Hong Kong Land Law - Coursework Example

Street v Mountford [1985] AC 809, (HL) Case On the facts of the case Street v Mountford [1985] AC 809, the appellant had been granted the rightto occupy a room under a weekly license fee of 37 pounds with the proviso that the license could not be assigned. The license was provided for in a written agreement and was capable of termination by fourteen days notice in writing.1 Specifically, the agreement was not intended to permit the appellant protection from eviction under the Rents Act.2 The appellant enjoyed exclusive possession of the room under the license and made an application to acquire fair rent registration, and the landlord made an application to the county court to have the arrangements designated a license. The county court denied the landlord’s application declaring that it was a tenancy.3 The landlord appealed the county court’s decision and the Court of Appeal ruled that despite the right to exclusive occupation the agreement itself defined a license and reflected the intentions of the parties to create a license. The matter was appealed to the House of Lords with the result that the decision rendered by the Court of Appeal was reversed. The House of Lords ruled that a right to exclusive possession for a fixed term would be deemed a tenancy provided there were no special circumstances negating the tenancy and the parties’ intentions had no bearing on this presumption.4 Essentially, the ratio decidendi of Street v Mountford was that exclusive possession for a fixed time at a rent was a lease despite the parties’ express intentions and the form of the agreement. As Lord Templeman explained, distinguishing between a license and a tenancy/lease depends entirely upon the terms and conditions of occupation. Lord Templeman went on to say that: “...there is no doubt that the traditional distinction between a tenancy and a license of land lay in the grant of land for a term at a rent with exclusive possession.”5 A license would arise if the agreement granted a right to occupy the land for a specific purpose, for instance the cutting go timber. However, if such a grant was merely incidental to a tenancy, it would be regarded as a lease rather than a mere license.6 Lord Templeman emphasised that the nature of the occupancy was therefore crucial for ascertaining whether or not upon a true construction of the agreement a license or a lease to occupy was granted. For example, previously in Abbeyfield (Harpenden) Society Ltd v Woods [1968] 1 WLR 374, the defendant was a lodger in an old folks’ home with all the added benefit of housekeeping, meals and other services outside of mere occupation of a room. In such a situation the occupant as lodger would be a licensee since all those benefits function to bar exclusive occupation.7 In other words the payment rendered was not merely for occupation. It was for other services together with occupancy and would certainly explain why a lodger in such circumstances could not claim to have been paying rent for mere occupation of a room. Similarly in Marchant v Charters [1977] 3 All ER 918 a bed-sitting arrangement in which the landlord provided clean linen and cleaning services was deemed a license.8 The scenario is essentially the same as in the Abbeyfield case in which the occupancy was aligned to that of a lodger rather than a tenant. The added benefits of cleaning and clean linen likewise barred exclusive possession. In the end, the landlord continues to remain in occupancy via the provision of services. The approaches taken by Marchant v Charters and Abbeyfield were essentially indorsed by the House of Lords in Street v Mountford. Ultimately, in ascertaining whether or not an agreement is a license or a tenancy the court has as its task distinguishing between a “deliberate sham” to avoid the consequences of re-entry and eviction and a genuine license.9 To this end the most important inquiry is whether or not the occupant has exclusive possession of the property in question.10 Moreover, a tenancy will not be implied if the court is satisfied that the parties did not have the necessary intention to create legal relations. For instance in the case of Cobb v Lane [1952] 1 All ER 1199, the homeowner’s brother occupied a home free of rent.11 It therefore follows that in the absence of a rent, there was no tenancy and the brother occupied the home via a license. Similarly, a family permitted occupancy of a cottage free of rent were also licensees.12 In Booker v Palmer [1942] 2 All ER 674, during the war an owner allowed a number of evacuees to occupy a cottage. It was held that evacuees were licensees and Lord Greene stated that: “...to suggest there is an intention to create a relationship of landlord and tenant appears to me to be quite impossible. There is one golden rule which is of very general application, namely, that the law does not impute intention to enter into legal relationships where the circumstances and the conduct of the parties negative any intention of the kind.”13 However, prior to Street v Mountford there was no certainty as to what course the court would take with respect to a license if the agreement specifically described the relationship as a license but in actuality the arrangements were no different from a tenancy. For instance in the case of Somma v Haslehurst [1978] 2 All ER 1011 the Court of Appeal upheld an agreement for a license although there was in fact, exclusive occupation.14 The practice of following form rather than substance was not that unusual because of the residual tension between the proprietary and contractual nature of a leasehold. On the one hand the landlord/owner of property has conferred upon the occupier a right to occupation and on the other hand the right is subject to specific terms and conditions. 