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AG Securities v Vaughan

[1990] 1 AC 417

Case summary last updated at 09/01/2020 14:31 by the Oxbridge Notes in-house law team.

Judgement for the case AG Securities v Vaughan

In the first case (AG Securities) 4 People shared a flat each under separate agreements with the landlord that were made at different rents, times and terms, and purported to give no more than contractual licence to stay, stating that there was no joint exclusive possession. This was on the understanding that the flat occupants would come and go (as they in fact did). The other case (Villiers) involved a couple who rented a flat under what purported to be a mere contractual licence and said that the landlord could introduce a new tenant at any point (even though this would have been difficult since there was only one bedroom). HL ruled that in the AG Securities case, there was no tenancy, but a contractual licence to share the flat with others, without exclusive possession. In the Antoniades case, the purported right of the landlord to introduce further occupiers into the flat was a pretence to avoid the provisions of the Rent Acts, whereas in reality there had been an intention to confer on the occupants exclusive possession of the flat for a term in consideration of periodical payments. 

Lord Templeman: Whether or not a device is a pretence (“sham” is no longer used) depends on whether it was “seriously intended in fact” and if it doesn’t reflect the “substance and reality of the situation”, or the parties do not consider it a term “to which any effect would be given”. On the relationship with the Rents Acts, he says that "Since parties to an agreement cannot contract out of the Rent Acts, the grant of a tenancy to two persons jointly cannot be concealed, accidentally or by design, by the creation of two documents in the form of licences.” He says that the courts are interested in the facts of the situation, not the labels parties agree on. Whether or not there is joint tenancy depends on whether the contracts of the occupiers were interdependent (as in the case of a couple, since without one, the other would not move in) or independent (as in the case of loosely tied flatmates). 

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