Lease License

Q) “In Street v Montford (1985) Lord Templeman identified three essential attributes for the existence of
a lease: certainty of term, exclusive possession, and rent. This suggests that the law and its application is
settled and straightforward. What is clear, however, is that the legal position is far more complicated and
uncertain.” How far, if at all, do you agree with this assessment? (2019 Zone A Level 6)
Q) ‘In Street Mountford the House of Lords assured us that a valid lease has three elements: certainty of
term; exclusive possession; and rent. Yet one is entirely unnecessary; another, although technically
necessary, can be avoided by either the draftsman’s or the court’s sleight of hand; and the third, whilst
absolutely necessary, is not always sufficient.’ Discuss. (2016 Zone B)

Themes:

1. The distinction is certain?

We disagree with the statement that the distinction between lease and license is certain. The reason
for disagreement is that the modern approach is objective, with courts taking into account the
presence of Exclusive Possession, Term Certain, Rent Charge, and in the case of multiple
occupancies, the four units, when determining a lease. We note that the legal definition of EP is
ambiguous because there are exceptions to the general rule, and the practical applicability of the
definition is also uncertain due to case-by-case analysis and the courts' focus on substance rather
than form; they do not examine the agreement itself. Regarding term certainty, the requirement is
unreasonable because it serves no practical purpose, and even if judges are obligated to uphold the
requirement if the term is uncertain, they created an exception to a pointless rule in Berrisford,
where they would make the term certain themselves. The same practical applicability and
uncertainty exists in the presence of four units, and the law was made more uncertain by
introducing a new concept between a lease and a license through the introduction of the non-
proprietary lease. Due to the aforementioned issues, the distinction between a lease and a license is
therefore ambiguous. To better comprehend our opinion and the preceding statements, we will first
define a lease and a license, as well as the previous and current approach. To better understand our
opinion and previous statements, we will first define a lease and a license, the previous and current
approach, the definition and uncertainty within the current law, and why the uncertainty has been
worsened by the implementation of the Bruton tenancy act.

2. The distinction is uncertain? – agree

[Opinion and Structure]

General Introduction – Lease and License Definition (History and Present approach)
Before we can comprehend the opinion, we must first define lease and license. While a lease is
a proprietary right that cannot be revoked at will, it establishes a landlord-tenant relationship in
which the landlord must provide fundamental amenities. This right belongs to the land, not the
individual. In contrast, a license is a personal right that can be revoked at any time and does not
establish a landlord-tenant relationship. It is a contractual right attached to the individual, not
the land. In the past, courts distinguished between a lease and a license based on the title of
the agreement between the parties and the relationship they named to be valid. This resulted
in certainty but a great deal of injustice in the society, as landlords would always title the
documents as licenses so that they could be revoked at any time, despite the fact that the
format of the entire agreement would be that of a lease, but the title would be changed.
Consequently, tenants would sign such documents believing they were protected as in most of
the cases they did not ask any lawyer before signing the agreement and the landlord had most
resources. Later on, the courts realized the injustice being promoted, Lord Templeman
introduced an objective criterion in the case of Street v. Mountford, where they said that the
subjective approach won’t be used anymore and 3 points have to be met and then the
agreement would be considered as lease even if it is titled as license agreement. The 3 points
which needed to be met where whether the agreement granted the tenant an Exclusive
Possession (the “EP”) of the premises and is Term Certain (the “TC”) and a Rent Charge (the
“RC”). If the following points are present then the agreement would be considered as valid
lease. However, the EP is what makes or breaks the deal.

