Leases and Licenses

-At the outset, it is important to note that a license is a mere personal right whereas a lease is a
proprietary right. While they may appear similar in some cases, they are extremely different in
terms of their effect on third parties.
-Licenses
-Features of a license:
• As per Vaughan CJ in Thomas v Sorrell, a license is a mere personal permission to use
land belonging to another such that without that permission the use would amount to
trespass.
• There are no formal requirements for creating a license. However, if the license is of a
particular kind, e.g. a contractual license, then the requirements of that form must be
fulfilled.
• Licenses usually arise when the formality requirements of some proprietary right are not
met or where the right is not capable of being a proprietary right at all.
• Since licenses are not proprietary rights and do not “run” with the land, they cannot be
protected through a Notice or through registration as a land charge.
-Types of Licenses
1. Bare Licenses
- The most common type of license is the most common type of license. It can be given in any
form or manner and no consideration is given in exchange of it. The license can be revoked if its
conditions are breached (The Calgarth). These licenses include basic permissions e.g. to deliver
goods up to your doorstep, to deliver a letter etc. It can be revoked easily by giving notice.
2. Contractual Licenses
- These are granted in exchange of consideration. They can arise out of any sort of contract, and
not necessarily one that complies with s.2 LP (MP) A 1989, since no interest in land is conveyed
through a license. The normal contractual remedy of damages is available. However, since land
is unique subject matter, equitable remedies of injunctions and specific performance may also be
available between the parties.
-Generally, the principle of privity indicates that a license can only bind the original parties. This
well-established principle was thrown into doubt by Lord Denning in the case of Errington v
Errington, where he stated that a license granted for a certain duration can be binding for the
entire duration even against the new owner of the property. This is a criticized decision since it
gives no reason for why a personal right should be elevated to the status of a proprietary right.
However, Ashburn Anstalt v Arnold declared Errington to be decided per incuriam and re-
stated the traditional view that a license is personal right. This traditional view was also re-
asserted in Lloyd v Dugdale.
-However, the case of Binion v Evans does create a limited possibility in which a contractual
license may bind a particular purchaser because the purchaser knew about it. However, Lloyd
clarifies this position and restricts its parameters by saying that:
• a contractual license is not proprietary
• there is no general rule that a license will be binding even where the purchaser knew
about it
• a constructive trust will only be imposed where the purchaser’s conscience is effected
• has the purchaser undertaken to perform some new obligation
• has the purchaser gotten a lower price for giving effect to the license
• constructive trusts should not be based on the basis of slender materials
3. Licenses arising out of estoppel
-These arise when a representor gives an assurance to the representee. The representee then relies
on it and the representor’s conscience is affected. However, these licenses are not binding on 3 rd
parties, and only bind those people giving and receiving the representation.
4. Licenses coupled with an interest

-Leases
-A leasehold estate is one of the two estates that may exist at law as per Section 1(1) of the LPA
1925. A leasehold estate can also exist as an equitable estate and are technically referred to as a
term of years absolute in possession.
-Benefits of a lease
• They allow more than 2 people to simultaneously enjoy the benefit of the land. The
freehold owners owns the land itself while the tenant enjoys possession of it. Both the
landlord and the tenant can sell their rights to third parties.
• Appropriate covenants can be inserted into the leasehold agreement which protect the
nature of the property.
-Features of a lease
-According to Lord Templeman in Street v Mountford, as lease was defined as a tenant
possessing exclusive possession for a term certain at rent. This is taken as a definition for a lease,
and shows that there are usually 3 features that demonstrate when a leasehold estate exists:
1. Exclusive Possession
-This is the most important feature of a leasehold, and is the key distinguishing feature between a
lease and a license. This distinction is important because a lease enjoys statutory protection
under the Rent Acts etc. which prevent a landlord from evicting a tenant. However, a mere
licensee can be evicted much more easily. Exclusive possession refers to the fact that a tenant
has the sole right to possess the property and exclude the world from it, including the landlord
himself unless the leasehold agreement provides for the landlord to enter.
-Landlords often insert “sham” provisions in agreements which try and negate exclusive
possession. However, the courts do not look at the form of the agreement but at the substance of
the relationship between the parties.
- Watts v Stewart: the court does not look at the label given to the agreement. A tenancy
agreement may well be a license and vice versa if that is the effect of the provisions.
-There may be situations where the person has exclusive possession but not a lease since the
exclusive possession may be explainable with reference to another bone fide relationship
between the parties.
• Street v Mountford: exclusive possession may exist when a mortgagee is occupying
property, or the occupation is based on charity and friendship. None of these give rise to a
lease.
• Facchini v Bryson: Lord Denning: There may be a range of situations where exclusive
possession exists but no lease. For example, where a person is a service occupier, being a
person who occupies property to perform his duties under an employment contract with
the landowner.
• Marcroft Wagons v Smith: occupation based on friendship does not give rise to a lease
• David v Lewisham: family relationship does not give rise to a lease
• Norris v Checksfield: employment relationship does not give rise to a lease
• Marchant v Charters: where a person is a mere lodger, i.e. he is being provided with
services such as cleaning, there exists no lease.
• Markou v Da Silvaesa: a promise to provide services is not enough, they must actually
be provided.
-Multiple people can be leaseholders only if the 4 unities are present. These are: 1. The unity of
possession i.e. all the parties must be entitled to possess all of the property, 2. The unity of
interest i.e. they must all have the same rights and obligations, 3. The unity of time i.e. the
interests of the parties must come into existence at the same time, and 4. The unity of title i.e.
they must all own title to the property. If these 4 unities are present the parties become joint
tenants and exclusively possess the property against the world.
• Antoniades v Villiers: A romantically involved couple obtained a one bedroom flat
according to an agreement. The agreement said that it was a license, and that the landlord
retained the right to enter the premises and spend a night in the flat. This was clearly a
sham provision that was not intended to be acted upon.

