agreement. A third party with no privity in the agreement cannot be brought within its ambit-Innih V Ferado Agro Consortium.
- Where a bona fide purchaser has acquired the legal estate for value and without notice of the existing agreement.
Where the agreement to create a lease is breached, Damages, specific performance or both can be awarded for non-performance. Similar provisions can be found in the states where the law of landlord and tenant exists.
This part on documentation is not so necessary for exam purposes. Furthermore, it would be better understood if you have a look at a specimen agreement.
It is advisable for the agreement to be in writing. A lease/tenancy agreement usually contains the following:
- Commencement date usually followed by the date it is made.
- Description of the parties: who must be juristic persons with capacity-Idowu V Williams.
- Recitals: It shows that requisite consent has been obtained. Such may be needed where the covenant prohibits a tenant/lessee from granting a sublease without the consent of the lessor.
- Testatum: shows what the parties have agreed to do (operative words) and a precise and reasonable description of the subject matter of the demise (parcel clause).
- Habendum: specifies the quantity, quality, duration and commencement of the term. Note that actual possession of the demised property is no longer a condition precedent to the creation of a legal estate in states covered by the PCL and the various states where the law of landlord and tenant applies.
- Reddendum: defines the amount of rent payable. A rent review clause should be inserted if the lessor is desirous of reviewing rent in the future. It must comply with the provisions of the applicable rent control statute.
- Covenants: implied by the law and those expressly agreed upon by the parties. E.g quiet enjoyment, etc.
- Testimonium Clause: Links the parties with the terms of the lease.
- Schedule: contains details of facts relating to the demised property.
- Capable and mature witness should also attest to the agreement.
The relevant stamp duties must be paid-See Section 68 Stamp Duties Act.
A tenancy agreement does not require governor’s consent under Section 21 and 22 of the LUA except it is for a duration more than 3 years (In Lagos State, it is 5 years). In such case, consent is necessary and Section 26 LUA invalidates non-conforming leases. A mere agreement to create a lease does not require governor’s consent-Sanni V Ogungbe. It is the lease agreement itself (of more than 3 years) that does. Non-compliance (by not obtaining governor’s consent) can invalidate the lease-Savanah Bank V Ajiloh. (However some cases (like Ugochukwu V Cooperative bank, Hamidu b Sahar Ventures Ltd) have applied the ex turpi causa non oritur actio rule to dispense with the consent requirement in the interest of justice. However, the more recent case of UBN V Ayodare takes us back to the Savannah Bank V Ajiloh era by requiring that consent MUST be validly obtained where required).
Note: Technically speaking; a “lease” creates a term of more than 3 years while a “tenancy” creates a term less than three years-Hamidu V Sahar Ventures Ltd.
A lease (ie more than 3 years) must be registered. See Section 2 Land Registration Law else it would be inadmissible as evidence. Where the tenant (of an unregistered lease) pays rent and assumes possession of the property, his interest is equitable and inferior to that of a subsequent bonafide purchaser for value without notice of the legal estate who registers his-Okoye V Dumez.