15 Street v Mountford attempts to remove those tensions by focusing on the both the nature of occupation and the terms and conditions of the occupancy. In other words the courts will look at the substance of the agreement rather than its form. The idea is to prevent a landlord/landowner using the license as an instrument of fraud or to prevent a sham license which effectively denies the tenant protection from eviction under the Rents Act 1977. More importantly Street v Mountford clarified the common law and statutory (Law of Property Act 1925) position on what constitutes an estate in a term of years. The House of Lords determined that a tenant could acquire the necessary estate by virtue of exclusive possession of the premises for a fixed or periodic term for a fixed sum or payments on terms. Lord Templeman went on to state that a leasehold did not intend to confer an estate as such, but rather a right in personam.16 The ruling in Street v Mountford was subsequently applied in AG Securities v Vaughan [1990] 1 AC 417 and Antoaides v Villers [1990] 1 AC 417 which were tried at the same time. In AG Securities there were four agreements between occupants of a house with respect to share occupancy of the house. The agreements had been made at different times. Since the agreements were on different terms they did not constitute a joint tenancy. Each of the occupants changed rooms from time to time with the result that there was essentially no exclusive occupation of an individual room.17 In Antoniades v Villers a similar scenario arose, only the agreement had been made with a couple. This agreement stated that there was no right to exclusive possession and the parties could occupy the premises from time to time.18 In Antoniades v Villers the House of Lords, in applying the ratio decidendi in Street v Mountford looked to substance rather than form. The agreement may have described the arrangements with the couple as a license, but in actuality, the couple enjoyed exclusive possession in consideration of rent. Therefore, they had every right to expect the rights and obligation conferred on tenants under the Rents Act and under common law.19 The House of Lords demonstrated that in cases where there is tension between the existence of a license and a lease, the court would look behind the descriptive words used in the agreement and ascertain: “...whether the residue of agreed terms genuinely discloses the presence of a lease of tenancy.”20 In other words, in order to distinguish a lease from a license, the essential criterion is ascertaining whether or not there is “exclusive possession.”21 In AG Securities v Vaughan [1990] 1 AC 417 however, the House of Lords found tht the basis of each party’s occupancy was severable from the others so that it was impossible to find unity of possession. As such each parties right to possession was no more than a license. This was particularly so since neither party had a right to exclusive possession. In this way, it was impossible to state with any degree of certainty that any of the parties, either individually or collectively had intended to create a tenancy.22 In another post Street case, it was ruled that an agreement describing an occupancy as a license was in fact a tenancy. In Aslan v Murphy [1990] 1 WLR 766 the complaint permitted the defendant to occupy his basement. The agreement permitting the occupancy stated that the defendant was a licensee and could occupy the basement together with other licensees. The owner kept the keys to the basement and the defendant was required to give up possession for at least 90 minutes each day. It was held however, that the defendant had exclusive possession and the threat of other licensees could not function to alter the presumption. Lord Donaldson pointed out that: “The labels which parties agree to attach to themselves or to their agreements are never conclusive and in this particular field, in which there is enormous pressure on the homeless to agree to any label which will facilitate the obtaining of the accommodation, they give no guidance at all.”23 The High Court of Hong Kong Special Administrative Region, applied the ratio decidendi in Street to Yip Alice et ales v Wong Shun Action No. 12614 OF 1999. The case was tried in 2002 and a judgment entered in April 2002. On the facts of the case, the plaintiffs had entered into a service agreement with the defendant. Under the terms of the agreement the defendant managed a restaurant owned by the plaintiff on specific terms for a monthly fee due to the plaintiffs. The agreement referred to the agreement specifically as a license. The defendant argued at the hearing that despite the wording of the agreement he was always under the impression that he had leased the premises from the plaintiffs.24 The court ruled that: “What is important is the parties’ intention, objectively ascertained from the wording of an agreement and the factual matrix, at the time of contracting.”25 The facts revealed that the sole basis of the agreement was to permit the defendant to occupy the premises for the purpose of operating