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A - the lessor
B - the lessee
X - a third party who is a stranger to the property to which the license relates
C - a third party who has acquired the relevant right from A (fee simple, lease etc.)
What is a lease?
A lease is a proprietary right which grants exclusive possession of land for a limited period of time.
A lease will affect different parties in the following ways:
(a) The effect of a lease on A -
a. A and B enter in to a landlord-tenant relationship i. The common law will impose certain duties on parties even if they didn't intentionally undertake these in the contract
1. s11 of the Landlord and Tenant Act 1985 imposes a duty on private landlords to keep in repair the structure and exterior of a dwelling house which B occupies
(b) The effect of a lease on X -
a. As a result of leases being proprietary rights, they are capable of binding third parties.
i. If B has a legal lease, then third parties have a prima facie duty not to interfere with B's use of A's land
1. In Hunter v Canary Wharf, it was held that to sue in nuisance a claimant must have a property right in the land and that property right must give the claimant exclusive possession of the land a. Lord Hoffmann said that "Exclusive possession is the bedrock of English land law"
b. One might take issue with Lord Goff's judgement where he states that a "licensee with exclusive possession" might be able to sue for nuisance, given that exclusive possession is a distinguishing feature of a lease. We can avoid this problem by distinguishing between two senses of exclusive possession:
i. Legal exclusive possession or a legal right of exclusive possession ii. A personal right of exclusive possession which arises, for instance, where a couple lives together, but one person moves out leaving the remaining partner as the sole factual possessor
(c) The effect of a lease on C -
a. Legal and equitable leases are property rights which are capable of binding third parties who later acquire a right from A What are the requirements for a lease?
In Street v Mountford Lord Templeman established the two requirements of a lease.
In this case S hired out two rooms to M. The contract said that the agreement was a license and not a lease. If this were true, M would not be protected by the Rent Act
1977. o Held: C had a lease
If the agreement satisfied the requirements of a tenancy, the agreement produces a tenancy and the parties cannot alter the effect of the agreement by insisting they only created a license
"The only intention relevant is the intention demonstrated to grant exclusive possession for a term at rent"
Lord Templeman set out the requirements of a lease:
Exclusive possession of land
For a fixed time
Three categories of tenancy might prevent the creation of a tenancy:
No intention to create legal relations
BUT: in Bruton v London & Quadrant Housing Lord
Millet said that his is not an exception to the general rule:
The landlord-tenant relationship is legal - it cannot exist by an arrangement not intended to be a legal one
Some additional independent relationship giving rise to an alternate explanation
The absence of a power to create a tenancy
BUT: see Bruton which seems to suggest that this is no longer true
Per Lord Templeman we seek to interpret the original 'lease' agreement, with subsequent conduct only illuminating the original agreement.
(a) Exclusive possession -
a. It will generally be necessary for a landlord to intend to grant the tenant a right to exclusive possession; the fact that the person exclusively possesses the land does not mean that they hold the right to exclusive possession i. Lord Templeman said in Street v Mountford that a right to exclusive possession is synonymous with ownership for a limited period ii. The lessor will retain a 'reversionary interest', meaning that the right to exclusive possession granted to the lessee will eventually revert back to the lessor.
iii. The distinction drawn above between legal exclusive possession and a personal right of exclusive occupation is important in this respect b. In Watts v Stewart, Sir Etherton MR referred to Denning LJ in Errington v
Errington, where he said that: i. "Legal exclusive possession entitles the occupier to exclude all others, including the legal owner, from the property. Exclusive occupation may, or may not, amount to legal possession. If it does, the occupier is a tenant. If it does not, the occupier is not a tenant and occupies in some different capacity."
ii. "if the circumstances and the conduct of the parties show that all was intended was that the occupier should be granted a personal privilege,
with no interest in the land, he will be held to be a licensee only"
1. The distinction drawn above between legal exclusive possession and a personal right of exclusive occupation is important in this respect c. In Westminster City Council v Clarke an agreement was made between C and
Westminster CC for C to occupy a room at a hostel. It was clearly stated that he license was not and was not intend to give any of the rights of a tenant or give the right of exclusive occupation of any particular accommodation or room which was allotted to C. (The hostel operated as a halfway house for rehabilitation and treatment en-route to an independent home). Following complaints from other residents, the council sought to remove C from the hostel, but he refused under Part IV of the Housing Act 1985.
