Hi 92133618-ga ,
The distinction between a lease and a licence in UK property law, is a
perennial problem for law students. However it is a distinction which
must be grasped, as it is the key determinant in deciding whether an
occupant holds a lease or a licence. In basic terms, the distinction
is as follow: a lease grants a person a proprietary interest in land,
conferring upon them a right of exclusive possession which is
enforceable against any other person, the landlord included. In
contrast a licence does not give a proprietary interest. Instead, it
gives the person a personal permission to occupy, with no exclusive
possession, as confirmed in
Street v. Mountford [1985] AC 809 (at 816C).
To provide you with your answer, I am referring to both online sources
, which will be referenced throughout the text of the answer, and
also, a book which is invaluable to students of UK property law, and
should be available in all law school libraries. This book is
Gray, Kevin. Elements of Land Law. Butterworths, 1993, 2001.
The most important case you will need to look at is Street v.
Mountford [1985] as referenced above. The information provided in this
answer is how the law in this area stands up to September 18th 2002.
The crucial determinant of whether a lease or licence exists is
whether or not the person has been granted exclusive possession of
premises. A tenant has far more rights than a licensee and enjoys
better protection in law, e.g. a tenant can assign a lease, or sue a
third party for nuisance or trespass, but not a licensee. A tenant is
also entitled to full protection within the scope of the Rent Act
1977, whereas a licensee is not.
Gray, as cited above, states at p 708 [1993 edition] that 'exclusive
possession is the essential criterion' in distinguishing a lease from
a licence, and has been so since medieval times. A tenant gains a
stake in the land not simply a 'personal permission' to occupy that
land, something which Lord Templeman described in Street v Mountford
as the tenant's right to 'call the land his own [1985] AC 809 at
816B-C.
In Radaich v Smith [1959] 101 CLR 209 at 223, Windeyer J declared that
exclusive possession provides 'the proper touchstone' of a lease or
tenancy, asserting that anything which negated an occupier's right to
exclusive possession, meant no lease existed, simply a licence.
However, to further complicate matters, even though exclusive
possession is essential in determining the existence of lease, just
because a person seems to be in exclusive possession of land, it
doesn't necessarily mean there is a tenancy. On this point, see Street
v Mountford [1985] AC 809 at 818E as per Lord Templeman, where it was
stated that someone who enjoys exclusive possession 'is not
necessarily a tenant'. His Lordship qualified this remark by stating
that a landlord-tenant [as opposed to landlord-licensee relationship]
is only found when that exclusive possession exists 'for a fixed or
periodic term certain'. He further expounded this point in:
Prudential Assurance Co Ltd. v London Residuary Body [1992] 2 AC 386
at 390C - 'exclusive possession and profit of land for some
determinate period'.
In Street v Mountford, Lord Templeman gave examples of where exclusive
possession might not grant a tenancy, for example where no intention
could be found to enter into a legal, contractual relationship [AC 809
at 819C, 820D]. His Lordship referred to the decision of Lord Denning
in
Facchini v Bryson [1952] 1 TLR 1386 at 1389.
In Facchini v Bryson, Lord Denning said a tenancy may be precluded if
'there has been something in the circumstances, such as a family
arrangement, an act of friendship or generosity, or such like, to
negative any intention to create a tenancy'.
As a result of the decision in Street v Mountford, it seems that
certain types of exclusive occupancy do not confer exclusive
possession and therefore do not create a tenancy, but a mere licence.
These include:
(i) Accommodation based on charity. See for example
Brent People's Housing Association Ltd. V Winsmore [Unreported, County
Court, 20 November 1985] as quoted by Gray on p 712, 1993 edition.
(ii) Accommodation based on friendship, as in
Marcroft Wagons Ltd. v Smith [1951] 2 KB 496, where a landlord, out
of genuine kindness, had allowed the daughter of deceased tenants to
remain in occupation for a period following a double bereavement. The
Court of Appeal in this instance rejected the daughter's later
assertions that she had been granted a new tenancy. This decision was
approved in Street v Mountford on the grounds that no intention to
enter into a contract had been evidenced by the parties. But Gray
asserts (p712-3) that this decision can also be justified due to the
fact that 'the relevant occupation did not confer a stake in the land
or constitute exclusive possession in any true legal sense'.
(iii) Occupancy of a quasi-familial or domestic nature.
Usually, such arrangements give no right of exclusive possession to
the occupier, and the intention to enter into legal relations is often
absent. On this point, see:
Barnes v Barratt [1970] 2 QB 657.
