ABDULQADIR NAEEM – PROPERTY LAW

DENNING LAW SCHOOL

LEASE / LICENSE DISTINCTION

The distinction between leases and licences is significant in the study of property law because it is a
straightforward illustration of the difference between having a proprietary right (such as a lease) or a
personal right (such as a licence). The holder of a licence has merely personal (i.e. contractual) rights
against the owner of the property they occupy. Because this right is purely contractual, it will not be
enforceable against the rest of the world, unlike a proprietary right. By contrast, the holder of a lease has
proprietary rights against the landlord, as well as having contractual rights against their landlord. This
means that in many of the cases we consider leaseholders had rights under the Rent Acts to protect them
from being arbitrarily thrown out of the property. It also means that their rights, as proprietary rights, are
capable of binding anyone in the world.
Lease and License
Lease is a propriety right connected with the land and cannot be revoked at will, it creates a landlord-
tenant relationship and under applicable laws, the landlord has certain obligations to provide basic
amenities to the tenant, whereas a license is a personal right which can be revoked at will, does not create
a landlord tenant relationship and no amenities have to be provided. Since a landlord preferred grant of
license and due to more resources could understand the distinction better then potential tenant, they made
tenants sign “license agreements” without them knowing its implications which eventually led to
termination and injustice as the courts previously adopted a subjective approach whereby the agreement
was conclusively i.e. if the agreement stated that it was a license then the courts had no choice but to
deem it as such. However, due to the injustices caused, the courts in Street v Mountford introduced an
objective criterion where if 3 conditions were met the rights could be capable of being a lease
notwithstanding what the agreement stipulated.
The following conditions were set out in the case of Street v Mountford:

1) Grant of Exclusive Possession:

This is grant of exclusive occupation and control of the premises, such that even the
landlord cannot enter without the permission of the tenant. In determining EP, the courts
will look at the substance (i.e. the objective circumstances prevailing and whether control
was actually given) and not the form (i.e. what the terms of the agreement stipulate) and
be vary of sham devices (fraud). It was held in the case of Street v. Mountford that limited
rights of entry do not negate EP, but reinforce it. retention of keys also does not negate EP unless
there is evidence that the owner who retained keys can prove that he or she could use the keys to
enter the premises without the tenants consent at anytime at their will. (Aslan v Murphy).

It was also held in Street v Mountford that if there is provision of services then EP will not be
considered, but the courts will look at the substance over form i.e.: where the service was
genuinely available example hotel rooms etc. (De Silveso) (Merchant v Chanter) or provided and
that too provided on continuous basis and not just to show the courts that EP should be negated.

The decision of the House of Lords in Street v Mountford identified that the court will
look for ‘the true bargain’ between the parties and so will ignore shams. Therefore, just
because a document claims on its face to be ‘a licence’ that does not mean that the courts
will treat it as such unless they genuinely believe that that is the true bargain between the
parties. It is common for landlords to claim that their arrangement is merely a licence
ABDULQADIR NAEEM – PROPERTY LAW
DENNING LAW SCHOOL

(and therefore that it does not create proprietary rights for the tenant). The courts will
ignore such provisions if they consider that that is not the true position between the
parties in the remainder of the circumstances.

There are certain circumstances where there is EP but the courts have refused to grant a lease and
these circumstances are as follows:

i. In cases where a public sector entity is a landlord and may be in occupation of granting
accommodation to homeless people then for policy reasons in particular to ensure that
such entities better manage their housing stock, a license is usually granted instead of a
lease – Westminster CC v Basson, WCC v Clarke and Gray v Taylor.
ii. Lord Denning in the case of Facchini v Bryson explained at length that certain entities
will not be granted a lease even when EP is present:
a) a mortgagee in possession upon default of the mortgagor.
b) a person who is in occupation by virtue of an enforceable contract of sale.
c) where there are no intentions to create a legal relation (Marcroft Wagons –
Friendship and Jones v Padvatton – family).
d) Service occupancy – i.e. where occupation is given to an employee for better
provision of services (Norris v Check field).

