10.1.1 Definition and the Three Marks of a Lease

A lease (demise) is a grant by lessor/landlord to lessee/tenant of the right to exclusive possession of land or buildings for a definite period, usually in return for rent.

Street v. Mountford [1985] AC 809 — if the occupier has exclusive possession for a term at a rent, the agreement is a lease regardless of label. Onasanya v. Ajayi (1970) NCLR 24 — Nigerian courts apply the same approach.

10.1.2 Lease, Licence, and Tenancy at Will

Licence — bare permission; revocable; no proprietary interest. Hotel guest analogy.

Tenancy at will — either party can end at any moment; no fixed term. Poor security.

10.1.3 Methods of Creation

• By deed — leases exceeding 3 years; Section 3 Conveyancing Act 1881 / Section 77 PCL Lagos
• By writing — leases of 3 years or less; Section 4 Statute of Frauds 1677
• By parol — narrow exception under Section 3 CA 1881 for short leases at best rent in possession, ≤3 years
• By operation of law — implied periodic tenancy from holding over; equitable lease under Walsh v. Lonsdale (1882) 21 Ch D 9, applied in Nigeria via Savage v. Sarrough (1937) 13 NLR 141

10.1.4 Types of Tenancies

• Fixed-term tenancy — agreed start and end dates
• Periodic tenancy — Tenancy Law of Lagos State 2011 notice periods: 1 week (weekly), 1 month (monthly), 3 months (half-yearly), 6 months (yearly)
• Tenancy at will — terminable at any time
• Tenancy at sufferance — Abiola v. Ijoma (1970) 2 All NLR 268 — holding over without landlord’s consent
• Statutory tenancy — Rent Control Law (now largely replaced by Tenancy Law of Lagos State 2011)

10.2.1 The Parties

Capacity required. For LUA property, Governor’s consent under Section 22 required for grant. Savannah Bank v. Ajilo (1989) 1 NWLR (Pt 97) 305.

10.2.2 The Premises (Demised Premises)

Must be precisely described. In multi-let buildings, lease typically covers internal space but excludes structure, common parts, and shared services (handled via service charge).

10.2.3 The Term

Must be certain. Lace v. Chantler [1944] KB 368 — “for the duration of the war” struck down. Nigerian commercial leases: 3-25+ years. Residential Lagos: 1-3 years.

10.2.4 Rent and Rent Review

Nigerian standard practice: one to two years’ rent in advance. Lekki Phase 1 three-bedroom flat: ₦3.5M-₦5M/yr. Victoria Island office floor: ₦15M-₦30M/yr with two years advance on signing.

Rent review — typically upward-only at fixed intervals (3-5 years).

Service charges in multi-let properties can rival or exceed base rent.

10.2.5 Habendum and Reddendum

Habendum — defines the estate granted: “To hold unto the Tenant from the 1st day of January 2025 for a term of ten years.”

Reddendum — reserves the rent: “Yielding and paying therefor the yearly rent of ₦12,000,000 payable in advance on the first day of January in each year.”

10.3.1 Tenant’s Covenants

• To pay rent — primary obligation; triggers re-entry on breach
• To repair and maintain — “fair wear and tear excepted”; FRI lease puts virtually all repair obligations on tenant
• Not to assign or sub-let without consent — Section 19 Landlord and Tenant Act 1927; consent not to be unreasonably withheld
• To use for permitted purpose only
• To insure (or contribute via service charge)
• To yield up at end of term

10.3.2 Landlord’s Covenants

• Quiet enjoyment — Lavender v. Betts [1942] 2 All ER 72 — removing doors and windows is breach
• Not to derogate from grant
• To repair the structure (multi-let properties)
• To insure
• To provide services

10.3.3 Implied Covenants

Quiet enjoyment and non-derogation implied at common law. Section 7 CA 1881 implies covenants in leases by deed.

10.4.1 The Proviso for Re-Entry (Forfeiture)

Re-entry requires court order (self-help is unlawful).

