Foundations of landlord and tenant law – part 5
As well as being an ‘estate in land’ (looked at in part 1) a lease or tenancy is also a type of contract. So we need to take a look at contract law.
Contract law is a very important area of law which affects all of us in our lives every day.
A contract is an agreement about something which is enforceable by law. To create a contract you need to have three things:
- An offer
- Acceptance of the offer, and
- Consideration going both ways.
Whats that all about? Here is a contract in action:
- You go to a car boot sale and say to a man there “I’ll give you £25 for that teapot”.
- The car boot sale man says “Done mate”.
- You hand over the £25 and he gives you the teapot.
That is a proper enforceable contract for the sale of goods. You see most contracts don’t have a lot of forms and paperwork. You just reach an agreement and pay the money.
In the situation above, the offer was you saying “I’ll give you £25 for that teapot”. The acceptance was the man saying “Done mate”.
The ‘consideration’ was on your part the payment of £25 and on his part the handing over of the teapot.
It is the consideration (one of those legal words – its nothing to do with being considerate) which turns the transaction into a contract. Consideration is something of value – often described as ‘money or money’s worth’. It doesn’t have to be market value. It just has to be something.
In the example above, if the man just liked the look of your face and gave you the teapot, that would not be a contract. So if the spout fell off one day, you would not have any remedy under contract law, because it would not have been a contract. It was a gift.
However if you paid him for it, it would be a contract, and it would not matter (so far as creating the contract is concerned) whether you paid £0.05p or £5,000.
It would also be a contract if instead of paying £25, you gave him a vase in exchange. Or if you repaired the flat tyre on his car or gave him a haircut. In all of these cases, something of value would have passed both ways.
Doing it by deed
A contract is legally enforceable, but you can only have a contract if there is consideration. But what if you agree on something and want it to be legally enforceable but there is no consideration?
The way to make the agreement enforceable is to put it in a deed.
So whats a deed then? A deed is where the terms of an agreement are written down, and the parties sign it, intending it to be enforceable as a deed, and their signature is witnessed (and the witnesses need to give their name and address on the deed).
For example, I like guarantees to be signed as a deed. Generally, the ‘consideration’ for a guarantee is the fact that the landlord agrees (for example) to grant a tenancy to someone they would otherwise not consider. However often when the paperwork is sent out, the guarantor will actually sign the form after the tenancy has been signed and finalised. Where then is the consideration? If the guarantee is signed as a deed, then there is no problem.
The lease as a contract
A lease or tenancy is created in the same way as a contract, by one party making an offer and the other party accepting it.
Normally there is a written document but not always (more on this later). The consideration, so far as the tenant is concerned, is the rent, and so far as the landlord is concerned, is the property.
The rent does not have to be a market rent. Nor does it have to be money. For example, in the past (and when spices were a lot more valuable) a peppercorn was sometimes used for rent. A ‘peppercorn rent’ is a phrase now used to indicate a payment which is of low value but sufficient to create the tenancy / lease.
Next time I am going to be taking a look at how the land law rules and the contract rules work together.