MODE OF CREATION OF LEASES

There are different modes of creating a lease depending on the intention of parties involved.

CHAMAN LAW FIRM

6/1/2022 2 min read

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MODE OF CREATION OF LEASES

A. Parol/Oral Lease

This is an agreement of mere words. Under the law, it is permissible as having of a lease at will. It must however have the following elements in order for it to be valid;

1. It must reserve the best rent obtainable (not premium or rack rent);

2. It must be for a period not exceeding three years; and

3. It must confer exclusive possession.

While parol/oral leases are permissible, they usually present difficulties in proving the essential terms agreed to by the parties; for a party alleging an oral agreement is duty bound to prove such an agreement to the hilt. Where there is a breach in oral agreement, the aggrieved party is only entitled to part performance.

B. Written Lease (Formal Lease)

This is a mere agreement in writing, and applicable to leases not exceeding three years. It is signed by the parties to it only, and binding on them as a contract and it is enforceable. The advantage of a lease in writing over oral lease is that a lease in writing is easily ascertainable and enforceable. Aggrieved parties are entitled to specific performance in addition to the remedy of part performance and there may be award of damages (if claim for specific performance fails). Part performance is where the plaintiff alters his position on the faith of the contract. He acquires an equity against the defendant which the court may enforce. Part performance is an exception to the Statute of Fraud 1677, which prohibits the enforcement of contract respecting lands that are not in writing.

C. Lease by Deed or Under Seal

It is mandatory and not conditional for a lease above three years to be by deed. It must be Signed, Sealed and Delivered. Under Section 3 of Statute Fraud Act of 1677; and Section 77(1) of Property and Conveyancing Law (PCL), a lease which is required to be in writing is void for the purpose of conveying or creating a legal estate unless made by deed.

In Anwasi v. Chabasaya, the Court held that a contract under seal is a written document, which is required to be signed as well as sealed by the party bound thereby and delivered by him, to or for the benefit of the person to whom the liability is incurred. However, by the rule in the old case of Walsh v. Lonsdale, an agreement to create a lease (with all the essential elements) will still operate as a lease, notwithstanding that it is not created under seal. This is based on the maxim that “equity looks at the intention of the parties and not the form” and “equity regards as done that which ought to be done.”

NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com

WRITTEN BY CHAMAN LAW FIRM TEAM

EMAIL: chamanlawfirm@gmail.com

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