Legal Definition of EP
The legal definition of EP was precise and unambiguous. EP refers to the granting of exclusive
rights over a property to the extent that even the proprietor requires permission from the
tenant to access the premises. Since the legal definition was quite clear, the criticism was that
they created exceptions to the legal definition, so that even if EP is present, it will not be upheld
(Facchini v. Bryson; Street v. Mountford). It was explained by Lord Denning in the case of
Facchini v. Bryson that certain conditions EP will not be upheld. If a mortgagee is in possession,
there is a service occupancy (Norris v. Check field), there are no intentions to create a legal
relation (Jones v. Padvatton), lodging or a service in being provided (Marchant v. Charters
[1977] or each responsible for their own rent (Mikeover v. Brady [1989] In all of these cases,
even if EP is proven, it will not be considered, creating uncertainty because the door remained
open for new laws and a judge could introduce more cases tomorrow in which EP will not be
considered even if it is proved. Since the practical application of EP is uncertain because of the
fact the courts will consider ‘substance over the form’, this makes the application of EP on case-
to-case analysis and is extremely factual. This could be seen in the case of Street v. Mountford
where there was a clause in the agreement which stated that the agreement is not a lease but
the courts did not approve that and they stated that the courts will look into the substance and
not the form, the concept of sham devices(fraud) was introduced. This concept means that
limited rights of entry will not negate EP. Similarly, retention of keys will also not negate EP
unless the owner can prove that he could enter the premises without the consent of the tenant
at anytime (Aslan v. Murphy). Similarly, in the case of Street v. Mountford the courts held that if
services are being provided then EP will not be upheld but again the courts will look into the
substance over the form and see that whether the services are really being provided and that
too on regular basis (e.g., Hotel services) or it’s just a sham clause to make it a license
agreement. As we can see from the above discussion it clearly shows that the term EP is still
uncertain and the courts will grant EP on extremely case-to-case basis.
Term Certain
Once EP is proven, now the tenant must prove that the agreement was TC. This is the maximum
duration that has to be mentioned in a lease. If it is specified, then an earlier termination will
also be held as valid. In the case of Lace v. Chantler (1944), it was held that lease will end when
the Second World War ends and it was deemed as uncertain. The courts specified that the
maximum duration of the term must be known in advance. The requirement of TC is only of
substance and not the form because it is only a requirement of words. To understand this
better, we will assume that there was a landlord and a tenant where the landlord has added a
clause that ‘the lease would end when the USA and Russia war ends’. Since this clause is written
in the agreement both the landlord and tenants have taken the risk and signed the agreement
that maybe this war could end in one year or it could take more than 50 years. In this situation
the agreement would be considered as license however, if the language is changed into ‘the
lease is for 1000 years but can be terminated earlier when USA and Russia war ends’ then this
clause will be TC. In both cases the lease would end when the war between the two countries
ends as both the parties cannot live for 1000 years hence in the case of TC the courts will look
at the substance and not the form and hence the TC is considered as a “judicial gloss” and is
criticized badly. In the case of Mexfield Housing Co-operative Ltd v. Berrisford (2011), the courts
devised an exception whereby they would automatically convert a lease to its utmost duration
of ninety years, which is a lease of life that can be terminated upon the occurrence of any
uncertain event. This was reaffirmed in the Hardy v. Haseldane case, but it was also emphasised
that such a tenure cannot be granted by a corporation. This clause made a lot of
misunderstanding as the tenant would take unfair advantage of the landlord and they could
easily make their lease a lifetime lease or even if there was a clause e.g., the lease will be
terminated when the tenant completes his masters which will take maximum of 3 years even if
he fails twice, so the intent of the lease will be short term but if the tenant goes to the court
then the court will grant him 90 years of lifetime lease with a clause that if he completes his
masters then it can be terminated earlier. We can conclude that the law regarding this is still
uncertain as the tenant can take unfair advantage
Rent Charge
This is not a necessary distinction between a lease and a license, as the value of property
fluctuates constantly. However, it is essential to observe that if there is a contractual tenancy,
then some form of payment must be made. If the lease is governed by a deed, however, no
consideration is necessary.
Multiple Occupation
In addition, if there are multiple co-owners under S.1(6) of LPA 1925 then an automatic trust of
land is created and the legal title is always joint tenancy so we need to prove the 4 unties i.e.,
unity of time, title, possession and interest (AG Securities v. Vaughan) and the courts will look
at the substance and not the form. As it was seen in the case of Antoniades v. Villiers, where an
unmarried couple were made to sign separate agreements which were described as license and
they were required to pay rent separately. The agreement contained a clause that the owner
can come or send someone to the flat anytime and even there was a sofa for a person to sleep
but the courts regarded this clause as a sham clause and the couple were held as Joint Tenants.
Similarly, in the case of Mikeover v. Brady, two parties who were living together but they were
made to pay rent separately. The courts held that the two separate agreements did not prove
unity of title as the intention from the beginning was not to be responsible for the other party.
Since both the cases had two separate agreements and the unity of title was not there in both
the cases but the court’s ruling for both the cases was as per the substance.

Bruton Tenancy
Later on, in the case of Bruton the courts created a new concept of non-propriety lease, where Bruton
wanted basic amenities from a public body and for basic amenities to be granted there must be a
landlord tenant relationship as stated by the law. To promote justice, the courts introduced this concept
where the lease is not connected to the land but still creates a landlord tenant relationship and
therefore, it can be granted where landlord himself in a licensee . this concept was heavily critized as it
created confusion and it went against the core principle of difference between lease and license. Lease
which was a propriety right and was attached to the land and not to the person. After the new concept
of Bruton Tenancy, this created a lot of uncertainty as the basic difference between a lease and license
has faded.

Walsh v. Lonsdale:

Similarly, In the case of Walsh v. Lonsdale, courts introduced a concept which further provided
protection to the tenants. Under this case, it was laid that a lease granted is effective even if there is no
agreement or deed outlining the agreement. However, this is only applicable if certain requirements are
met. The first aspect is to prove that the individual came with clean hands and there was no evidence of
bad faith and secondly a rent was being paid by the individual whilst possession of the land was also
taken In control. This is only effective if the agreement between the two parties was laid out through
written means and not carried out orally only.