In this case, the Court of Appeal refuted the existence of a tenancy
in a situation where a couple were granted occupation of part of a
house in return for the performance of domestic duties and the payment
of a portion of the household bills. It was held that they merely had
a 'personal licence to occupy' based on what Sacks LJ described as a
situation 'closely akin to those produced by family arrangements to
share a house' [1970] 2 KB 657 at 670A.
(iv) Service occupancy.
In Street v Mountford, it was held by the House of Lords that if an
employee is required to occupy an employer's premises in order to
better perform his or her duties, then the employee is a mere licensee
and not a tenant. The reason for this was summed up by Lord Templeman:
"the possession and occupation of the servant is treated as the
possession and occupation of the master and the relationship of
landlord and tenant is not created" [1985] AC 809 at 818f-G.
(v) Occupancy of the 'lodger'.
In Street v Mountford, the House of Lords emphasized a vitally
important area where someone may have exclusive occupation, but where
the right to exclusive possession of the same premises is vested in
another individual. This is where the occupant is deemed to be a
lodger rather than a tenant. The essential distinction Lord Templeman
drew here is based upon who has the right of overall control of the
premises. He also distinguished a tenant from a lodger or licensee, by
stating that an occupier is a lodger if the landlord provides services
'which require the landlord or his servants to exercise unrestricted
access to and use of the premises'. On this point, also see
Antoniades v Villiers [1990] 1 AC 417 at 459 F-G per Lord Templeman.
Such circumstances deny the occupier any right to resist intrusion,
therefore the owner retains the right to exclusive possession, making
the occupier a mere licensee.
Irrelevancies in determining the existence of a lease or licence
Certain factors are deemed irrelevant in deciding whether a lease or
licence exists. It doesn't matter if the occupation is permanent or
temporary ( Marchant v Charters [1977] 1 WLR 1181 at 1185F, where it
was held that mere passage of time could not convert a licensee into a
tenant). It is irrelevant whether the premises concerned are
furnished or unfurnished (Marchant v Charters). Also, it is irrelevant
if the money paid in return for occupancy is called 'rent' or even if
a rent book is provided. Use of such terms merely creates a
'convenient means of verbal reference to the payments' - per Slade LJ
in Street v Mountford [1984] 49 P & CR 324 at 328. In Uratemp Ventures
Ltd. v (1) John Collins (2) Mary Carrell (2001), HL, LTL 11/10/2001,
the House of Lords held that the presence or absence of cooking
facilities was irrelevant to the issue of exclusive possession.
In order to determine the existence of a lease or licence, a court
will pay meticulous attention to any written documentation drawn up
between the parties, in order to determine whether a right of
exclusive possession has been conferred upon or denied to the
occupier. These documents will be interpreted according to the
ordinary laws of contract. It is an issue of substance, as Gray (op.
cit) points out on p.718. For example, if the occupier is granted the
right to transfer their occupier's rights, this implies that he has a
lease not a licence. However, if the agreement states that the
occupier's rights are personal to him alone and non-assignable, this
negates the existence of exclusive possession, as would a term
allowing the owner to move the occupier from room to room within the
same house. On this point, a good case to look up is:
Crancour Ltd. V Da Silvaesa [1986] 52 P & CR 204 at 230.
Once their intention to create a legally binding contract has been
determined, whether the parties intended to create a lease or licence
becomes irrelevant. If the contract which they intended to create
confers 'exclusive possession for a term at a rent' (per Lord
Templeman in Street v Mountford [1985] at 826G) , it is a question of
law, to be determined by the court on the basis of primary facts, as
to whether a lease or licence has been created. Street v Mountford is
a crucial judgement in determining whether a lease or licence has been
created. Prior to the case, many landlords sought to deny occupiers of
premises their full legal rights by getting them to sign express
declarations that they were licensees rather than tenants, regardless
of whether or not the occupier had exclusive possession. It was this
kind of abuse that the House of Lords was keen to eliminate in Street
V Mountford. Lord Templeman insisted that parties 'cannot turn a
tenancy into a licence merely by calling it one'. He continued:
"if the agreement satisfied all the requirements of a tenancy, then
the agreement produced a tenancy and the parties cannot alter the
effect of the agreement by insisting that they have only created a
licence. The manufacture of a five-pronged implement for manual
digging results in a fork even if the manufacturer, unfamiliar with
the English language, insists that he intended to make and has made a
spade". [1985] AC 809 at 819E-F.
See also Bingham LJ in Antoniades v Villiers [1990] 1 AC 417 at 444B:
"A cat does not become a dog because the parties have agreed to call
it a dog".