It was held in Clear Channel UK case that advertisement hoardings do not have EP and are
therefore licenses

2) Term Certain:

The term must commence at a time certain and exist for a definite period (Lace v
Chantler [1944] where a lease expressed to last for the duration of the Second World War
was deemed to be too uncertain). As long as the maximum duration of the term is known
in advance, it is immaterial that it may come to an end at an earlier date (e.g. by the
service of a notice to quit or on the occurrence of some other event). In Prudential
Assurance Co Ltd v London Residuary Body [1992] - the House of Lords reasserted a
strict interpretation of the certainty of term rule after a number of cases (most notably Re
Midland Railway Co’s Agreement [1971] and Ashburn Anstalt v Arnold [1989]) had
sought to relax its requirements. Therefore, todays law is that the maximum duration
should be certain (PLEASE REFER TO CLASS DISCUSSIONS ON THIS POINT).
Whilst this decision is criticized as being a judicial gloss (an artificial requirement) since
it does not serve any useful purpose and is a requirement of form rather than substance.

Accordingly, this principle is further criticized in light of the House of Lords’

unenthusiastic application of the rule in Prudential in the case of Mexfield Housing Co-
operative Ltd v Berrisford [2011] where the case involved a clause in an occupancy
agreement that stated that it could only be terminated if the occupier was in arrears or had
otherwise breached its terms. In the Court of Appeal it was held that the agreement was
void as a lease for uncertainty of term as its maximum duration was uncertain under
Prudential v LRB. On appeal to the Supreme Court the agreement was seen differently: it
was accepted that a lease of uncertain duration was void for lack of certainty of term.
However, before the 1925 legislation, such a lease would have been deemed to be a
tenancy for life determinable on the happening of the uncertain event, which under
ABDULQADIR NAEEM – PROPERTY LAW
DENNING LAW SCHOOL

s.149(6) LPA 1925 was converted into a tenancy for 90 years, determinable on the death
of Ms Berrisford or in accordance with the terms of the original agreement. The Supreme
Court, like the majority in Prudential v LRB, showed no great enthusiasm for the
certainty of term requirement and consequently embraced an imaginative means of
avoiding its implications on these facts. However, you should be aware of the limits of
the decision. For example, the device whereby a lease of uncertain duration is deemed to
be a determinable life tenancy will not work where the lessee is a corporate entity as they
cannot hold a lease for life. In Mexfield, the application of the rule that converts an
uncertain term to a 90-year lease determinable on the tenant’s death (‘the Rule’) was
consistent with the intention of the transacting parties. However, Baroness Hale
contemplated situations in which the application of the Rule would frustrate their
intention. Hildyard J was confronted with just this situation in Southward Housing Co-
operative Ltd v Walker [2015]. The landlord granted to the tenants a weekly tenancy but
agreed not to terminate the tenancy as long as the tenants observed their obligations under
the lease. As the fetter on the landlord’s ability to terminate the tenancy created an
uncertain term, Hildyard J had to decide whether the Rule applied. As a matter of
construction, Hildyard J concluded that the parties envisaged that the tenancy would be
long term, but that they did not intend to create a lease for the tenants’ lives: the provision
permitting the landlord to terminate in the event of breach was inconsistent with any such
intention. Accordingly, Hildyard J considered that the application of the Rule to the case
before him ‘would confound the accepted approach to the construction of any agreement,
including a tenancy agreement, substitute for the meaning of the contract on its true
interpretation an entirely different contract, and thereby contradict the intention of the
parties.’ Hildyard J was able to avoid this ‘bizarre’ result. After a careful analysis of the
judgments in Mexfield he concluded ‘with diffidence and anxiety’ that the Rule can be
displaced where its application would be inconsistent with the intention of the transacting
parties or would frustrate fundamental aspects of their agreement. One question remained
for consideration: if the lease was void for uncertainty and was not saved by the
application of the Rule, what was the effect of the parties’ agreement? Hildyard J adopted
the obiter comments in Mexfield and held that the agreement took effect as a contractual
licence – a licence which could only be determined in accordance with its terms.

Please note that lack of a commencement date does not necessarily render a lease void,
particularly if it is a commercial lease and the parties intended it to be enforceable:
Liverpool CC v Walton Group plc [2002].

Finally, note that perpetually renewable leases are converted into terms of 2,000 years:
s.145 and Schedule 15 LPA 1922. The danger here is that a lease containing a covenant
for renewal on the same terms may be construed as a perpetually renewable lease and
converted to a 2,000-year term. Compare Caerphilly Concrete Products Ltd v Owen
[1972] and Marjorie Burnett Ltd v Barclay [1981] where it was stated that ‘...the leaning
of the courts has been against perpetual renewals’.
ABDULQADIR NAEEM – PROPERTY LAW
DENNING LAW SCHOOL

