Concurrent leases and the fragility of the equitable estate in the torrens system

Concurrent leases have been described as a mystery. Largely “unexplored” in the academic literature, they arise when the landlord (L1), having leased the land to the tenant (T), then leases the reversion to another party (L2) so that L2 then becomes the landlord of the original tenant (T) – the original tenant neither having agreed to, nor endorsed the replacement of their original landlord. Often confused with an assignment, though the two are conceptually different, absent any prohibition in the original lease preventing the creation of a concurrent lease, such an arrangement can occur, and the tenant will have no cause for complaint. Dating from at least the 17th century, the case law would seem to suggest that such an arrangement leads to the covenants agreed between L1 and T becoming enforceable by, and of, L2 and T. But this we suggest is too simplistic a suggestion and fails to understand the nuances associated with the jurisprudence of property law, and, in particular, how the Torrens system interacts with the unregistered or equitable lease. In the English context, it is noted that a strong recommendation exists that the concurrent lease should be made by deed, “since otherwise … the validity of the transaction is always open to dispute and in any event the lease will suffer from the fragility of an equitable estate”. This problem, we suggest, is no less applicable to the equitable lease created within a Torrens regime. The failure of property law to address these matters can be understood – concurrent leases have not attracted the same level of attention as the traditional lease in the halls of academia, nor within the common law cases (at least in a property perspective) though the topic has garnered some attention in the financial and commercial space. In this area, there is no shortage of recent commentary. While this financial and commercial focus is undoubtedly important, the increased presence of the concurrent lease reminds us that the property aspects should not be forgotten. The answer as to whether the covenants agreed between L1 and T become enforceable between L2 and T will depend, we suggest, on the application of a number of well-established property principles. These include asking whether the covenants touch and concern the land, with this dependent on there being privity of estate in those covenants, and in the context of equitable leases, determining whether there is any mechanism to overcome the inability to use privity of estate in this context; given privity of estate’s common law, rather than equitable genesis. The words of Klineberg when commenting on concurrent leases in 2004, as important as they were then, resonate equally as forcefully today: “care must be taken to ensure that fundamental aspects of leases are not overlooked or forgotten in the drive for ingenuity.”