The Rent Review Specialist
Asset Management
Landlord and Tenant Relationship
The relationship of landlord and tenant may be described as the relationship which exists between the parties to a demise and between their respective assigns. The relation is one of tenure, and although in former times it existed between freeholders, where the owner of a freehold granted there out a lesser estate of freehold (such as an estate for life), in practice at the present day the relationship of landlord and tenant arises where the owner of an estate in land grants to another an estate less than freehold and less than he himself possesses in the land. It is because the relationship is one of tenure that particular incidents of that tenure, although the subject in the first place of a contract between the original parties, may become annexed to their respective estates so as to bind all who come into possession of those estates.
The party to whom the lease is granted is called the “lessee” or “tenant”, and the party by whom the lease is granted is called the “lessor” or “landlord”. The person in whom a lease is for the time being vested is also known as a “leaseholder”, and the person entitled for the time being to the reversion thereon as a “reversioner”. Other persons beside the landlord and the tenant may be party to a lease. It is common in long leases of residential flats for a management company to be party to the lease for the purpose of covenanting to perform certain functions and services, and to collect a service or maintenance charge, or for a trustee to be a party to a lease for the purpose of applying funds collected from the lessees towards the maintenance and repair of property. Equally a surety or guarantor may be a party to a lease in order to guarantee performance of the tenant’s obligations.
Property, in the context of buildings and land, is under the heading of 'real estate'. Real estate is a legal term that encompasses land, improvements to the land, such as buildings, fences, wells and other site improvements that are immovable and fixed in location.
The ownership of 'real property’ in England and Wales is enshrined in common law, equity and statute. As a monarchy, ownership is based upon hierarchy. The 'Crown' has the right and duty to determine the legal owner of the land, and the duty is administered by Her Majesty's Land Registry, a government agency whose task is to keep title records. Property transactions are almost always in writing and the title deeds (records) include information about the owner, charges, restrictive covenants, and so on.
The ultimate title is the freehold, which is ownership for an indefinite period of time. Below the freeholder is the leaseholder. Any number of leaseholders can be created but a leaseholder cannot grant an underlease for a longer period than the term of its own lease.
There is no practical distinction between landlord, lessor and owner, assuming the owner is also the landlord, or between tenants, lessee and occupiers, assuming the tenant is not the owner-occupier: describing landlords as 'owners' and tenants as 'occupiers' reflects a desire to get away from feudalism. Similarly, it is open to discussion nowadays whether in the context of the landlord and tenant relationship a landlord ought to be considered the more dominant party, because many tenants regard landlords as suppliers.
The shop property market comprises freeholders and leaseholder owner-occupiers, landlords and 'tenants'. (I've put 'tenants' because here I am using the terminology loosely to include licences. There are important differences in law and practice between tenancies and licences.) Where there are intermediate interests between freeholder and occupational tenant, the in-between respective landlords would be defined as 'superior landlord' and landlord or lessor.
Frequently in leases, the landlord is described as 'lessor' or 'lessors' - the plural is sometimes used even though there may be only one party - and the tenant as 'lessee' or 'lessees'. Also, when the landlord is the officers of an administrative body, for example the "Mayor and Burgesses of..." the landlord could be described as the "council" ; and with railway leases, the landlord is often described as "the Board". Although for some aspects of a tenancy the correct description is necessary, in this section and unless otherwise stated, I shall stick to landlord, tenant, and tenancy.
The party to whom the lease is granted is called the “lessee” or “tenant”, and the party by whom the lease is granted is called the “lessor” or “landlord”. The person in whom a lease is for the time being vested is also known as a “leaseholder”, and the person entitled for the time being to the reversion thereon as a “reversioner”. Other persons beside the landlord and the tenant may be party to a lease. It is common in long leases of residential flats for a management company to be party to the lease for the purpose of covenanting to perform certain functions and services, and to collect a service or maintenance charge, or for a trustee to be a party to a lease for the purpose of applying funds collected from the lessees towards the maintenance and repair of property. Equally a surety or guarantor may be a party to a lease in order to guarantee performance of the tenant’s obligations.
Property, in the context of buildings and land, is under the heading of 'real estate'. Real estate is a legal term that encompasses land, improvements to the land, such as buildings, fences, wells and other site improvements that are immovable and fixed in location.
