“it was not enough to apply the label of licence to a transaction that was in substance a lease”
From this case we can denote that even though the agreement was primarily established to represent a licence it can still become a lease.
Although Lord Templeman outlined the main criteria for a valid lease to be present in Street v Mountford, exclusive possession may still have been granted without amounting to any form of tenancy. We can see this in Markou v Da Silvaesa, where it illustrates the fact that attendance or services provided by the landlord even though exclusive possession has been given does not equate to a lodging agreement. This is better emphasised, that “a mere promise by the landowner to provide such services is not sufficient to generate a lodging agreement…if the occupier receives ‘board and lodging’, he holds a mere personal licence”. The involvement of some sort of services given can also determine the fact that it is a licence, emphasised by Lord Templeman in Street v Mountford above. We also need to note that in some instances landlords tend to create ‘shams’ artificial transactions and pretences, primarily to prevent tenancy. The Rent Act 1977 does not apply to licenses so a landlord will try to create a licence, which subsequently portrays to be a lease. Theses ‘shams’ have tried to deny a tenant of their true right in tenure, so as no security could be given to a tenant. The definition for a sham was given by Diplock LJ in Snook v London & West Riding Investments Ltd:
“acts done or documents executed by the parties to the ‘sham’ which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intent to create”
From this statement we can see that where a term inserted in to an agreement to prevent exclusive possession from taking place, will be a ‘sham’ if neither of the parties wish to enforce that term. Cases highlighting this issue include Antoniades v Villiers, where the agreement stated “the licensor shall be entitled at any time to use the rooms… permit other persons...together with the licensee”. There was no attempt made by the licensor to implement the term, it was merely inserted to prevent a tenancy and only to create a licence preventing exclusive possession.
Relating back to the question of whether or not Terry and Tina have a lease or licence is controversial. From Linda’s point of view they only have a licence agreement which permits them to use the rooms, therefore having no protection under The Rent Act 1977. As we have seen before the fact that Linda has made a licence agreement in which she believes is a licence and nothing else, can be proven wrong. The words of Lord Templeman in Street can show us this in its true form: “the manufacture of a five-pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade”. This statement showing that Linda’s mere label of the agreement does not automatically amount it to being a licence if it can be proved otherwise. The clause which was inserted allowing her to remain there for period of two hours a week can amount to her trying to prevent Terry and Tina exclusive possession. It is unknown that she did in fact stay at the flat for two hours per week, and for what purpose her initial intention was. Her intention could have been to inspect the premises or to provide services, for example to clean the flat. Her intention is not prescribed and thus we will assume it was to merely evade Terry and Tina having exclusive possession of the room. There is some similarity with Aslan v Murphy and in this case, where the occupier was made to look like a lodger by having to vacate the premises for 90 minutes each day. In this instance the owner retained the key and was to clean the room, he did not provide any services and the term was inserted as merely a pretence to avoid statutory protection. If the landlord in fact did provide services then the occupant would have been a lodger instead of a tenant. The court of appeal held in this case that the occupant was a tenant and not a licensee. Another case similar to the facts were Huwyler v Ruddy, in this case the services were eventually provided at a much later date and so amounted to a licence. Assuming that no services have taken place between Linda and the occupants, Linda only wanted to grant them a licence, by preventing exclusive possession, which would be the reason she inserted the clause. The case of Somma v Hazelhurst , would have allowed the clause to be valid. In the case the owner had reserved the right to occupy a single room which was licensed to a couple and the right to put in another occupant if one was to leave. The Court of appeal held that this prevented exclusive possession, therefore preventing a lease. The courts take a different approach to this now with regard to Street, we can finally conclude that Linda’s clause is a pretence according to this authority.
