Leases 2 Lecture 14 - reading and notes PDF

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Leases (Part II) Lease/Licence Distinction: Exclusive Possession

Exclusive possession- important living agreement which will determine whether they are a tenant or a licensee. It is the ultimate hallmark of a lease. Rent MIGHT be peripheral. May need to meet statutory requirements and is vital in saying if a lease can be changed to 90 years from lease for life as section 149 requires rent.

Introduction – nature/characteristics of a lease

l Lease = term (maximum duration being certain) that confers on T a right to exclusive possession of land (rent usual but not a legal requirement): Lord Templeman Street v Mountford (1985)- heavy emphasis on EP. l As an estate (proprietary right)- proprietary rights that can be transferred by following certain legal formalities, and its proprietary status will be crucial to the question of what happens to tiff and her right in the flat where the freehold that Ian holds is sold to a third party, e.g. Phil.

– Both Parties to lease have property rights that can be transferred – Where Ian sells to Phil/Pr – Tiff’s lease has the potential to continue to be enforceable (usually a licence does not: exceptionally see (a) Binions v Evans (1972) (contractual licence + constructive trust); and (b) proprietary estoppel licence and s 116 LRA 2002)

Lease/Licence Distinction The agreement between them could be a lease or a license so how does T know what she has? License is a personal right and is a permission to be in the flat.

l The agreement that gives T rights to live in Ian’s flat may be by – Either a licence Or a lease

– Lease = proprietary right (estate) – Licence = personal right – permission to use the land (maybe via contract) l How will T know if she has one or the other? l Distinguishing between a licence and a lease has generated a great deal of case law (less so recently) You can change the license by simply telling them not to come, and just withdraw your permission. What is the Difference between T having a license or a lease? Pivoted around the area of Exclusive Possession: Statutory Context: security of tenure legislation applied to leases not licences

The incentive to a license has changed and now, it is not so relevant. It was particularly historically related to security of tenure; did you have tenure to be in X house for certain amount of time? Since 20th century- rent came into play. These might restrict how much the landlord or owner of freehold could increase your rent. That is limited if you had a lease and also if you had a lease you had a certain amount of prevention from eviction. This is relevant to something called an ASSURED SHORT TENANCY INTRODUCED IN 1988 AND WHO THIS ACTUALLY PROTECTS. l Why might Ian prefer to create a licence (rather than a lease) for T to occupy the flat? – To escape security of tenure legislation that applies to leases but not licences l Since around 1915, so-called “Rent Acts” – legislation giving security of tenure to tenants (but not licencees) – protecting rent rises, prescribing court procedures for termination – (protectionism/restriction on freedom of contract?) – But Housing Act 1988 allows for six month (“assured shorthold”) tenancy with less security for T; so these days there is less incentive for

Ian to create licence rather than tenancy. If one has an assured short tenancy which would be for a minimum of 6 months, after this 6 months the landlord could give the tenant statutory 2 months’ notice to quit and the provisions of the statute were if the landlord gave this notice to quit and the tenant refused, the landlord would go to court and they would have to give an eviction notice. l So, on this basis, there is not a massive difference between a license and a lease, because the landlord can get you out. But there are certain other protections a lease may give an occupant. E.g. landlord and tenant act 1985, gives landlord certain repairing obligations. But this doesn’t apply if occupant has a license.

Exclusive Possession: Meaning

l T’s- occupant’s- right to control the property including entry on to the land – right to exclude others/strangers including landlord (Ian): Lord Templeman in Street l There is a difference between EP and exclusive occupation. This is illustrated in the following case – Shell-Mex v Manchester Garages (1972) – Agreement allowed Shell to keep control over layout of garage = therefore no exclusive possession/lease l S leased the land to M but retained control over the garage. That level of control was the reason why M had exclusive occupation, but it also explained by no EP was found to have been created. So, it’s a matter of whether you can find on the evidence in relation to Tiff, that Tiff has the right in the term agreed, to exclude everybody that she has exclusive control over the land. This is related to exclusive occupation but is separate from it DISTINCTION BETWEEN EP AND EO:

EP- right to exclude everyone else from the land including the landlord. It is a question of fact. Who has the right to possess the property excludes means excluding everyone.

