Leases & Licences: Essential Characteristics

Question 1

Why is it important to distinguish between a licence and a tenancy?

Answer 1

Distinguishing between the two is crucial for advising clients on their status and the rights and protections they may or may not have under the law.

Question 2

What determines the nature of a person’s occupation of premises owned by another?

Answer 2

The nature of occupation is determined by whether the arrangement is a tenancy, which offers specific rights and protections, or a licence, which is a more informal and revocable permission to occupy.

Question 3

What is the classification of a domestic arrangement, like hosting a friend, in legal terms?

Answer 3

Such a domestic arrangement is classified as a licence, characterized by its informal nature where no landlord-tenant relationship exists, and the host has the discretion to withdraw permission at any time.

Question 4

How are commercial occupancy arrangements, such as hotels or temporary lodgers, legally classified?

Answer 4

These are legally classified as licences, intended to avoid granting tenant rights.

The arrangement allows the property owner to provide occupancy without the legal obligations typically associated with tenancy.

Question 5

How does legal protection differ between tenants and licensees?

Answer 5

Tenants are afforded specific legal protections that are not extended to licensees.

Question 6

What does “term of years absolute” mean under Section 205(1)(xxvii) of the Law of Property Act 1925?

Answer 6

A “term of years absolute” is defined as a lease for a term of years certain, or one that is liable to be determined by notice. It requires a term to be specified for the lease.

Question 7

What is a fixed-term lease?

Answer 7

A fixed-term lease is a lease granted for a specific period of time, such as 99 years, clearly defining the duration of the tenant’s right to occupy the premises.

Question 8

How is a fixed-term lease created?

Answer 8

A fixed-term lease must be created expressly, identifying the lease’s duration upfront.

It forms a contract granting the tenant occupancy rights for a fixed period, typically in exchange for rent and other obligations.

Question 9

What are the ways a fixed-term lease can be terminated?

Answer 9

Termination can occur
1. automatically at the term’s end (effluxion of time),
2. through forfeiture (e.g., for rent arrears), or
3. via a break clause (e.g., for obtaining planning permission or in case of an unsuccessful business).

Question 10

What characterises a periodic lease?

Answer 10

A periodic lease is characterised by its renewal on a rolling basis, such as every 6 months, with rent typically paid weekly or monthly.

It continues from one period to another until terminated by notice.

Question 11

How can a periodic lease be established?

Answer 11

A periodic lease can be created either
1. expressly, with terms specifying the periodic nature like ‘weekly lease’, or
2. impliedly, through regular payment of rent without a fixed term agreement.

Question 12

How is a periodic lease terminated?

Answer 12

Termination requires proper notice, generally one full period’s notice, proportional to the lease’s term (e.g., a week for a weekly tenancy).

It must expire at the end of a clear period.

Question 13

What does the section 3 and 5 of the Protection from Eviction Act 1977 specify for terminating periodic tenancies?

Answer 13

Section 5 requires 4 weeks’ written notice with prescribed information for dwellings.

Section 3 mandates a court order to recover possession if the premises are occupied under a lease or licence.

Question 14

How does the law address the absence of explicit agreements in periodic leases?

Answer 14

The law implies terms based on what was agreed and surrounding circumstances, typically inferring a weekly or monthly tenancy from regular rent payments, to fill gaps in a reasonable and sensible manner.

Question 15

What is required for there to be certainty of duration in a lease?

Answer 15

For certainty of duration, the commencement date of the lease must be known to both parties.

If unspecified, the lease is deemed to start immediately.

Question 16

What happens if the commencement date of a lease is not specified?

Answer 16

The lease is deemed to commence immediately, ensuring that the requirement for a known start date is met.

Question 17

What did the case Lace v Chantler establish regarding lease duration?

Answer 17

It established that a lease must have a certain duration; a lease for the duration of the war was invalid as its end was uncertain.

Question 18

What did Lord Templeman state in Prudential Assurance Co Ltd v London Residuary Body regarding periodic tenancies?

Answer 18

He confirmed that the ability to end a periodic tenancy by notice was essential for meeting the requirement of certainty.

Question 19

What clarification did Berrisford v Mexfield Housing Co-operative provide about tenancies for life?

