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Review Your SQE 1 Practice Records

Examination Timing: 00H00M27S

Matt verbally agrees with his friend Clara that he will occupy her house while she goes on a four-year round-the-world tour. Neither party intends for Matt to have any right to remain in the property after four years. As he is doing Clara a favour, she agrees that he can pay rent at half the true market rent of the property. 

Which of the following statements best describes the legal position?

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A parol lease is an agreement made verbally, not in writing, between the parties, by which one of them leases to the other a certain estate. In this case, a valid parol lease has not been created because neither the term nor the level of rent complies with the statutory provisions. Section 54 of the Law of Property Act (LPA) 1925 provides that all leases must be evidenced in writing except a lease not exceeding a term of three years at a market rent where no premium is paid for the grant. Since the agreement between Matt and Clara exceeds three years and involves a rent below market rate, it does not comply with the statutory requirements for a parol lease. 

Key Point: Leases exceeding three years or those not at market rent must be in writing to be valid under section 54 of the LPA 1925.

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