The fact that T is living alone is evidence of this but is not decisive or conclusive of EP. Sometimes judges use EO in their judgements when it seems what they really mean is EP. What we are seeking to find, is the formal legal definition of EP. l Depends on having right to exclusive possession (EP) rather than being in exclusive occupation – Watts v Stewart [2016] EWCA Civ 1247, Sir Terence Etherton MR – But c.f. Lord Templeman’s use of language n Antoniades (1990)

Exclusive Possession: Meaning

l Exclusive possession- concept figures in other contexts of ownership: and adverse possession; fee simple estate l Contrast exclusive possession and more limited land law rights – Easement; or – Licence to offer front of house rights at a theatre: Clore v Theatrical Properties (1936)

Establishing Exclusive Possession

l Finding exclusive possession: a question of fact in each case – objective assessment of terms of the document/surrounding circumstances (mode of occupation; pre-agreement discussions) l Start by looking at terms agreed in the document. Remember you have to have a written document for a lease, if you want a legal lease, this document has to be in form of a deed. If you want a lease for more than 7 years, has to be a deed and it has to be registered.

l There are no exceptions to this fixed rule apart from the ONE exception: a short lease which is 3 years or less, taking effect in possession at market rent section 4(2) of the LPA. l Distinguishing between lease and licence usually determined by looking at effect of the agreement not the intention of the parties l Somma v Hazelhurst (1978) Cumming-Bruce LJ (overruled by Street)- court of appeal recognised very clearly that as the intention of the parties was to create a license, that is what should be recognised by the court and so the COA recognised the SUBJECTIVE INTENT OF THE PARTIES AND HENCE, THE EXISTENCE OF A LICENSE NOT A LEASE.

l Sea – change: Street (1985) (HL) – Lord Templeman- S was a solicitor who rented some rooms to M and she was claiming protection under the rents act and on this basis S said, we signed a license agreement and it was called a license agreement, and because I am a lawyer I know based on Somma case, that this is a license. M said I have a lease, I effectively have EP of the land, for a term, at a rent. Went to court: S knew he was right M thought she was right she had two rooms in the property. It was titled a license agreement. M was trying to use the statutory provisions in the rent act to challenge the argument S proposed. Went to HL: M was wrong and it was expensive for him. Templeman concentrated on the objective of the parties. Where the agreement is for a certain term with a rent, all it needs is EP to become a lease. l So, usually, you look at the effect of the agreement to find the true bargain of the parties. l Pre-Street – courts recognised that licence might exist where occupier had EP: Marcroft Wagons v Smith (1951)

To find EP, you scrutinise individually the terms that have been agreed between he parties to reach a conclusion whether or not the use of the flat by Tiff would give her the right to exclude everybody else. But there are other things as well: -

There may have been discussion before the agreement

-

There may have been things happening on the ground that are not consistent with the terms of the agreement

e.g. Ian says to T you can live in the flat for 5 years, we will put this in a document. Document terms say, ‘I can live there too if I want and I can insert a third party to come and live with you,’ in this case, T would have NO EP.

IF on the other hand, I says ‘of course I won’t come and live there and I won’t force you to live with someone you don’t know,’ this will be relevant in determining whether T has EP over the land.

So OTHER FACTORS MAY BE RELEVANT, BUT ALWAYS START WITH THE TERMS OF THE AGREEMENT ITSELF. E.G. in agreement presented to T. ‘T is to occupy the land as a licensee,’ she is to pay 700 a month as an occupation fee, she must sign the agreement that says she does not have a lease but only a license.’ T may just sign regardless of understanding what the document says. This happens in case of Somma. Look above. The language for Tiff then, may indicate on basis of this Somma case, that it is a license she has and not a lease. This was considered by the Law lords in Street, and was rejected. What the court was looking for, was not the parties subjective intentions, look at Street case above.