In their determination to prevent shams and pretences denying
occupiers their rights, Lord Mustill declared that a court is
entitled, obliged even, to take an agreement 'otherwise than at its
face value' where that agreement is clearly a sham or contains terms
which constitute an artifice (Hadjiloucas v Crean {1988] 1 WLR 1006 at
1019 D-F). Antoniades v Villiers is an essential case to look at in
order to appreciate how the courts go about identifying misleading
contractual terms when distinguishing between a lease and a licence.
In order to try and deny the existence of a tenancy, in this case a
landlord made a young couple sign an agreement stating that they were
obliged to share all areas of their flat with him, including their
bedroom. The court held that this term was clearly never intended to
be acted upon and was therefore a sham in order to try and deny the
occupiers their rights as tenants.
This approach has been upheld in more recent case of R v Trinity
Development Co (Banbury) Ltd., ex parte National Car Parks Ltd.
(2001), CA, LTL 18/10/2001 extempore. Here, the Court of Appeal held
that the nature of an agreement should be determined with reference to
the substance of the agreement, rather than its form.
Multiple occupation of premises can cause a lot of problems in
determining the existence of a lease or licence. However, the main
doctrinal starting point for the court is in looking to see if the
four unities of joint ownership can be established, i.e. unity of
possession, interest, time and title. If the form of holding by two
or more persons fails to display these four unities, there is no joint
tenancy. Where a joint tenancy does exist, the tenants have a
collective right to exclusive possession which mere licensees would
not have. For an exposition of how the courts distinguish between a
lease and licence where there is multiple sharing by a shifting
population of occupants, you will need to look at the leading case of
AG Securities v Vaughan [1990] 1 AC 417. Also check out [1989] Conv
128 (P.F. Smith).
Historically, up to and including present day, the case law points
conclusively at exclusive occupation being the crucial determinant in
distinguishing between a lease and licence. For recent decisions
confirming this, check out the following link:
http://www.lawyer2b.com/archive/TL2BARCHIVEi2_thelawstory2.asp .
A lecturer at Cardiff University has a website which includes detailed
notes on Street v Mountford, Antoniades v Villiers and AG Securities v
Vaughan. The URLs are:
http://ourworld.compuserve.com/homepages/pntodd/cases/cases_s/street_m.htm#street_comments
http://ourworld.compuserve.com/homepages/pntodd/cases/cases_a/anton_v.htm
http://ourworld.compuserve.com/homepages/pntodd/cases/cases_a/ag_sec.htm
.
Todd also discusses related case law such as Mehta v Royal Bank of
Scotland plc Times, 25 Jan 99, QBD.
http://ourworld.compuserve.com/homepages/pntodd/cases/cases_m/mehta.htm.
You may also wish to check out the following online essay:
http://www.essaybank.co.uk/free_coursework/606.html and the website's
main law section:
http://www.essaybank.co.uk/University/Law/index.html.
If you wish to duplicate my search for online materials, run separate
searches at http://www,google.co.uk. The first search I ran involved
the input of the key words 'lease licence exclusive possession' which
returned the following results:
://www.google.co.uk/search?hl=en&ie=UTF-8&oe=UTF-8&q=lease+licence+exclusive+possession&btnG=Google+Search
Then I conducted a search on the leading cases. The results I obtained
for a search on Street v Mountford are as follows:
://www.google.co.uk/search?hl=en&ie=UTF-8&oe=UTF-8&q=street+v+mountford&btnG=Google+Search.
Antoniades v Villiers -
://www.google.co.uk/search?hl=en&ie=UTF-8&oe=UTF-8&q=antoniades+v+villiers&btnG=Google+Search.
AG Securities v Vaughan
://www.google.co.uk/search?hl=en&ie=UTF-8&oe=UTF-8&q=AG+Securities+v+Vaughan&btnG=Google+Search.
But do try to obtain a copy of Kevin Gray's book as cited above, and
primary sources, such as law reports. If time is short, there are
numerous good books in any law library which contain abbreviated
versions of cases and other materials. They will all have a section on
the distinction between leases and licences.
I hope the information I have uncovered for you helps. This is a
notoriously difficult area of UK property law, but as long as
exclusive possession has been granted to an occupant i.e. the right to
exclude all others, including the landlord, then that occupant is a
tenant and holds a lease rather than a licence. Also, keep in mind
that the terms 'exclusive possession' and 'exclusive occupation' are
not interchangeable. Someone who has exclusive occupation has no right
to exclude all others and is thus a licensee. Exclusive possession
will then be vested in someone else, usually the landlord. This is the
kind of situation which may be seen where a lodger occupies a bedroom
in a house but is obliged to share cooking and bathroom facilities
with the owner.
Good luck 92133618-ga!
Purplecat. |