i. Held: C did not have a lease - he had a license. Lord Templeman said that "the provisions of the license to occupy and the circumstances in which the license was granted (the purpose of a halfway house)
continued to lead to the conclusion that Mr Clarke has never enjoyed that exclusive possession which he claims"
1. The key to this outcome was the contextual factors which meant that the Council could not have granted a lease a. NOTE: it is possible that there was more judicial sympathy towards the objectives of the council than those of Mr Street
There are two problems which are often posed to the requirement of exclusive possession:
Landlords have, in the past, attempted to engineer the situation is that no grant of exclusive possession is made so as to avoid the various duties that the law would place on them as landlords
One way to do this is not to give them exclusive possession of any rooms. In Aslan v
Murphy the agreement stated that the "licensor" did not grant the "licensee"
exclusive possession of any part of the room and that the "licensor" may permit others to use the room. The rent was referred to as a "license fee". The "licensor"
reserved the right to retain the keys. In practice no one else used the room.
o Held: The agreement did constitute a lease.
The provision that D was to share and vacate the room temporarily where unrealistic and clearly pretences
The right to retain keys had no "magic" in itself as he may have needed these in order to effect repairs
Lord Donaldson MR said that "the courts would be acting unrealistically if they did not keep a weather eye open for pretences, taking due account of how the parties have acted in performance of their apparent bargain"
Where there are multiple people who have a right to occupy, no one can claim to have
"exclusive possession" of the premises
This is therefore another opportunity for lessors to avoid the statutory protection offered to lessees (Rent Acts) - if both parties get the right to be on the premises,
neither has the right to exclude the other from those premises and thus neither has the right to exclusive possession
The way to avoid this is by finding that the occupiers have been granted a lease together
In AG Securities v Vaughan the landlord hired out a four-bedroomed flat which was shared by four single people. The population of the flat shifted. Each of the individuals entered in to different agreements at different times for different amounts of rent.
o Held: the individual contracts were licenses.
The independent agreements did not confer a right of exclusive possession on any one barring the occupant, but merely a right to share the flat with others
There was clearly no exclusive occupation as, on the death of one of the four, the remaining three would not be entitled to exclude a fourth person nominated by the company
Lord Templeman said that "In considering one or more documents for the purpose of deciding whether a tenancy has been created, the court must consider the surrounding circumstances including any relationship between the prospective occupiers, the course of negotiations and the nature and extend of the accommodation and the intended and actual mode of occupation of the accommodation"
This is to be contrasted with the case of Antoniades v Villiers. Here an unmarried couple entered into two identical license agreements for occupation with a fee simple holder of a one-bedroom flat with a double bed. The 'licensor' was unwilling to grant exclusive possession of any part of the premises; use of the rooms was 'in common with the licensor and such other licensees or invitees as he may permit to use such rooms'
o Held: The individual contracts constituted a lease - the two agreements had to be read together as they were interdependent - "Both would have been signed or neither"
Where it is alleged that there is a pretence, and in reality the parties occupy land as joint tenants, the courts will search for the four unities:
(2) Time a. There is a key distinction between:
i. Cases where the rooms are occupied by individuals who move in and out at different time (such as in AG
ii. Cases where the house or flat itself is occupied by a group who move in together and are expected to move out together (Antoniades v Villiers)
(3) Title a. In Antoniades, although the tenants signed two separate lease agreements, the court considered the unity of title as being satisfied as one wouldn't have singed the lease without the other; each was a but-for cause of the other
(4) Interest a. In Mikeover v Brady the determinative factor against finding a lease was that the two occupants had a separate rent liability - when one left the premises, the landlord only asked for half rent from the remaining occupant
Lord Templeman said that "The facts must prevail over the language in order that the parties may not contract out of the Rent Acts. In the present case clause 16 was a pretence"
In the later case of Aslan v Murphy (Nos 1 and 2) the agreement included a term that the licensor licenses the licensee to use (but not exclusively) all the furnished room […]
on each day between the house of midnight and 10:30am and between noon and midnight, but at no other times"
o The Court of Appeal found that a lease had been granted despite the attempt to prevent exclusive occupation
Lord Donaldson MR, referring to the concept of a pretence, regarded it as important that A had not in practice attempted to exercise his rights to remove B from the land between 10:30am and noon.
In Camelot Guardians v Khoo, a summary was provided of how the court should approach determining whether or not an agreement creates a tenancy or a license:
(1) The court will construe the agreement to see whether it confers a right to exclusive possession (per Street v Mountford)
(2) In the process of construction, the court will consider the words used in the document in its context, in accordance with the regular rules of contractual interpretation (Arnold v Britton; Wood v Capita)
(3) Before engaging in this process of construction and considering the context and relevant background information, there does not need to be a finding of any ambiguity in the words used in the agreement
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