Lease - Licence Distinction Flashcards
What is a lease?
A proprietary right – capable of attaching to land, moving with the land and binding with a 3rd party
You can have a:
> Legal leasehold estate
OR
> equitable lease
What is a licence?
A personal permission
Terminable at will –> Licence can be brought to an end at any minute
Can do stuff on the land that you don’t own without becoming a tresspasser
Consequences of the difference - LEASE
ENFORCEABILITY:
> Is capable of enforcement against a new owner of the land
STATUTORY PROTECTION:
> Previously: Protection under Rent Act 1977
> Now, e.g.
> Security of tenure for business tenants
> Right to extend lease/buy freehold of residential property
> Landlord repairing obligations
Consequences of the difference - LICENSE
Is not capable of enforcement against a new owner of the land because it is a personal permission
No statutory protection
Lease or Licence - How do you decide?
STREET V MOUNTFORD:
> S granted and license to M to occupy rooms at a weekly rent
> titled the agreement a ‘license agreement’ –> so it DIDN’T grant a tenancy or statutory protection of tenure
> However M appealed and said she had a lease
> Court of appeal declared it was a license
LEADS TO A TWO PART TEST
Street v Mountford - 2 Part Test (STEP 1)
STEP 1 - Are the requirements for a lease met? > If yes
1 - CERTAINTY OF TERM (essential)
- Say v Smith (1563) – The term of the lease must be ascertainable at the time the lease is created
- Lace v Chantler [1944] - duration of war was uncertain so failed the test
> certainty of commencement:
- Leases created to commence at a future date
- Pretoria Energy v Blankney (2023) confirms must be certainty on when lease begins for there to be a legally binding contract.
2 - EXCLUSIVE POSSESSION (essential)
> ‘The tenant possessing exclusive possession is able to exercise the rights of an owner of the land…a tenant armed with exclusive possession can keep out strangers and keep out the landlord’ –> free from supervisory control
3 - RENT (not essential)
> Ashburn Anstalt v Arnold [1989]0 Ch 1
IF THESE CHARACTERS ABOVE ARE NOT PRESETN THEN IT IS A LICENSE
Exclusive possession - Somma v Hazelhurst 1978
Old law
There was variety of sham clauses (clauses that were designed to make the agreement look like a license)
Exclusive Posession - S v M: how far does freedom to contract extend?
No longer purely document focussed
Begin with document and freedom to contract
Now look at actual substance and reality of the agreement to avpid sham clauses
Exclusive Possession - What about the label parties give the agreement?
Labels are nothing more than a statement –> can’t change the nature of something just by calling it something else
‘A cat does not become a dog because the parties have agreed to call it a dog.’ - Antoniades v Villiers 1990
Exclusive Possession - How the courts deal with a clause stating the owner has the right to introduce others to occupy the property
Antoniades v Villiers [1990] 1 AC 417
The court must consider:
> surrounding circumstances e.g. relationship between the prospective occupiers
> the course of negotiations
> the nature and extent of the accommodation
> and the intended and actual mode of occupation of the accommodation
Exclusive Posession - How the courts deal with a clause that states the owner will retain a key
Aslan v Murphy –> Landlord would be able to retain a key for emergencies and NOT just for entry at will as this would then negate exclusive possession
Street v Mountford –> AND if there is entry of services e.g. a cleaner who is entering the property at will, this would negate exclusive possession –> its not about the services but rather the entry at will with a key
Street v Mountford - 2 part test (STEP 2)
Step 2 – Exceptional circumstances which give rise to a licene even though the requirements for a lease are met
Absence of intention to create legal relations:
> family relationships –> Cobb v Lane
> acts of generosity or friendship - Marcroft Wagons v Smith
Exclusive possession is referable to a legal relationship other than a lease
> Service occupancy –> Norris v Checksfield (living somewhere in relation to work, employer-employee relationships)
Different Types of license - Bare license
A permission granted gratuitously by the licensor
Can the licensor revoke the licnese?
> Yes at any time
> The licensee must be given reasonable time to leave
Is the license enforceable against a new owner?
> No
Different types of license - Contractual license
A contractually-created permission to use land. It is granted in return for valuable consideration
CAN THE LICENSOR REVOKE THE LICENCE?
> General rule = NO –> they have to stick to the terms of the contract (Hurst v Picture theatre)
IS THE LICENCE ENFORCEABLE AGAINST A NEW OWNER?
> They aren’t enforceable against a new owner unless there is something to prove the owner acted unconsionably –> leads a constructive trust against new owner
USE OF A CONSTRUCTIVE TRUST AGAINST THE NEW OWNER
Binions v Evans – sale contract expressly stated that Binions purchased “subject to” Mrs Evans contractual rights. But contractual licences do not bind third party purchasers so was Binions bound? –> was unconsionable for her to take the property and then not be bound by it as a third party because its a license SO the courts used a constructive trust to bind her to the license