a restaurant. The fixed fee was for the restaurant and could not be construed as rent. Moreover, the plaintiffs had expressly stated that they would not give up possession of the premises which effectively barred any claim that the defendant had exclusive possession.26 A similar arrangement came up before the Hong Kong District Court in the matter of Tin Hau Temple between The Secretary for Justice v Zhao Huo Zirconium DGMP 697/2003. In this case the defendant’s occupation was for the express purpose of managing a Temple. Once again, the Hong Kong Court, applying the rationale expressed in Street concluded that the defendant’s occupation was for a specific service and could not be construed to confer upon the defendant the right to exclusive possession. In other words the owner had reserved the right to occupy the premises at will.27 The facts of the Hong Kong cases can be distinguished from the facts of Street. In the Hong Kong cases there was a clear intention to intern into a service contract with no real right to exclusive possession. In neither case were the defendants occupying the premises in question for any reason other than to run or manage a business. The monthly fee pertained to a fixed profit and could not be interpreted as rent. These findings are therefore consistent with the ratio decidendi in Street. The Street case however is not without controversy. In Bruton v London & Quadrant Housing Trust [1999] 3 WLR 150 the court considered a scenario in which the defendant, a charitable housing association had no right to create or confer upon an occupant a tenancy. The plaintiff, however, claimed otherwise and argued that he was entitled to protection under the statutes regulating landlords and tenants. On the facts of the case, the defendant had been granted a license by a local authority to use vacant homes that were slated for refurbishment to provide short term housing for the homeless. The plaintiff obtained a license to occupy property under the defendant’s ambit and tried to enforce a tenancy under Section 11 of the Landlord and Tenant Act 1985.28 Section 11 makes binds the landlord to the upkeep of the demised premises. 29 The court ruled that although the defendant did not have the right to confer a tenancy on the plaintiff the relationship was such that it was in fact a tenancy. Applying the ruling in Street, the court determined that it was bound by the facts of the case and that since the plaintiff had exclusive possession and paid a rent, he had a tenancy.30 The difficulty with this ruling was that an estate interest was created out of an interest that did not exist. A firmly established tenet of land law has always been that an estate interest can only be created out of an existing interest. Since a license is not an estate interest and only allows access to someone else’s estate, the latter would have been a finding consistent with the traditional tenet of estates in land law. As K. Gray and S. Gray explain, the Burton case: “...controversially confirms the existence in English Law of the phenomenon of the contractual or non-proprietary lease.” 31 It has been submitted that the court’s purpose in Street was to provide a means by which persons enjoying exclusive occupation are protected.32 Likewise the case creates a “doctrine of pretence” in which it seeks to guard against the possibility of landlords describing an occupancy agreement as a license for the express purpose of avoiding the consequences of tenancy protection and rights.33 While the doctrine of pretence serves a useful purpose in denying landlords a disingenuous method of avoiding obligations under tenancies, it can have dire consequences for charities as in the Burton case. A strict application of Street decision with respect to exclusive possession can only discourage charities in helping to place the homeless in temporary accommodations. On the other hand, businesses may be able to escape the doctrine of pretence in the sense that they rarely let premises for residential purposes.34 As manifested by the Hong Kong cases, when occupation is non-residential it is difficult to prove exclusive possession. When exclusive possession cannot be proved, a license will be implied. In the final analysis, while Street may protect individuals who take on short term agreements for residential purposes, it is of very little use to charities and persons agreeing to occupy a business. Bibliography Abbeyfield (Harpenden) Society Ltd v Woods [1968] 1 WLR 374. AG Securities v Vaughan [1990] 1 AC 417. Antoaides v Villers [1990] 1 AC 417. Aslan v Murphy [1990] 1 WLR 766. Booker v Palmer [1942] 2 All ER 674. Bright, Suzan. (1991) “Beyond Sham and into Pretence.” Oxford Journal of Legal Studies. Vol. 11(1) 136-145. Bruton v London & Quadrant Housing Trust [1999] 3 WLR 150. Cobb v Lane [1952] 1 All ER 1199. Colbey R, (2001) “Detecting a Sham”. New Law Journal 151.7006 (1612) Errington v Errington [1952] 1 All ER 149. Goo, S.H. (2001) Sourcebook on Land Law. Routledge. Gray, K., and Gray, S.F. (2005) Elements of Land Law. Oxford University Press. Gray, K., and Gray, S.F. (2007) Land Law. Oxford University Press. Heslop v Burns [1974] 3 All ER 406. Landlord and Tenants Act 1985. Marchant v Charters [1977] 3 All ER 918. Somma v Haslehurst [1978] 2 All ER 1011. Street v Mountford [1985] AC 809. The Secretary for Justice v Zhao Huo Zirconium DGMP 697/2003. Yip Alice et ales v Wong Shun Action No. 12614 OF 1999. Read More