Landlord and Tenant Law Lease or Licence - Essay Example

In order to advise Mr Smith with regard to his potential rights of occupancy to the room it will be necessary to firstly determine whether his livingarrangement constituted a contractual arrangement under a licence, or alternatively granted proprietary rights under a lease. If the living arrangements point to rights under a lease, it will then be necessary to consider whether the interest takes effect as a legal or beneficial interest, which is relevant to determining Mr Smith’s position in enforcing these rights against Mr Jones. With regard to whether or not the living arrangements constitute a lease or a licence, the general principle of law is that unless an individual occupying another’s land has exclusive possession, they will be a licensee and not a tenant1. Accordingly, if Mr Smith does not have exclusive possession of the room, he will be considered a licensee. Furthermore, the other key defining factor of a tenancy is the offer and acceptance of exclusive possession for a term at “rent2” In the current scenario, the weekly payment is referred to as the “licence fee”. However, the referral to “rent” or “licence fee” is not determinative per se. For example, in Marchant v Charters3, it was held that certain factors are irrelevant to determining whether a lease or licence exists and that it was irrelevant whether the occupation is permanent or temporary and that it was irrelevant if payments were called rent as “use of such terms merely creates a convenient means of verbal referenced to the payments4”. The distinction between a lease and a licence was formulated in the leading case of Street v Mountford5, where Lord Templeman asserted that the general test for determining a tenancy was to firstly consider the question of “exclusive possession” as a starting point and it is irrelevant whether the agreement itself is labelled a licence. Therefore whilst the agreement between Mr Smith and Mr Jones is labelled a licence, the terms of possession will be relevant to determining whether the occupation constitutes a licence or a tenancy regardless of the label given to the arrangement. Moreover, in referring to the decision in the street case, in Crancour Ltd v Da Silvaesa6it was interpreted that if on the facts, intention to create a legally binding agreement could be determined; it was irrelevant whether the parties actually intended to create a lease or a licence. They referred to Lord Templeman’s statement in Street v Mountford that the terms of occupancy as a lease or licence were ultimately dependent on the facts of each case. Furthermore, in Street v Mountford7 Lord Templeman further stated that the existence of “exclusive possession” was essentially a question of fact and that the intention of the parties was irrelevant8. Accordingly, although at the point of grant both Mr Smith and Mr Jones may not have intended the occupation arrangement to take effect in exclusive possession, if Mr Smith can establish that in fact, the occupation arrangement resulted in the grant of exclusive possession, the arrangement will constitute a lease and not a licence. Additionally, in Street v Mountford it was highlighted that the important issue was to consider whether the occupation was actually exclusive regardless of the terms of the written agreement. This was to ensure protections for provisions purposefully geared towards circumventing legal rights given to tenants. Therefore, if Mr Smith’s possession is actually exclusive it is irrelevant that the agreement enables third parties to occupy his room at any time. Additionally Smith comments9 that with regard to rented accommodation an occupier in residential accommodation is either a lodger or a tenant10 and it would appear from the current scenario that Mr Smith and Mr Jones intended a lodger arrangement. In Street v Mountford11, Lord Templeman asserted that the facts would point to a lodger if the landlord provides attendance or services which required the landlord to exercise unrestricted access to and use of the premises. However, in practice many landlords have not wanted to provide the services required but have used the shield of lodger as a route to indicate a licence12. For example, in the case of Aslan v Murphy13, the occupier was made to vacate the premises for 90 minutes every day and the owner retained a key on the pretence of cleaning the room and providing bed linen. However, the Court of Appeal asserted that the term requiring the vacating of room was not actually intended to be acted upon and was therefore a sham14. Additionally in the Aslan15 case, it was asserted that retention of a key proved little by itself and what was important was the consideration of why the key was retained. If it was solely intended for emergency access, it was consistent with a lease. Alternatively, if the key was used for regular access to provide frequent services such as cleaning at regular intervals, the occupier would be a lodger under a licence16. With regard to the current scenario, it appears that other than the bed being made, Mr Jones does not provide any services. Moreover, the regular receipt of rent and term of a year as a minimum requirement of Mr Smith’s occupation will also point to the legal position of Mr Smith’s occupation of the room being under a tenancy. For example, in Prudential Assurance Co Limited v London Residuary Body Limited17 the property concerned was non-domestic land and the landlord required the property back for road widening. The House of Lords held that whilst the original agreement did not constitute a tenancy because it was for an uncertain duration, the fact of possession, payment and acceptance of rent resulted in a periodic tenancy. If we apply this by analogy to the current scenario, it is evident that the weekly payment of rent, possession and minimum term of the year would