Section 146 PCL Lagos (modelled on Section 146 LPA 1925) — for breaches other than rent, landlord must serve notice:
1. Specifying the breach
2. Requiring remedy if capable
3. Requiring compensation if landlord wishes

Relief from Forfeiture — under Section 146(4) PCL, sub-tenants and mortgagees can apply for relief. This is a lifeline for lenders: pay arrears, remedy the breach, keep the lease alive.

For non-payment of rent: landlord makes a formal demand (unless lease exempts). If tenant pays all arrears and costs before final order, relief is granted as of right.

10.4.2 Option to Renew

Must be exercised strictly in accordance with terms. Six months’ notice typical. Adds substantially to lease value.

10.4.3 Break Clauses

Allows early termination by either party on conditions. From a lender’s perspective on lease offered as security, a break clause is a red flag.

10.5.1 Sub-Leases

Carved out of existing lease for term shorter than head lease residue. If lease has 15 years, sub-lease must be ≤ 14 years (otherwise it’s an assignment).

Sub-tenant has no direct contractual relationship with head landlord. If head lease forfeited, sub-lease falls.

Under LUA: sub-lease of statutory R of O requires Governor’s consent. Awojugbagbe Light Industries Ltd v. Chinukwe (1995) 4 NWLR (Pt 390) 379.

10.5.2 Assignment of Leases

Transfer of tenant’s entire remaining interest. Most leases require landlord’s consent.

Privity of estate — between current landlord and current tenant; touch-and-concern covenants enforceable.

Privity of contract — between original landlord and original tenant; original tenant remains liable for entire term even after assignment. UAC v. Global Transport Oceanic SA (1996) 5 NWLR (Pt 448) 291.

10.6.1 Methods of Mortgaging Leasehold Property

Sub-demise — sub-lease for term slightly shorter than head lease residue (e.g., head lease 20 years → sub-demise 20 years less 3 days). Traditional English method.

Assignment by way of mortgage — entire lease assigned to lender as security; simpler but puts lender into tenant’s position with covenant liability.

Legal charge — most common modern Nigerian method. Charge gives lender same powers (power of sale, right to possession) without complexity of sub-interest.

10.6.2 What Lenders Look For

• Unexpired term — rule of thumb: unexpired term should exceed mortgage term by at least 5-10 years
• No subsisting breaches
• Consent provisions — landlord’s consent if required
• Forfeiture provisions — notification to lender before forfeiture proceedings
• Rent obligations — and rent review impact

10.6.3 Risks for Lenders

• Forfeiture risk — breach destroys security; lender can apply for relief
• Consent risk — landlord refusal/delay can block transaction
• Lease expiry risk — diminishing asset; build buffer between mortgage end and lease end
• Rent arrears and service charge default — ongoing monitoring required

Think of lending against a lease like standing on a plank resting across two supports: borrower’s ability to repay AND the lease itself. If either gives way, the lender falls.

A lease grants exclusive possession for a definite term, usually at rent — making it an interest in land that can be mortgaged. Distinguished from licence (no proprietary interest) and tenancy at will (no certain term).

Creation: by deed (>3 years), writing (≤3 years), oral (short tenancies), or operation of law (implied periodic, equitable Walsh v. Lonsdale).

Tenant’s covenants: pay rent, repair, no assign/sublet without consent, permitted use, insure, yield up. Landlord’s covenants: quiet enjoyment, non-derogation, structural repair, insure, provide services.

Forfeiture under Section 146 PCL requires notice + opportunity to remedy. Sub-tenants and mortgagees can apply for relief under Section 146(4).

Leasehold mortgages: by sub-demise, assignment, or legal charge. Lenders must check unexpired term, breaches, consent, forfeiture provisions, rent levels.

1. What three characteristics distinguish a lease from a licence? Refer to Street v. Mountford.
2. Describe the four methods by which a lease may be created under Nigerian law.
3. List five covenants typically imposed on a tenant in a commercial lease.
4. Explain the proviso for re-entry and the Section 146 PCL procedure.
5. A 99-year lease granted 72 years ago has 27 years unexpired; client wants a 20-year mortgage. Identify risks and advise.