Leases and Licenses

Question 1
Answer:
The question statement asks us to distinguish between lease and a licence. In property
law, the only two existing estates are fee simple absolute in possession and terms of
years’ absolute in possession, according to the (Law of Property Act 1925). The word
"terms of years absolute in possession" relates to a lease, which is defined in s.205(1)
(27)(LPA 1925), but also in (Street v Mountford) as “an arrangement that grants a
person the right of exclusive possession of land, for a term at a rent”.
This test separates a lease from a licence; a licence entails the owner of land granting
another person permission to use the landlord for a certain purpose, such as parking a
car (Hurst v Picture Theatres). Because the criteria is objective, courts will not place
weight on the label used to characterise the agreement, as established in (Street v
Mountford). The most authoritative case on leases is Street v Mountford, in which the
House of Lords established the rule for distinguishing a lease from a licence. A lease or
tenancy occurs, according to the House of Lords, when the arrangement in question
was intended to create legal connections and the occupier was allowed exclusive
possession of the premises for a fixed or periodic term at a rent. Anything else is
regarded as a licence. Legal leases require a deed, which must be signed and
witnessed (s.52 & s.54 LPA 1925). Equitable leases, on the other hand, necessitate a
legally binding contract, as approved in (Walsh v Lonsdale). A lease provides more
protection than a licence since licences have no interest in the land. As stated in
(Thomas v Sorrell), a licence ‘properly passeth no interest nor alters or transfers
property,' implying that licences, unlike leases, are personal and not proprietary in
character. As a result, licences are unable to bind third parties.
In the case of Street v Mountford, Lord Templeman outlined three essential elements
that must be present for a tenancy to exist. These are the exclusive possessions
(meaning the right to the property excluding others even the landlord himself). It should
be emphasised, however, that the landlord has the right to visit the premises (for
example, for maintenance) within acceptable hours. Though the landlord reserved the
right to visit the property whenever he wanted in Appah v Parncliffe Investment Ltd, this
was treated as a licence because the occupier did not have exclusive ownership. To put
it another way, exclusive possession isn't the only conclusive evidence of the lease's
existence. A determinate term, on the other hand, is a term that has no meaning.
Finally, the term must be shorter than the grantor.
The courts also decided that any levels associated to the agreements would be ignored,
and that only the substance or reality of the agreements would be evaluated. Lord
Templeman appears to argue that rent is necessary in Street v Mountford, although
section 205(1)(27) of the Law on Property Act 1925 refers to a number of years
‘whether or not at a rent'. The Court of Appeal later concluded in Ashburn Anstalt v
Arnold that the right to receive rent is not a necessary part of a lease or tenancy in a
more recent case. In National Car Parks Ltd v Trinity Development Co (Banbury),
Bingham LJ applied the same principle as in Antoniades v Villiers and said “A cat does
not become a dog because the parties have agreed to call it a dog”. In Clear Channel
UK Ltd v Manchester City Council, Etherton J questioned whether the company had a
tenancy or tenancies protected by the Act, and to answer this question, he referred to
Lord Templeman's decision in Street v Mountford to see if the intention was to grant
exclusive possession for a period of time at a rent.
Exclusive Possession is a vital distinguishing factor, because without it, the agreement
must always be a licence. A lease provides additional protection above a licence since it
puts a minimal duty of repair on landlords in a lease (section 11 of the Landlord and
Tenant Act 1985). Exclusive possession, on the other hand, is a factual state; it is the
right to occupy the premises exclusively; licensees have this right, but they do not have
the right to exclude owners from the premises, as held in (Somma v Hazelhurst); thus,
occupation does not provide the same level of land control. Exclusive possession does
not necessarily imply the presence of a lease; it could refer to another legal relationship,
such as a trustee and beneficiary, that precludes the existence of a lease (Grayv
Taylor). Also, it was held in (Aslan v Murphy) that an owner cannot design a "sham
agreement" to deny a lease since the court will apply an objective approach to the
structure of the agreement as approved in (Aslan v Murphy) (AGSecurities v Vaughan).
The case of (Bruton) had a significant impact on tenancy law since it suggested that a
‘non-tenancy estate,' or a tenancy without an estate in land, may exist. (Pawlowski)
stated that because this tenancy does not bind third parties, it functions as a licence, as
it would otherwise violate the nemo dat non quod habet principle. Although such a
tenancy is valid between the original landlord and tenant, it is not binding on the lawn's
original owner (Kay v Lambeth). Because there is an overlap with licences, the fact that
not all leases must have estates or interests in land causes issues. (Bright) states that
‘Bruton leases [unlike ordinary leases] don't bind the world, they are just a contract,'
which could mean that these leases would receive the statute protection that licences
do not. (Dixon) also criticises this argument, claiming that the non-proprietary lease is a
"contradiction in terminology" because the concept is the same as a contractual licence.
Because non-estate leases, as argued by (Henderson), are "ill-suited for this world
because it lacks conceptual coherence," Bruton) is the cornerstone for the difficulties in
distinguishing between the two ideas of a lease and a licence. Estate-based tenancies,
on the other hand, can be distinguished from licences because they bind third parties
and provide exclusive possession. A lease is private and enforceable against third
parties, whereas a licence is personal and not. It's vital to distinguish between the two
since only leases provide rent control, security of tenure, and protection against
unlawful eviction due to statutory protection.
To conclude we can say that Lord Templeman’s speech in the case of Street v
Mountford put forward a clear distinction between leases and licenses. The subsequent
case laws which came after it challenges Lord Templeman’s statement but it still holds it
pivotal position. History does not repeat itself, and the distinction between lease and
licence evolved into its current form. We must emphasise that ultimate certainty is
impossible to acquire, because justice requires that each case be considered on its own
facts.

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Question 1

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