Tenancies, Contracts and Deeds

Landlords, tenants, and other stakeholders in the social housing sector will deal with tenancy agreements and/or leases daily, but does anybody ever pause to consider the nature of the agreement being entered into or dealt with, or the law behind it?

A tenancy or lease is an interest in land which can be created by contract or deed, but what is the difference?

Contracts

A contract can be written or verbal so long as 3 core elements exist: offer, acceptance, and consideration. In a tenancy or lease situation, a landlord can offer a prospective tenant a tenancy and property to occupy, the prospective tenant can accept the offer of the tenancy or lease and the prospective tenant will then pay rent and sometimes a deposit – the payment/s being classed as consideration. These 3 core elements being achieved forms a contract.

Ideally, there will be a written contract as it will contain express written terms which the parties to the contract will need to abide by. In a tenancy or lease situation, this may be the amount of rent to be paid, the frequency of payment, the duration of contract, access to the property for the landlord, and so on.

On occasions, parties may form a contract during a discussion when there is offer, acceptance and consideration, e.g., cash changing hands, and some loosely worded terms. The lack of a written agreement can prejudice the position of the parties but is still a contract and there can still be implied terms. For example, if one party allows another to take up occupation of a property for payment of money then there will be implied terms that they can reside in the property and that they will make regular payments.

Contracts can be varied by agreement of both parties. If parties therefore wish to change something and they mutually agree to it, then amendments can often be made to the original contract rather than entering a new contract.

Contracts will usually include express provisions on how they can come to an end or be terminated, e.g., at the end of the term of contract or by way of a ‘notice to quit’ in a ‘licence to occupy’ situation.

Deeds

A deed is a written document which is ‘executed’ (signed) with necessary formality, i.e., more than a simple signature, and by which an interest, right, or property, passes or is confirmed, or some obligation binding a person is created or confirmed.

One of the main differences between a deed and a contract is that deeds are usually enforceable despite the fact there need not be any consideration.

Some agreements or transactions must be created by deed due to statutory or common law requirements, e.g., transfers of land or interests in land, some leases, mortgages and charges, and powers of attorney.

If a deed is not entered into correctly and not executed correctly then it may be invalid.

The four key requirements for a deed to be valid are that it must be in writing, must be clear on the face of it that it is intended to be a deed, that it is validly executed, and that it is delivered.

Execution means that the deed is signed by the parties to it, and that the signatures are witnessed at the time of them being signed, i.e., in the presence of the witness. If a company enters into a deed, there can be different requirements and not any employee of a company can sign it. A company will either need to affix its seal, or have two authorised signatories, or a director of the company.

A deed becomes valid when it is delivered, not when it is executed. This can be when a party intends to be bound by it, a clear indication of an intention to be bound by it is given and/or, at a later date, if it is held to order – which can be in the case in property transactions.

This article has been written by Thomas O’Reilly, Trainee Solicitor with MSB’s Commercial Litigation team.