Free Law Dissertations - Attempts To Find A Touchstone Test For Distinguishing Between Leases And
Attempts to find a touchstone test for distinguishing between leases and licences are all doomed to failure because they fail to take account of the need to accommodate short-term or informal arrangements on the one hand, and the impact on third parties on the other.
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Introduction
In the 70s and 80s, landlords developed a practice of contracting out of their obligations to tenants that arose, for example, in the case of residential property, with the Rent Act 1977 and, in the case of business property, with the Landlord and Tenant Act 1954. Their trick was to state on the contractual agreement that it was a licence and they even devised superficial privileges on the part of the landlord so as to create the most convincing licence appearance.
Judges combated these sham arrangements by looking beyond the false labelling of the agreements and looked to the ‘nature and quality’ of the occupancy. This objective approach to contractual arrangements reflected the social agenda to protect the rights of those seeking accommodation and was never more strongly apparent than in the case of Street v Mountford, where Lord Templeman said:
although the Rents Act must not be allowed to alter or influence the construction of an agreement, the court shouldbe astute to detect and frustrate sham devices and artificial transactions whose only object is to disguise the grant of a tenancy and to evade the Rents Acts
As the usual trick of landlords was to attempt to create a licensing agreement over that of a lease, the key method of ascertaining the ‘nature and quality’ of the agreement was for judges to develop a clear, touchstone test for the distinction between the lease and the licence. This test will be analysed in light of the above accusation that they are doomed to failure as a result of failure to take account of the need to accommodate short-term or informal arrangements and the impact on third parties.
Characteristics of the lease
In the words of Lord Templeman in Street v Mountford:
To constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of a premium or periodical payments
With regard to the first characteristic, Windeyer J stated in Radaich v Smith, that the real right of exclusive possession is the ‘the proper touchstone’ without which there can be no lease. No such privilege is granted in licences and authority for this is found in Thomas v Sorrell by Vaughan CJ:
(a licence) properly passeth no interest nor alters or transfers property in any thing, but only make an action lawful, which without it had been unlawful
A licence therefore carries only a personal, contractual right to occupy the land as against the licensor.
Case law illustrates the scenarios where exclusive possession is not present for certain types of property.
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