LEASEHOLD. (Saxon leasum, to enter lawfully.) Where the owner of freehold land grants it to a person for a term of years it is called a lease and the land is then leasehold. The person leasing it is the lessor, and the party in whose favour the lease is given is the lessee. When a lease is granted for more than three years the land is " de mised " by deed to the lessee. (But see I ralsh v. Lonsdale, 1S82, 21 Ch. D. 9). When the lessee transfers the land to some one else he " assigns the lease." In Camberwell and South London Building Society v. Holloway (1879. 13 Ch. D. 754), Jessel, Al.R., said : " The word ' lease ' in law is a well-known legal term of well defined import. No lawyer has ever sug gested that the title of the lessor makes any difference in the description of the instru ment, whether the lease is granted by a freeholder, or by a copyholder, with the licence of the lord, or by a man who himself is a leaseholder. It being well granted for a term of years it is called a lease. It is quite true that where the grantor of the lease holds for a term, the second instrument is called either an under-lease or a derivative lease, but it is still a lease." In taking the deeds of leasehold property as security, it should be remembered that failure to fulfil the covenants contained in the lease may result in the forfeiture of the lease, and re-entry of the lessor. If the last receipt for the landlord's rent is produced.
it is a waiver of any breach of covenant of which the landlord was aware before giving the receipt, but it is not a waiver with regard to any breach of which he was ignorant.
A perusal of the deeds will show the nature of the covenants, and some of them may be very burdensome. A banker taking an assignment of a lease becomes liable for all the covenants, but if a mere deposit of the deeds is taken, or a sub-demise, if allowable, for a day or two short of the remainder of the term of the lease, he does not incur any liability on the covenants there is, how ever, the danger that the lease may be for feited through failure of the lessee to fulfil the conditions contained therein.
Where any part of the property of a bank rupt consists of land of any tenure burdened with onerous covenants, the trustee may, with leave of the Court, disclaim the pro perty. Where a trustee disclaims leasehold
property " the Court shall not make a vesting order in favour of any person claim ing under the bankrupt, whether as under lessee or as mortgagee by demise, except upon the terms of making such person subject to the same liabilities and obligations as the bankrupt was subject to under the lease in respect of the property at the date when the bankruptcy petition was filed, and any mortgagee or under-lessee declining to accept a vesting order upon such terms shall be excluded from all interest in and security upon the property " (Section 55, s.s. 6, Bankruptcy Act, 1883).
A lessor cannot compel an equitable mortgagee by deposit of a lease to take a legal assignment, but if the mortgagee enters into possession of the property he is liable on the covenants of the lease.
If there is a covenant in the lease that the lessee cannot sub-demise or assign without the consent of the lessor, the licence of the lessor should accompany the deeds where there is an assignment or sub-lease. (Sec LICENCE TO ASSIGN.) It is the rule in open contracts that a purchaser of leasehold property is precluded from inquiring into the title of the lessor to the freehold. But if a recent lease is offered as security, unless the lessor is well known, the banker ought to receive satisfaction as to the lessor's title.
By Section 3, s.s. 4, of the Conveyancing Act, 1581 : " Where land is held by lease (not in eluding under-lease . the purchaser shall assume, unless the contrary appears, that the lease was duly granted ; and, on production of the receipt for the last payment due for rent under the lease before the date of actual completion of the pur chase, he shall assume, unless the contrary appears, that all the cove nants and provisions of the lease have been duly performed and observed up to the date of actual completion of the purchase." Where land sold is held by under-lease, the purchaser shall assume, unless the con trary appears, that the under-lease and every superior lease were duly granted, and on production of the last receipt for rent he shall assume that all covenants and pro visions of the under-lease and of every superior lease, as well as all rent due, have been duly performed and paid up to date (s.s. 5).