Therefore, if T has got EP of the flat, the subjective intention of the parties is not determinative. Look at case of Bruton case, in this case, the housing trust had a license over the block and not an estate at all and granted B right to use one of the rooms, and he argued he had a lease. The court reverted to S and said what we have is EP at a

term for a rent. Those are the hallmarks of a lease. So, what we are looking for is the objective intention of the parties to find this, we look at the terms of the agreement, the discussions between them and what is happening on the land to determine what their objective intentions must’ve been. This was approved in MEXFIEDL BY NEUBERGER. As a result of street, there is an article written by Street on this case being one of the parties and how the HLs decision was wrong as he applied the law from Somma case.

So, Street happened, then this decision was agreed in Mexfield v Berrisford. Establishing Exclusive Possession

l Distinguishing between lease and licence usually determined by looking at effect of the agreement not the intention of the parties l Notice the importance in Bruton v LQHT (2000), per Lord Hoffmann l “As observed by Lord Clarke a tenancy agreement has to be

interpreted in the same way as any other written contract, so the precise rights and obligations of the parties under it must depend on the terms which the parties have agreed and the circumstances in which they were agreed. However, in some circumstances, there may be principles of law which result in the parties' intention being frustrated or modified, and, as is clear from the reasoning in Street v Mountford [1985] AC 809, the legal consequences of what the parties have agreed is a matter of law rather than dependent on what the parties intended.” Mexfield, Lord Neuberger at [17] l It might be that this is not the case…

Establishing Exclusive Possession If we are dealing with businesspeople who are trained and advised in the area, we may look at the words that were used to find the objective intention. If they have been advised and it is clear their objective intention is not to create a lease, it may be the court give higher credence to this particular intention. l So, language/labels less important than the effect of the agreement in creating exclusive possession l Street; and Watts v Stewart [2016] EWCA 1247 l Might parties stated Intention/label be more persuasive in determining lease/licence in a commercial agreement between parties of equal bargaining power? – National Car Parks Ltd v Trinity Development [2001] EWCA Civ 1686 at [28] & [29] (Arden LJ) – Clear Channel UK v Manchester CC [2005] EWCA Civ 1304 at [28] & [29] Jonathan Parker LJJ)

Exclusive Possession: sole occupation Difference between EO and EP?

EO would make the person living there a lodger, Tiff. If the person lives with the landlord and you live in the house and can use the stuff of the house, you will be a lodger. But this would be for a temporary period. But say, the lodger likes servicesmeals, cleaning and the landlord has access to whichever land part to provide the food, services, and all. l Ian enters into a written agreement with Tiff l With a single occupier Lord Templeman (Street) saw the essential distinction as between “lodger” and “tenant” – What makes an occupant a lodger? – Does Street therefore create a clear-cut demarcation/test – so that Tiff is either a tenant or a lodger? or

–

Is there middle ground between the two? Brooker v Ayers (1987); Hadjiloucas

v Crean (1988)?

Establishing Exclusive Possession l What terms in Ian and Tiff’s agreement might indicate the presence or absence of EP? l What if Ian retains right to enter the property – – Unrestricted/Unlimited = licence? Say Ian has unrestricted access to the property by the terms of the agreement, this would make the occupant a lodger as this access gets rid of EP – Limited right to enter (inspection/emergency) – arguably emphasises exclusive possession so = lease? l Lord Templeman in Street – No hard and fast rule? l To provide cleaning between 10.30 and 12 noon: Aslan v Murphy (1990);- the landlord retained a key to access the property in emergencies. This is theoretically unrestricted, but this was for emergencies only so this retention of a key did not negate EP. l Markou v De Silvaesa- occupiers were required to leave the property when landlord told them and there were cleaning terms, this was not EP. The unrestrictive access was determinative in not finding EP. l Or repair If an occupant has to leave in a situation, say if the landlord needs to clean, this takes away EP.