• AG Securities v Vaughan: 4 unrelated people responded to advertisements for rooms

and they all had separate rooms in the same apartment. They had a communal living
room. This was held to give rise to a license agreement since the 4 unities were not
present.
 • Aslan v Murphy: An agreement that said that the landlord could ask the tenant to vacate
the premises for 90 minutes everyday was held to not give rise to a license. The substance
of the rights gave rise to a lease, since the term was never intended to be acted upon.
• Mikeover v Brady: Two friends were required to sign separate agreements stating that
they were responsible for their own rents. It was held that this did give rise to a license
agreement since the friends were genuinely responsible for their own personal share of
the rent and the other party was not expected to pay if one defaulted.
2. The requirement of there being a term certain
-The key distinguishing feature between a leasehold and a freehold estate is that a lease lasts for
an ascertainable period of time while a freehold is not bound by a time limit. A lease granted till
the second world war ends is not valid, but a lease granted for 1000 years terminable by either
party when the second world was ends is valid. This situation can give rise to obvious absurdities
since both of these leases would have the same effect, only one is technically valid and other is
not.
-Lace v Chantler: A lease granted till the second world war ended was not a valid lease. This is
because it was not ascertainable at the start of the agreement when the war would end
-Re Midland Railway Company’s Agreement: This case tried to relax the term certain
requirements. The tenants were granted a periodic tenancy for 6 months, which would continue
to run till the landlord needed the land for his own purposes. The new landlord served a notice,
trying to end the lease even when it was not needed for their own business purposes. The court
held that the parties should be held to their express agreements and that the lease could not be
determined till such time that the land was required for the requisite purposes. They also stated
that the term certain requirement does not apply to periodic tenancies.
-Prudential Assurance v London Residuary Body: A lease granted on land till such time that
the land was needed for road widening purposes was not a valid lease at all. This is because there
was no certain duration for when this event would happen. However, where rent is paid
regularly, a periodic tenancy of such duration after which rent is to be paid may be implied.
-Berrisford v Mexfield: In this case, a lease that could be terminated by the landlord if the
tenant breached any condition of the agreement was held to give rise to a valid lease even though
the term was not ascertainable. The Supreme Court fulfilled the term certain requirement saying
that a lease given to an individual for an uncertain period was converted into a lease for life, and
as per Section 149 LPA 1925, leases for life were converted to leases for 90 years. The House of
Lords took this opportunity to criticize the term certain rule and the anomalies it gave rise to.
-Southward Housing Cooperative v Walker: The Rule laid down in Mexfield only applied in
those cases where the parties intended to create a lease for life in the first place. This
significantly restricts the application of the rule.
-Gilpin v Legg: Jude Paul Matthews: the judge expressed doubt regarding whether the
authorities used in Berrisford could be used to be support the conclusion in the case.
-Hardy v Haselden: Berrisford only applied to agreements for long leases where they have been
created formally, so they cannot apply to periodic tenancies created informally.
3. Rent
-It is necessary to understand that rent is not legally necessary for a lease to be valid-Ashburn
Anstalt v Arnold and Section 205(1)(xxvii) LPA 1925.
-Bostock v Bryant: The rent, if present, must be a certain amount. Paying utility bills, which
fluctuate often, does not count as rent.
-Hill v Booth: It is possible for a lease to exist on the payment of lump sum rather than periodic
payments of rent.

-Formality requirements for creating a lease

-Leases less than 3 years: can be legal if created orally provided that: 1. They are for less than 3
years, 2. Are granted at the market rate, and 3. Come into possession immediately.
-Leases less than 7 years: Need to be created by a deed as per Section 52 LPA 1925 in order to
be legal.
-Leases for more than 7 years: Need to be created through a deed and be registered as per Section
27 LPA 1925 in order to be legal.
-Equitable leases: Can exist where a specifically enforceable contract exists but the lease is not
registered (Walsh v Lonsdale).
- Determination of a lease
1. Forfeiture: In this method of ending a lease, the landlord re-enters the premises when one of
the conditions of the lease agreement have been violated. This right can only be exercised where
the breach has not been waived and there the right of re-entry was allowed in the agreement.
-Section 146 LPA 1925 requires that when a breach occurs, a notice must be served on the tenant
before the right of forfeiture can be exercised. This notice should: specify the breach, require the
breach to be remedied, require compensation be paid, if possible.
-The most important thing when it comes to a Section 146 notice is determining whether the
breach is remediable. If it turns out that the breach was remediable and the landlord did not
require it to be remedied in the notice, he cannot lawfully exercise the right of forfeiture.
-Expert Clothing Services v Hillgate: Slade LJ: The purpose of Section 146 is to give tenants
an opportunity to comply with their obligations before the landlord enters. The test is whether
late compliance with the covenant can remedy the harm the lessors suffered or are likely to
suffer.
2. Notice
-A fixed term lease can only be terminated by notice is this is expressly agreed. A periodic
tenancy can be determined by notice, and any term that prevents the landlord from ever
determining the tenancy is void (Centaploy Ltd. v Matlodge Ltd.). The notice period for
periodic tenancies is the period itself, but for tenancies going up to one year, it is half the year.

-A lease can also be terminated when any party gives notice, and the notice must unambiguously
exercise the notice term (Aylward v Fawaz).