LEASES

Question 1

What is a lease

Answer 1

This is a grant of right of exclusive possession in a property for a term of years in consideration of rent of money’s worth

Question 2

Who is a Guarantor

Answer 2

A person who undertakes to guarantee the due performance of the covenant and terms of the lease. This usually in a tri-parte lease

Question 3

Essential elements of a lease/ conditions for a valid lease?

Answer 3

1. Certainty of parties
2. Certainty of property
3. Certainty of term
4. Created in Due and Proper Form
5. Exclusive possession

Question 4

Differences between a Lease and an Assignment

Answer 4

1. Lease has reversionary interest; Assignment does not
2. Lease transfers only possessory rights; Assignment assigns proprietary rights
3. Parties are Lessor and Lessee; Parties are Assignor and Assignee
4. Lease can be created by a deed; Assignment must be created by deed
5. Lease is created by a Deed of Lease; Assignment is created by Deed of Assignment
6. Lease does not require investigations to prove title; Assignment requires investigation of title
7. All covenants in the head lease will bind parties to a lease; In Assignment, only covenants that touch and concern the land in the head-lease will bind the assignee

Question 5

Who is a Licensee?

Answer 5

S. 47 of Lagos Tenancy Law 2011 defines a licensee as a person who comes into occupation by the mere permission of another, without the creation of a landlord and tenant relationship and has no interest in the property

Question 6

Differences between a Lease and Licence

Answer 6

1. In a lease, parties are called Lessor and Lessee; in a licence parties are called licensor and licensee
2. Exclusive right is granted in lease but not in licence
3. The interest is transferrable in a lease but not in a licence
4. A lease is a grant of interest while a licence is a mere privilege
5. Lessee can bring an action of trespass; Licensee cannot
6. Lessee is entitled to statutory notices; Licensee is not entitled to statutory notices
7. In a license, the demised estate can survive the death of the parties. In a lease, the death of a grantor or licensee terminates the relationship.
8. There is transfer of interest in property in a lease. There is not in a licence

Question 7

Difference between Lease and Tenancy

Answer 7

1. A lease is grant of term of years for above 3 years; A Tenancy is for 3 years and below;
2. A lease is created by a deed; A tenancy is created by a tenancy agreement
3. A lease must be signed, sealed and delivered and tenancy agreement is by appending a signature without seal
4. A lease requires Governor’s consent; a tenancy does not
5. In a lease parties are called Lessor and Lessee; in a tenancy parties are called Landlord and tenant.

Question 8

What is Habendum

Answer 8

Habendum goes to the duration of the term. It refers to the term granted by the Landlord

Question 9

What is Reddendum

Answer 9

Also, known as rent clause. This is part of the lease that defines the amount of rent payable, how to pay rent, when the money is payable /due.

Question 10

What is commencing FROM

Answer 10

You start counting from the day after the first day of the commencement date. Ends on the anniversary of the lease e.g. a one year lease commencing from the 1st of January 2000 will end on the 1st of January 2001.

Question 11

What is commencing ON

Answer 11

You start counting from the day of the commencement date. This lease will end on the eve of the anniversary e.g. a one year lease commencing from the 1st of January 2000 will end on the 31st December 2000

Question 12

What areas are not covered by the Lagos Tenancy Law

Answer 12

Victoria Island
Ikoyi
Ikeja GRA
Apapa

The provision of the Conveyancing Act apply to these areas

Question 13

What ways can a lease be created?

Answer 13

Orally - if not exceeding 3 years
In writing - if not exceeding 3 years
By a deed
Acts of performance
Equitable lease under the rule in Walsh v Lonsdale

Question 14

Types of rent

Answer 14

1. Rack rent - Also economic rent, which refers to the rent paid to the lessor for use and possession of the premises and improvements and developments on the land
2. Ground rent - Paid to the Government for use and occupation on the bare ground not in consideration of any improvement thereon.
3. Premium - Sometimes called fine. It is a lump sum of money payable to lessor in consideration for a reduced rent. Usually used for a long leases.

Question 15

Factors to be considered in fixing or charging rent

Answer 15

1. Physical location of the property
2. Nature of the property
3. The use of the property
4. Tax implications
5. Inflation
6. Statutory provisions
7. The investment on the property

Question 16

What is the rent review clause?