Answer 19

It clarified that a tenancy for life is converted into a 90-year lease, determinable on the tenant’s death or as specified in the agreement, per s 149(6) of the Law of Property Act 1925.

Question 20

What is the key distinction between a tenancy and a licence as highlighted in Lord Templeman’s judgement in Street v Mountford?

Answer 20

Lord Templeman clarified that the essential difference between a tenancy and a licence lies in the grant of exclusive possession for a term at a rent.

A tenancy grants an occupier a legal estate in land and rights protected under the Rent Acts, while a licence merely authorizes use of the land without creating any estate in it.

The agreement’s terms and the parties’ intentions, especially the grant of exclusive possession, determine whether an arrangement is a tenancy or a licence.

The case underscored that labels used by parties (e.g., “licence fee” instead of “rent”) do not override the legal reality of the agreement’s substance.

Question 21

Under what circumstances might an occupier have exclusive possession but not constitute a tenancy, according to Lord Templeman?

Answer 21

Exclusive possession does not always signify a tenancy if
1. there’s no intention to enter a legal relationship,
2. the occupancy is tied to service or employment,
3. it falls within vendor and purchaser relationships, or
4. if the owner lacks the power to grant a tenancy.

Question 22

How do AG Securities v Vaughan and Antoniades v Villiers differentiate between a licence and a tenancy?

Answer 22

In AG Securities v Vaughan, agreements were independent, with no exclusive possession, indicating licences.

In Antoniades v Villiers, joint and exclusive occupation was intended, creating a tenancy despite clauses suggesting otherwise, showcasing the importance of the agreement’s substance over its form.

Question 23

What key legal principles differentiate a licence from a tenancy, as demonstrated in AG Securities v Vaughan and Antoniades v Villiers?

Answer 23

The distinction hinges on exclusive possession and the agreement’s overall substance.

AG Securities v Vaughan: illustrated a licence scenario, as the agreements did not grant exclusive possession to any single occupier and varied in rent and agreement dates, maintaining the owner’s control over occupancy.

Antoniades v Villiers: was deemed a tenancy because the agreements, though purporting to be licences, were interdependent, signed on the same date, for the same rent, intending for the occupants to jointly have exclusive possession. The court saw through the sham clauses denying exclusive possession, affirming the tenants’ rights under the Rent Acts. This case underscores that the presence of exclusive possession, even if the agreement labels the arrangement as a licence, can establish a tenancy if the true substance of the agreement supports it.

Question 24

Is payment of rent necessary to establish a tenancy?

Answer 24

No, payment of rent is not strictly necessary to establish a tenancy.

While Lord Templeman in Street v Mountford identified ‘exclusive possession for a term at a rent’ as key indicators of a tenancy, the Court of Appeal in Ashburn Anstalt v Arnold clarified that tenancies can exist without rent, referencing s 205(1)(xxvii) of the Law of Property Act 1925.

This section defines a ‘term of years absolute’ as possibly existing ‘whether or not at a rent’, indicating that the presence of rent supports but is not essential for the intention to create a formal landlord-tenant relationship.

Question 25

What defines a licence in the context of land occupation?

Answer 25

A licence is defined as permission for one party to occupy premises with the consent of the lawful owner, granting a right or privilege over the land without conveying an estate or interest in the land.

Question 26

What is a bare licence and how can it be revoked?

Answer 26

A bare licence allows lawful occupation without granting an estate or interest in the land.

It can be automatically revoked by the licensor’s death, land transfer, or at will by providing reasonable notice to the licensee.

Question 27

What is a contractual licence, and what are its enforceability and limitations?

Answer 27

A contractual licence, enforceable against the original licensor according to its terms, cannot be revoked until its term expires.

However, it’s a personal right that doesn’t bind successors, highlighting its non-proprietary nature.

Question 28

What legal protection exists against the unlawful recovery of possession from a licensee?

Answer 28

The Criminal Law Act 1977, s 6, prohibits taking possession from a licensee by criminal means, often requiring a court order for possession, underscoring the legal process for eviction.

Question 29

What protections does the Protection from Eviction Act 1977 offer to licensees?

Answer 29

The Protection from Eviction Act 1977 extends further protections to certain licensees in dwelling houses, emphasizing legal safeguards against arbitrary eviction.