If there is no term in a tenancy agreement but only stipulates that the tenant can stay so long as he
pays monthly/quarterly/yearly rent then the term is certain and courts will look at this as a
periodic tenancy with the term being 30 days or 365 days as applicable.
3) Rent Charge:

Rent is not an essential characteristic of a lease (see s.205(x) and (xxvii) LPA 1925;
Ashburn Anstalt v Arnold [1989]), but almost every lease will involve payment of rent or
a lump sum by the tenant. A periodic tenancy’s duration is aligned with the period over
which the rent is quantified (e.g. if rent is quantified on a monthly basis, it is a monthly
periodic tenancy and can be brought to an end by a month’s notice to quit from either
party). However, if a lease is given by contract and not deed, then without rent the contract will
be unenforceable for want of consideration and without rent it may also be difficult to establish
intention of lease.

Other Principles
Multiple Occupancies: As a legal title to land can only be co-owned by joint tenants (s.1(6) LPA 1925), to
have a legal lease they must satisfy the four unities (see AG Securities v Vaughan): 1. Possession – they
all have the right to exclusive possession against the world. 2. Interest – they all have the same interest
in the property and their rights and obligations are joint rather than separate. 3. Time – the interest
begins and ends at the same time. 4. Title – the estate is created by a single transaction. In other words,
if more than one party are occupying premises jointly then in addition to the Street criteria the parties will
have to prove 4 unities of time, title, possession and interest, which the courts will determine based on
substance and not form (Antonaides v Villieus) (Mikeover v Brady) (AG Vaughan Securities)
Bruton Tenancy: In the case of Bruton the courts created a new concept of a non-proprietary lease, which
is a lease that is not connected to the land but creates a landlord tenant relationship and therefore, can also
be granted even where the landlord himself is a licensee. This concept created ambiguity in the law as it
went against the core difference between a lease and a license, which was that the former was proprietary
and the latter, was personal. In this case, he may have had exclusive occupation, which can be granted
under other arrangement but did not have EP, which can be granted only under a lease. However, in the
subsequent cases of Kay v London Borough Council of Lambeth, Green case and Mitchell v
Watkinson, the bruton tenancy was granted but it was held that such tenancy is non-proprietary, purely
between the parties and cannot bind a third party or the fee simple holder.
Walsh v Lonsdale: If a person has agreed to grant a lease by contract and then refuses to do so, the tenant
can apply to the court under the Walsh principle for specific performance i.e. The courts will order the
landlord to grant equitable lease if: 1) Possession has been delivered; 2) Consideration i.e. rent is present;
3) The tenant comes to equity with clean hands.
Case Facts:

Street v Mountford - Mr Street, by an agreement which stated that it was a licence, granted Mrs
Mountford the right to occupy rooms 5 & 6 of the property 5 St Clements Gardens in Boscombe for a rent
of 37.00 per week. The question for the court was whether the agreement was, as expressed in the
agreement, a licence, or whether it was in fact a lease. The terms of the agreement included that Mr Street
could enter the rooms at any time to inspect , to read the meter, to carryout maintenance and install or
replace furniture or for any other reasonable purpose. No one other than Mrs Mountford could occupy or
 ABDULQADIR NAEEM – PROPERTY LAW
DENNING LAW SCHOOL

sleep in the room without permission. No children or pets were allowed. The licence could be terminated
by 14 days written notice. The agreement also stated the that the licence did not and was not intended to
give a tenancy and conferred no protection from the Rent Acts. The agreement was held to be a lease –
substance over form (refer to class discussions)

Aslan v Murphy - Mr Murphy occupied a basement room owned by Mr Aslan. It was a small room
measuring 4ft 3in by 12ft 6 in. The agreement stated that the licensor was not willing to 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 licence fee. The agreement also reserved Mr Aslan the right to retain keys. Mr
Aslan was to provide services in the form of cleaning the room, rubbish collection, provision of and
laundering of bed linen. However, in practice no others were permitted to enter the room and no services
were actually provided. Mr Murphy was a tenant rather than a licensee. The provisions relating to
exclusive possession, permitting others to use the room and the provisions for services were a pretence for
the sole purpose of defeating the Rent Act. The agreement was wrongly described as a licence. The
retention of keys by a landlord will not automatically negate exclusive possession – substance over form
(refer to class discussions). It was also held that the landowner had not retained exclusive possession by
including in a residential occupation agreement a term that required the occupant to vacate the premises
for 90 minutes every day. The Court of Appeal concluded that the term was ‘wholly unrealistic’ and a
clear pretence, and that it should be ignored in ascertaining the true relationship between the parties.