Answer 16

This enables the lessor periodically review the rent and maximise profit. The purpose of the rent review clause is to enable the lessor to take advantage of capital appreciation on the real property/demised premises bearing in mind the fact of inflation. It enables the landlord to fluctuate the rent to according to realities.

Where no rent review clause, court will imply fair market or reasonable rent and this would always be a matter of evidence – See Unilife Dev. Co. LTD v Adeshigbin (2001).

Question 17

Contents of the rent review clause?

Answer 17

1. Period/ time frame when rent will be reviewed
2. Method of calculating the new rent
3. Method of initiating the review e.g. issuance of notice and duration of such notice
4. Procedure for resolving any issues concerning new rent - ADR clause.

Question 18

Types of Covenants in a lease

Answer 18

1. Usual covenant - These covenants that are usual by virtue of that relationship. They normally arise by virtue of that landlord-tenant relationship.
2. Implied covenant - These covenants can be left out of the deed because they are implied and imposed on the parties by the law.
3. Express covenant - These are expressly agreed by the parties and must be written down

The covenant will be included in the miscellaneous part of the deed

Question 19

Examples of implied covenant

Answer 19

Implied on the Lessee

1. Covenant to permit the lessor enter upon and view conditions of the premises
2. Covenant to pay rates and taxes
3. Covenant not to commit waste
4. Covenant to pay rent (Tenancy law of LAGOS)

Implied on the Lessor

1. Quiet enjoyment
2. Non-derogation of grant
3. Fitness for habitation

Question 20

Examples of usual covenant?

Answer 20

1. Quiet enjoyment
2. Covenant to pay rent
3. Fitness for habitation
4. Use of property in a tenantable manner

Question 21

What is user covenant on use/ user covenant?

Answer 21

It specifies what purpose or use the lessee is to put the premises to.
Where this covenant is omitted, the lessee may use the property is any legitimate manner. See Dawodu v Odulaja (1976)

Question 22

What is the consequence of having an overly restrictive covenant on use?

Answer 22

It may affect the market valuation of the property

Question 23

Draft user covenant on use/ user covenant

Answer 23

The lessee covenants to make use of the premises and to permit the premises to be used for residential purposes only

Question 24

What is the purpose of the covenant to pay rent (Reddendum)

Answer 24

To enforce the obligation of payment of rent

Question 25

What is the consequence of not including the rent clause

Answer 25

The lessor cannot enforce payment of rent if not expressly stated. However, payment of rent is an implied covenant in areas covered by Tenancy Law of Lagos State.

Question 26

What is the consequence of not including that rent would be paid in advance?

Answer 26

It would be paid in arrears

Question 27

Draft a covenant to pay rent

Answer 27

Yielding and paying the sum of N200,000 as reserved rent on the demised premises which shall be payable in advance and if not paid within 21 days after the month's notice in writing has been issued by the lessor, it shall be lawful for the lessor to re-enter upon the premises and the lease shall cease.