The other question of where it was unknown to Linda that Terry and Tina were not just friends but a couple will not be relevant in considering the fact that they were joint tenants. Linda may have tried to grant them a separate licence each for each bedroom, and the fact that they use one as a study and the other as a bedroom will be irrelevant in this context. We can see that Terry and Tina are joint tenants with exclusive possession of the flat, since the original agreement was a ‘sham’ trying to prevent this. Linda cannot try to argue that she tried to grant them a separate licence each where they cannot exclusively possess the flat as a whole and that they only occupy it in common with the other occupant. If Linda possibly charged them a different rent independently she could have relied on the case of Mikeover v Brady. The reality is that Terry and Tina were in fact paying the rent jointly once a month. The test laid out in AG Securities v Vaughan provided that there needs to be four unities present: the unity of possession, interest, title and time. It is clear to see that both Terry and Tina have this; they share the flat together completely, rent is paid jointly every month, entered into the (sham) agreement at the same time and they have unity of time where they both moved in together. We can assume more clearly now that Tina and Terry are joint tenants with a leasehold interest that have a lease.
The lease which Terry and Tina have is an equitable lease and not a legal one because it is not by deed. Since the agreement is in writing and so will amount to an equitable lease. It can only apply where there is an enforceable contract for a lease (including the writing necessary under s.2 of the Law of Property (Miscellaneous Provisions) Act 1989) which there is. The authority for this is the case of Walsh v Lonsdale in which we can see that the maxim is, equity treats as done that which ought to be done. In this case the grant of the lease is the thing which ought to be done.
Linda could still sell the property but fully notify the purchaser with regard to Terry and Tina since they still do have certain rights. Terry and Tina who, if have an equitable lease, would be in actual occupation of the premises at the time of sale will have an over-riding interest under paragraph 2 of Schedule 1 or Schedule 3 of the Land Registration Act 2002. If on the other hand they do not have an equitable lease, they can still claim a right to have a periodic tenancy. Since they were paying the so-called ‘licence fee’ of £4,000 per year, a month this would amount to a periodic legal tenancy. We cannot ascertain the date and time of which the lease has started and so can assume that since Tina and Terry are paying per year that this is a yearly tenancy. According to the cases of Prudential Assuarance Co Ltd v London Residuary Body and Lace v Chantler there could not be a certainty of a time and date which could not conclude for them to have a valid term of years absolute. However this amounted to a periodic tenancy in these cases and thus was a valid lease.
Linda has given three months notice to quit on Terry and Tina. She is obliged under law to give them six months notice since they now have a lease that is based on a periodic legal yearly tenancy. Under paragraph 1 of Schedule 1 and 3 Land Registration Act 2002 Terry and Tina will have an overriding interest.
As far as Dave is concerned we can conclude that he has a licence. We can assume this because Lord Templeman’s notion of exclusive possession is not present here. As Markou provides us that where services are produced by the landlord, that would not amount to exclusive possession. Clearly Dave has been receiving services from Linda in the form of breakfast in the morning and the case would be authority for this. The fact that he also pays Linda £35 per week shows us it is a week by week basis and this could have amounted to a periodic tenancy if he had exclusive possession. The purchaser will not be bound by Dave as he will have to quit his occupancy since there is no protection for him. It is only binding on the other parties since they have a lease as in Lloyd v Dugdale the purchaser will effectively not be bound by Dave. Linda’s notice is sufficient for him to vacate the premises.
Word Count: 2,241
Bibliography
Textbook on Land law, Judith – Anne Mackenzie, Philips 11th Ed, Oxford 2006
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Land Law 5th Ed, Kate Green, Joe Cursley, Palgrave, 2004
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Street v Mountford [1985] AC 809
Street v Mountford [1985] AC 809, p. 816
Facchini v Bryson [1952] 1 TLR 1386
Property Law 5th Ed, Roger Smith, p.355 para 2
Markou v Da Silvaesa (1986) 52 P & CR 204
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Snook v London & West Riding Investments Ltd [1967] 2 QB 786
Antoniades v Villiers [1990] 1 AC 417
Aslan v Murphy [1990] 1 WLR 766
Huwlyer v Ruddy (1995) 28 HLR 550
Somma v Hazelhurst [1978] 1 WLR 1014
Mikeover v Brady [1989] 3 ALL ER 618
AG Securities v Vaughan [1990] 1 AC 417
Walsh v Lonsdale (1882) 21 Ch D 9
Prudential Assuarance Co Ltd v London Residuary Body [1992] 3 WLR 279
Lace v Chantler [1944] KB 368
Loyd v Dugdale [2002] 2 P&CR 13