suggest a periodic tenancy in line with the rationale in the Prudential case. Additionally, a person sharing a house may still be a lodger as opposed to a tenant18 and the relevant consideration is whether Mr Smith’s occupation satisfied the requirements of “exclusive possession” as set out in Street v Mountford19. In AG Securities v Vaughan, Antoniades v Villiers20, the House of Lords was dealing with two linked appeals regarding joint occupiers, although the facts of each case were different. In AG Securities, a flat was occupied by four persons, each having their own room. As one left, a new owner would enter into a new six month agreement with the owner. The result was that each of the four had entered into agreements at different times, terminating at different times. As such, it was held that each occupier merely had a right to share the property with the others under a licence. Parker LJ asserted that “the flat was suitable for use by a multiple but shifting occupation and was so used21”. Accordingly, no individual occupier could be held as having exclusive possession, nor was it possible to find that the four jointly enjoyed exclusive possession due to the varying periods of occupation and termination22. Furthermore, it was found on the facts that the four occupants paid different rents, separate agreements were entered into with each of them and there was no unity of time. Accordingly, the legal requirements for joint tenancy were not satisfied, which again highlighted the existence of a licence in reality. The Antoniades case also involved a sharing arrangement, where two occupiers shared the property as cohabitees. However, the owner entered into separate agreements with each of them (described as licensees in the written agreement) and included a clause that the owner could introduce other licensees or live there himself. However, in considering the size of the flat, the House of Lords refused to accept that anyone other than the two occupiers could live in the premises and as such, the agreements were interdependent and the clause in the contract merely operated as a sham and as such, the occupancy clearly constituted a lease23. Furthermore, the House of Lords delivered a scathing attack on the Court of Appeal’s approach to the four unities principle in the case of Mikeover Ltd v Brady24, where in facts similar to Antoniades, the Court of Appeal had held that the occupiers could not hold as tenants due to the lack of four unities. In the Mikeover decision, the Court of Appeal specifically referred to the fact that the each occupier had agreed to pay half the total rent and when one left, the owner refused to take the other half from the remaining occupier as justification for its decision. The House of Lords rejected this rationale in Antoniades and Lord Oliver asserted that if the real transaction points to the couple becoming joint tenants with exclusive possession, then it would follow that each would be liable for rent under a tenancy25. In applying this reasoning by analogy to Mr Smith’s possession, whilst the facts clearly point to exclusive possession of the room and regular payment of rent to Mr Jones, Mr Jones also lives in the property and the different entry points to the occupation of the property negates the unity principles for a joint tenancy. However, if Mr Smith’s possession is exclusive, then it will still potentially constitute a tenancy as opposed to a licence. Mr Smith’s potential rights to a tenancy are further bolstered if we consider the decision in Uratemp Ventures Limited v Collins26where the House of Lords determined that a hotel room was held under a lease on grounds of the room constituting part of the property over which the occupant had exclusive possession. The House of Lords’ rationale was rooted in defining the room as a separate dwelling, which Lord Millett defined as “the place where a person lives and to which he returns to and which forms the centre of his existence”27. Therefore on this basis, if the room that Mr Smith occupies is viewed as the “separate dwelling” from the property itself and Mr Smith has exclusive possession of this room, then it would strengthen Mr Smith’s rights to claim that he had a lease of the room as opposed to a contractual licence. The next issue is to consider is whether Mr Smith’s rights under the lease are enforceable in terms of the lease being valid. In order for a lease to be valid, the case of Lace v Chantler28 asserts that it must be for a determinable period (in the case of periodic tenancies/recurring tenancies) or a specified period of time, which in the current scenario is specified as being for a period of one year. However, with regard to the current scenario, it is important to mention at the outset that the lease if valid may not constitute a legal lease and may take effect in equity29. In summary, the facts indicate that Mr Smith has strong grounds for arguing that his occupation constituted a tenancy as opposed to a licence. BIBLIOGRAPHY Abbey, Robert M. “Blackstone’s Guide to the Land Registration Act 2002” Oxf.U.P. Blackstone’s Statutes on Property Law (2007-2008) 15th Edition Oxford University Press. Bright, S (1991). Beyond Sham and into Practice 11 Oxford Journal of Legal Studies 138. Bright, S (1993). Uncertainty in leases: Is it a vice? 13 Legal Studies 38. M. Dixon (2005) “Principles of Land Law”, 5th Edition. Routledge -Cavendish Publishing Dixon, M (1999). Leases and Licences: new headaches? 28 Student Law Review 60 A J Oakley (2001) Megarry’s Manual of the Law of Real Property 8th. Sweet & Maxwell Pawlowski, M (2002). Occupational Rights in Leasehold Law: Time for Rationalisation. Conv.2002 Nov/Dec 550-559. R J Smith (2003) Property Law 4th Edition, Longman R J Smith (2003) Property Law Cases & Materials 2nd Edition, Longman Megarry and Wade., (2007) The Law of Real Property. 7th Edition Sweet & Maxwell Read More