Establishing Exclusive Possession

l What impact might following terms have on finding that exclusive possession exists: – Provision of Services negates EP – e.g. cleaning: Marchant v Charters (1977); Aslan (1990); Markou v Da Silvaesa (1986); Huwyler v Ruddy (1995) - H case. Agreement between parties that landlord would provide services, but they didn’t provide them. One can argue then that the EP is there, but court said: the occupant is not getting the services but under terms of the agreement, the occupant could insist upon getting these services which would give the landlord unrestricted access, and this negated EP. – Moving occupier to another room: Westminster CC v Clarke (1992) – occupant in a hostel could be asked to change rooms. This is not EP – Introducing other occupiers: Antoniades (1990) – term which reserved a right to the landlord to introduce another occupant and the argument here was that therefore, this did not give EP. Or for example, if there was more than one occupant and one leaves, the landlord says they will get another occupant in, this does not give EP. – Requiring the premises to be vacated: Aslan (1990) – Right to retain a key – ask why? Aslan v Murphy (Lord Donaldson)have to look at reason behind the retention of key. If it is so the landlord can come whenever, NO EP. Or, if it is because in cases of emergencies, landlord does not have unrestricted access and occupant will have EP. – Reserving right for Ian to use premises: Antonaides (1990) Lord Oliver

Exclusive Possession: multi-occupation What if Tiff wants to occupy the flat with her partner? This is easier to apply Templeman’s EP in Street.

l Multi-Occupancy: couples/students – what if Ian rents the flat to a couple or a group of students? Who, if any of them has EP?

We have to ask whether the group or couple collectively have EP. If we prove they have a collective right of EP, this could be in favour of them. l Lodger/Tenant distinction inapplicable? Brooker v Ayers (1987); Hadjiloucas v Crean (1988) This comes to whether they are a joint tenant, tenant in common, and the person who is the tenant of land meaning that they have a lease. Joint tenancy is a way to hold something jointly, this could be jointly holding a lease!! l Ask: do multiple residents share a single right to exclusive possession? l The law approaches this by asking if they are joint tenants of the right? AG Securities v Vaughan (1990) l Joint tenancy is a term of art (one we will meet again when looking at coownership) – here it does not mean the type of right (ownership/lease), but a way of holding the right.

Exclusive Possession: multi-occupation

l Group of occupiers collecitvely must have single right to exclusive possession as “joint tenants” (joint ownership: see co-ownership lectures) if it is going to be a lease. l Joint Tenancy of the right to exclusive possession exists where the following ‘four unities’ exist: – Possession – right to occupy as single property- they all have to have the same right to have the property – Interest – same period/obligations (rent) – Time – acquiring rights at same time from L- the right is being given to them at the same time – Title – single rather than separate agreement with L

If any ONE of them is missing, there is NO joint tenancy and NO lease.

If you have a joint tenancy, you have these four unities which are useful to you. You may want to use this. Because if the toilet breaks, you want to show the landlord has a statutory duty to repair.

If you have a lease, you are all jointly and severally liable for the lease amount. If one person does not want to live with you anymore, you still have to pay their sum. In such a case, you want to show you did not have all four unities, and no lease so just an occupancy as a result, and so you will only pay the amount you are liable for.

Exclusive Possession: multi-occupation Why would you be deemed to have an occupancy or a tenancy? l A-G Securities v Vaughan (1990) (group of flat sharers)- 4 professionals coming and going at different times, each responsible for their own rents. They entered into separate license agreements of a bedroom in the house. Court said: you do not as a group have EP. You do not have the four unities of PITT especially time. This is an example of where you DON’T HAVE THE FOUR UNITIES. There was also no collective right to EP. l Antoniades v Villiers (1990) (couple); - these two cases were decided by HL at same time. In Ant, the landlord insisted the couple who moved in signed separate documents but had identical terms. This had that they pay half rent each. It also said another person could come and live there in the attic. Applying PITT, they don’t have a joint tenancy. No unity of possession as they can get someone else. Separate interests as paying different amount separately, time- depends whether they signed at same time or not and title as had different documents. This would mean they had no joint tenancy, and no license.

Court said: these were two separate agreements that were interdependent, one would not move in without the other. It was a small room and if one was to introduce a third party, one would have to question how much room there would be for them and so the third party would share the room with the couple.

On basis of interdependent agreement- court said there was EP. They didn’t look at how the couple was each responsible for their responsibility of the rent l Antonadies – a generous approach in finding that the couple’s separate agreements to be interdependent rather than independent? l Mikeover v Brady (1989) – couple with separate agree...