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Prudential Assurance v London Residuary Body [1992] 2 AC 386  House of Lords

In 1930 by a sale and lease back arrangement, London County Council let a strip of land to Mr Nathan for £30 per annum.  The agreement stated that the tenancy was to continue until the Council required the land for road widening. Nathan was entitled to erect temporary one storey buildings on the land. The agreement was intended to be temporary, however the road widening scheme never materialised and the occupation continued for over 60 years. During this time the benefit of the agreement was transferred to Prudential Assurance and London Residuary Body took over the free hold but they had no road making powers. Prudential Assurance were still paying £30 per annum whereas the market rent at that time would have been £10,000 per annum. The question for the court was whether the agreement did in fact create a tenancy.

Held:

No tenancy was created due to an uncertain term.

Lord Templeman:

“A lease can be made for five years subject to the tenant's right to determine if the war ends before the expiry of five years. A lease can be made from year to year subject to a fetter on the right of the landlord to determine the lease before the expiry of five years unless the war ends. Both leases are valid because they create a determinable certain term of five years. A lease might purport to be made for the duration of the war subject to the tenant's right to determine before the end of the war. A lease might be made from year to year subject to a fetter on the right of the landlord to determine the lease before the war ends. Both leases would be invalid because each purported to create an uncertain term. A term must either be certain or uncertain. It cannot be partly certain because the tenant can determine it at any time and partly uncertain because the landlord cannot determine it for an uncertain period. If the landlord does not grant and the tenant does not take a certain term the grant does not create a lease….In the present case the Court of Appeal were bound by the decisions In re Midland Railway Co's agreement [1971] 1 Ch. 725 and Ashburn's case. In my opinion both these cases were wrongly decided. A grant for an uncertain term does not create a lease. A grant for an uncertain term which takes the form of a yearly tenancy which cannot be determined by the landlord does not create a lease. I would allow the appeal. 

Back to lecture outline on requirements of a lease in Land Law