Antoniades v Villiers - An unmarried couple occupied an attic flat with one bedroom with a double bed.
The owner had insisted they enter separate agreements which were described as licences and they were
required to separately pay half the rent. The agreements contained a clause reserving the owner the right
to occupy the flat or to nominate another to occupy it. There was a sofa bed in the living room so this may
have been physically possible, nevertheless the House of Lords considered the clause to be a sham and the
couple were held to be tenants in joint possession.

Mikeover v. Brady – intention of two parties to live together but pay rent separately – courts held that
the two agreements did not in substance prove unity of title as the intent was always not be responsible
for the other party.
Lace v Chantler - Duration must be known and certain from the outset. Here 'for the duration of the war'
was used however held this was not certain enough to create a legal lease.
Prudential Assurance Co v London Residual Body - 'Tenancy until land required for road widening' -
not certain enough to create a legal lease.
Ashburn Anstaldt v. Arnold: Rent is not required as a component of a lease - Also S205(xxvii) LPA.
General Concepts

A lease is a carvout of fee simple for a certain number of years and is capable of being a legal
proprietary right – S.1 (1) (b) of LPA 1925.
A lease of 3 years or below can be oral provided the tenant takes immediate possession and pays best
rent i.e. rent which is not nominal – S.54 (2) LPA 1925.
For a lease between 3-7 years a deed is required – S.52 LPPA 1925.
For a lease above 7 years, registration is required – S.27 LRA 2002.
A legal lease above 3 years but below 7 years can be entered on the registry as notice (S.32 and S.33
LRA 2002) but a legal lease below 3 years cannot be entered on the registry as it will clog the same and
therefore, overrides under Schedule 3 Para 1.
ABDULQADIR NAEEM – PROPERTY LAW
DENNING LAW SCHOOL

Q) Tina and Yves saw an advertisement for a flat in London on the internet. It read: ‘Cheap flat for rent.
Would suit couple or two individuals sharing. References required.’ The landlord was Susan. Tina and
Yves met with Susan to view the flat. The flat was comprised of the following rooms: one bedroom with
a double bed; one bathroom with a bath and shower; one kitchen; one utility room with enough room for a
washing machine; and one living room. Tina asked Susan: ‘How could two people possibly share this flat
if they weren’t a couple?’ Susan answered: ‘The sofa folds out into a bed, or we could probably do
something with the utility room like putting a mattress in there.’ Susan gave them a document to look at.
It was titled ‘Licence Agreement’ and contained the following clauses: (1) The landlord has the right to
introduce any third person she chooses to occupy the property with the occupants. (2) The occupants will
be separately responsible for half of the licence fee of £800 per calendar month, but the landlord reserves
the right to recover the balance from the other occupant. (3) The occupants shall be required to leave the
property every day between 10.30am and 12.00pm. Susan has also offered to provide a cleaner for the
property if Yves and Tina paid an extra £80 per month. Nothing has been signed yet. Advise Yves and
Tina as to their rights if they were to sign the agreement and advise them generally. (2018 Zone A)
Q) Peter and Lois are a couple. They have lived together for twelve years and Lois is six months pregnant
with their first child. They were looking for a flat in Birmingham, England. They found an advert in the
local newspaper which read: ‘Fashionable flat. Would suit young professionals who like to party.’ The
owner, Stewart, showed the couple round the flat. It was a large minimalist flat over two floors with two
bedrooms, a bathroom, a downstairs lavatory and an open plan living room and kitchen. Peter and Lois
said they were interested. Stewart provided the couple with a ‘licence agreement’ with the following
terms: (1) This is a licence, not a lease. The owner does not agree to rent the property out on any other
basis. In the event that the occupants seek a declaration that this is a lease, this agreement shall
automatically be null and void. (2) The occupants will pay £350 each per week as an occupation charge.
They shall be separately responsible for that occupation charge and not responsible for each other’s
payment obligations. (3) The owner will provide cleaning services each week for which the occupants
will pay £150 per month. (4) The owner reserves the right to occupy the property with the tenants. Peter
and Lois signed the agreement. They are now seeking your advice as to the nature of their rights. Stewart
did not provide cleaning services because Lois told him “we can manage perfectly well, thank you”.
Therefore, the couple did not pay the £150 per month. Last Saturday night, Stewart arrived at the flat
unannounced and slept in the second bedroom. Peter and Lois want that room for their baby when it is
born. Advise Peter and Lois. (2018 Resit Zone A/B)