Question 28

What are some express covenants

Answer 28

``` Covenant to use Covenant to pay rent Covenant to pay rates, taxes and outgoings Covenant to insure Covenant on assignment Covenant to repair Option to renew (Covenant for renewal) Provision for forfeiture and re-entry ```

Question 29

What is the purpose of a covenant to pay rates, taxes and outgoings

Answer 29

It is to specify and identify who is responsible to pay the rates, taxes and outgoings.

Question 30

Consequence of absence of a covenant to pay rates, taxes and outgoings

Answer 30

Either party depending on the law. Usually, Usually the landlord pays for the non-recurrent rates while the tenant pays for the recurrent rates.

Question 31

Draft a covenant to pay rates, taxes and outgoings

Answer 31

The lessor/lessee covenants to pay all rates, taxes, charges, duties and other outgoings in respect of the demised property payable now or subsequently introduced whether payable by the occupier or the owner.

Question 32

Consequences of exclusion of covenant to repair

Answer 32

If there is no express covenant as to repair this covenant would be implied on the tenant by virtue of the implied covenant of the tenant to use and keep the property in a tenantable condition But, Generally, the landlord should be responsible for structural and external repairs while the tenant should be responsible for internal repairs. Also the law under the Tenancy law of Lagos State

Question 33

Draft a covenant to repair

Answer 33

The lessee covenants to keep the demised premises in good and tenantable condition and repair, reasonable wear and tear expected.

Question 34

What is the implication of not including a covenant on assignment

Answer 34

This is an express covenant. Cannot be implied. Where this provision is not made for it means the tenant can assign Inuwada v Bryne (1973) CCHCJ 59 HOWEVER, under the Tenancy Law of Lagos State, it is an implied covenant that the lessee shall not assign with the written consent of the lessor

Question 35

What is the purpose of a covenant on assignment

Answer 35

1) To protect the demised premises and prevent it from falling into wrong hands 2) it assists to ensure that undesirable elements are not allowed into the property 3) protect his reversionary interest

Question 36

Draft a covenant on assignment

Answer 36

The lessee covenants not to assign, sublet, charge or otherwise part with possession of the demised premises or any part of it without the prior written consent of the lessor, such consent not to be unreasonably withheld or delayed in the case of a reasonable and respectable person

Question 37

Who is a reasonable and respectable person

Answer 37

Person with good financial standing. Alakija v John Holt (1973)

Question 38

Grounds for refusal of consent to assign by lessor

Answer 38

♣ Personality of the proposed sub lessee (e.g. unemployed) ♣ The use to which the property will be put See Houlder Brothers & co v Gibbs (1925)

Question 39

What is the purpose of covenant to insure

Answer 39

To protect the reversionary interest of the lessor

Question 40

What are the contents of an insurance covenant

Answer 40

1. Who to insure? 2. The risks to be insured against 3. The insurance company 4. Amount of cover – the insurance premium payable 5. Application of insurance money

Question 41

Who is to insure?

Answer 41

Both the landlord and the tenant have insurable interest in the property. Under the Tenancy law of Lagos State, it is the Landlord

Question 42

What happens when the property is destroyed and the money is re-instated i.e. Application of Insurance money?

Answer 42

General Position – under the common law: Where the landlord insures the tenant does not have a right to compel the landlord to use the money to re-instate. Under common law where the property is destroyed the tenant is still bound to pay rent - Leeds v Cheetham (1827). Same with if the tenant insures in his own name and in the absence of any provision for reinstatement. HOWEVER, where the tenant insures or reimburses the landlord due to a covenant requiring him to, he can compel the landlord to use the money towards re-instatement of the property - Munford Hotels ltd v Wheeler (1964) Ch 117 NOTE: s 66 (1) and (2) of the Insurance Act LFN 2004 has modified this in relation to damages by FIRE only, an interested party can by means of specific performance compel the landlord to apply that the money be used towards re-instatement of the property.

Question 43

Purpose of the option to renew?

Answer 43

Grants maximum terms of stay to the lessee

Question 44

What is the consequence of not having an option to renew clause?

Answer 44

1. If it's not there all the terms and condition of the existing lease would be used for the new lease 2. If it's not there the issue of renewal would not arise as such the lessee would not be entitled to a new lease

Question 45

Draft an option to renew clause

Answer 45

The landlord shall on the written request of the tenant made 3 months before the expiration of the term hereby created, grant to the tenant the lease of the demised premises for another term of 3 years from the expiration of the term hereby granted inclusive of rent and with an option to renew (at a rent to be agreed and containing all the terms and conditions of this lease except the option to renew)

Question 46

Differences between Rent Review and Option to Renew

Answer 46

1. Rent review clause goes to the amount of rent that is paid; Option to renew goes to the term/ duration of the periodic renewal in the habendum 2. Rent review takes place whenever before the term expires; Option to renew is to the effect that at the end of the current lease

Question 47

What is the purpose of a provision for forfeiture and re-entry

Answer 47

It operates to bring a lease to an end at an earlier time than the expiry date agreed upon by the parties

Question 48

Draft a provision for forfeiture and re-entry

Answer 48

PROVIDED ALWAYS that if the lessee commits a breach of the terms of the covenant, it shall be lawful for the lessor to re-enter and immediately the lease shall cease

Question 49

What covenants are implied when a lessor leases in his capacity as a beneficial owner

Answer 49

1. Good right to convey 2. Quiet enjoyment 3. Valid and subsisting lease 4. Further assurances 5. Free from encumbrances

Question 50

How may a lease be determined

Answer 50

``` ♣ By expiration ♣ By notice to quit ♣ By forfeiture – this must be expressly provided for in the lease agreement ♣ By surrender ♣ By merger ```

Question 51

Remedies available to a lessor

Answer 51

♣ Specific performance ♣ Damages ♣ Forfeiture ♣ Re-entry