The ownership of 'real property’ in England and Wales is enshrined in common law, equity and statute. As a monarchy, ownership is based upon hierarchy. The 'Crown' has the right and duty to determine the legal owner of the land, and the duty is administered by Her Majesty's Land Registry, a government agency whose task is to keep title records. Property transactions are almost always in writing and the title deeds (records) include information about the owner, charges, restrictive covenants, and so on.
The ultimate title is the freehold, which is ownership for an indefinite period of time. Below the freeholder is the leaseholder. Any number of leaseholders can be created but a leaseholder cannot grant an underlease for a longer period than the term of its own lease.
There is no practical distinction between landlord, lessor and owner, assuming the owner is also the landlord, or between tenants, lessee and occupiers, assuming the tenant is not the owner-occupier: describing landlords as 'owners' and tenants as 'occupiers' reflects a desire to get away from feudalism. Similarly, it is open to discussion nowadays whether in the context of the landlord and tenant relationship a landlord ought to be considered the more dominant party, because many tenants regard landlords as suppliers.
The shop property market comprises freeholders and leaseholder owner-occupiers, landlords and 'tenants'. (I've put 'tenants' because here I am using the terminology loosely to include licences. There are important differences in law and practice between tenancies and licences.) Where there are intermediate interests between freeholder and occupational tenant, the in-between respective landlords would be defined as 'superior landlord' and landlord or lessor.
Frequently in leases, the landlord is described as 'lessor' or 'lessors' - the plural is sometimes used even though there may be only one party - and the tenant as 'lessee' or 'lessees'. Also, when the landlord is the officers of an administrative body, for example the "Mayor and Burgesses of..." the landlord could be described as the "council" ; and with railway leases, the landlord is often described as "the Board". Although for some aspects of a tenancy the correct description is necessary, in this section and unless otherwise stated, I shall stick to landlord, tenant, and tenancy.
Insurance
When a lease requires the tenant to pay the landlord’s cost of insuring the premises, the relevant clause will usually refer to the landlord’s covenant to insure, as in “the tenant will pay the landlord’s cost of insuring the premises in accordance with clause x”.
The matter of building insurance is amongst the more thorny issues of tenancy management. The recent case Green v 180 Archway Road Management Co Ltd [2012] could well add to the problems.
In outline, insurance rent is only payable by the tenant where landlord complies with its own obligations.
The case involved a ground floor shop with three flats above The landlord was required to insure the building in the joint names of the landlord and the tenants Each tenant paid one quarter of the cost of the building insurance premium. Originally the certificate of insurance showed the landlord as the insured, included a general interest clause and noted specific interests. For the last three years no specific mention was made of one of the tenants, (Ms Green). She claimed she was not liable to pay towards the premiums as the landlord had not complied with his covenant to take out the policy in joint names.
The Upper Tribunal (Lands Chamber) held that in order to be entitled to recover payment from Ms Green, the landlord had to show that it had placed insurance in accordance with the relevant clause in the lease. The Tribunal appears to have accepted that noting of special interests was sufficient to satisfy any lease with joint insurance obligations (although many may argue this point).
Placing insurance in the name of the landlord with no mention of the tenant’s name and relying on a general interest clause was not, however, sufficient. Ms Green was therefore only liable to pay for those years when her interest had been directly named on the insurance policy.
The matter of building insurance is amongst the more thorny issues of tenancy management. The recent case Green v 180 Archway Road Management Co Ltd [2012] could well add to the problems.
In outline, insurance rent is only payable by the tenant where landlord complies with its own obligations.
The case involved a ground floor shop with three flats above The landlord was required to insure the building in the joint names of the landlord and the tenants Each tenant paid one quarter of the cost of the building insurance premium. Originally the certificate of insurance showed the landlord as the insured, included a general interest clause and noted specific interests. For the last three years no specific mention was made of one of the tenants, (Ms Green). She claimed she was not liable to pay towards the premiums as the landlord had not complied with his covenant to take out the policy in joint names.
The Upper Tribunal (Lands Chamber) held that in order to be entitled to recover payment from Ms Green, the landlord had to show that it had placed insurance in accordance with the relevant clause in the lease. The Tribunal appears to have accepted that noting of special interests was sufficient to satisfy any lease with joint insurance obligations (although many may argue this point).
Placing insurance in the name of the landlord with no mention of the tenant’s name and relying on a general interest clause was not, however, sufficient. Ms Green was therefore only liable to pay for those years when her interest had been directly named on the insurance policy.