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22 Jan

PL-PRACTICE WEEK 9 LEASES 1

WEEK 9 — LEASES 1

  1. MEANING OF (AND PARTIES TO) A LEASE: Occurs where a person (called lessor/landord) grants exclusive use and possession[1] of his premises to another (called lessee/tenant) for a definite period[2]. May be with or without consideration called rent.

:: TYPES OF A LEASE: A lease may be classified;

  1. Based on purpose: under this we have residential, commercial, agricultural, industrial.
  2. Based on Tenure: Under this we have Tenancy at Will, Monthly, Quarterly, Half-yearly, Yearly and fixed tenancy which require one week’s, one month, 3 months and 6 months’ quite notice to be given respectively[3].
  3. Based on Mode of Creation: under this we have; an Oral Lease, Written Lease and lease Under Seal.

Oral/Parole: i.e. lease not in writing. Provided it is NOT for more than 3 years, must take effect in possession and reserve the best rent obtainable alongside exclusive possession (not premium or rack rent). Although difficulty may be encountered in proving it-Odutola v PaperSack Nig Ltd (2007). Section 79 PCL

Written Lease: more advisable as terms are easily ascertainable to be enforced or specific performance ordered. A written lease need not be under seal except it is for more than 3 years.

– Lease Under Seal: This is required for leases more than 3 years. i.e. it must be signed, sealed and delivered. See Section 77 PCL. Non-compliance would not be totally fatal by virtue of the equitable rule in Walsh v Lonsdale which seeks to still enforce agreements notwithstanding non-compliance with legal requirement.

:: FEATURES/ESSENTIAL ELEMENTS OF A LEASE:

  • Certainty of Parties: who must be capacitated legal persons-UBA v Tejumola and Sons Ltd.
  • Certainty of Property: as the parties must be in agreement in relation to the property which must have been precisely described-Okechukwu v Onuorah.
  • Certainty of duration/term: Must have a commencement and expiration date because a lease cannot last in perpetuity[4]UBA v Tejumola, Lace v Chantler. Note Bosha v Oji. There must be reversion.

– Exclusive Possession: being the right of the lessee to exclude other persons from the property including lessor. It appears that lodgers or boards are not in exclusive possession since servants and workers of the landlord can come in at any time to clean the rooms without restriction.

Rent; is NOT an essential element of a lease-African Petroleum v Owodunni.

Proper Creation; e.g. Leases above 3 years must be by deed check S17 PCL. However, the rule in Walsh v Lonsdale may step in to enforce an agreement to create a lease.

  1. DISTINGUISH A LEASE FROM A LICENCE, AND AN ASSIGNMENT: In construing a lease, courts look at the intention and substance of the agreement rather than the nomenclature-Ebenezer v Bell, Street v Mountford.
  • License: is a mere permission to do an act which would (but for the license/permission) have amounted to trespass. In license; no exclusive possession (thus no action in trespass against third parties), no interest transferred, no transmissibility/assignability, death terminates it, not entitled to statutory notices, no implied covenants.
  • ASSIGNMENT: Must be by deed, no reversionary/expiry date, Transfers proprietary and entire interest, only covenants that touch and concern the land in head lease would bind assignee.

Sub-lease: no direct relationship between head lessor and sub lessee.

Customary Tenancy: inures in perpetuity subject to good behaviour-Aghenghen v Waghoreghor-Abioye v Yakubu. Unlike lease which has a certain reversion/expiry date.

TYPES OF RENT: is consideration (money or money’s worth) paid by tenant for use landlord’s property. It is not compulsory-AP v Owodunni. Rent is payable in arrears except otherwise agreed by parties-GB Olivant v Alakija. It May be ground rent: paid on the land itself irrespective of development/improvement[5].

Rack/Economic rent: represents full value of property (land + improvement + development. Usually for shorter leases.

Premium: lump sum prohibited/regarded as a fine in most states[6] therefore landlords circumvent this by charging for many years in advance. The landlord should consider inflation (value of money can depreciate) and tax implications if the rent is collected for more than 5 years-S 4 & 3 ITMA and PITA respectively.

At common law lease is deemed renewed for same terms and rent once landlord collects rent after the lease has expired.

RENT REVIEW CLAUSE[7] (USES AND ESSENTIAL ELEMENTS): needs to be expressly provided for in the agreement (usually in reddendum) for the landlord to review rent to keep up with prevailing market rates and protect commercial interest. The clause should provide for –the method of initiating and time frame for review, calculation and dispute resolution procedure. Unilife Development Co Ltd v Adeshigbin

TENANCY LAW OF LAGOS 2011: applies to residential and business premises only. It excludes premises used by educational institutions for its staff and hospitals.

With both MC and HC having jurisdiction. (MC limit being 10 million). This law prohibits rent in advance (advance should be < 6 months for monthly tenant and < 1 year for yearly tenant) and prohibits arbitrary or unilateral increase in rent.

Landlord must issue receipt for payment (else 100,000 or 3 months imprisonment) and landlord must ensure tenant enjoys quiet possession and notify tenant before entry to inspect property.

ETHICAL ISSUES ARISING FROM THE ABOVE OUTCOMES

BOSAH V. OJI (2002) 6 NWLR (PT. 762) 137; OKECHUKWU V. ONUORAH (2000) 12 SCNJ146; AND TEJUMOLA & SONS V. UBA [1986] (PT.38) 815

 

[1] Where this is lacking, we may call it a license.

[2] Prudential Assurance Co v London Residuary Body No period may make it customary tenancy and where it is for the full duration of grantor’s interest, then it may be regarded as an assignment. Also absolute transfer may amount to an assignment.

[3] Note however that Fixed Tenancy does not require notice as it lapses upon effluxion of time.

[4] In this case, Tenancy “for the duration of the war” was held to be uncertain and the agreement could not qualify as a lease. Although in Bosah v Oji and Okechukwu v Onuorah the court noted that where the date is linked to an event (e.g. from the date of obtaining governor’s consent) then the agreement can still be a valid lease.

[5] Section 5 LUA empowers Governor to grant SRO and impose ground rent.

[6] For example S 4 RRPLL 2004.

[7] In Lagos, the right of landlord to increase rent is subject to the Court’s power of review and unreasonable increase can be challenged by tenant-See Section 37 TLL.

Isochukwu

Quite eccentric really

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