Ashburn Anstalt v Arnold

Legal Case Summary

Ashburn Anstalt v Arnold [1989] Ch. 1

LAND LAW – LEASE/LICENSE DISTINCTION

Facts

The defendant was the successor-in-title to a company which persuaded the claimant to sell his lease to the company in exchange for a promise that he would continue occupying the property rent-free until the defendant gave him one quarter’s notice to leave. No end-date was given. The defendant sought possession of the property without notice.

Issue

The case of Street v Mountford held that a lease requires an exclusive grant of possession for a certain period of time and the payment of rent.

The claimant argued that it had a valid lease over the property, binding the defendant by virtue of the ‘actual occupation’ overriding-interest provisions of Land Registration Act 1925. In the alternative, it argued that if the interest was a mere license, it should be a binding license or constructive trust.

Decision / Outcome

The Court of Appeal held that the claimant had a binding lease.

The court held that the ‘period of time certain’ requirement would be satisfied if the lease terminated on a sufficiently certain event (such as after the expiry of notice). However, this case has been overruled on this point by the House of Lords in Prudential Assurance v London Residuary Body, and is therefore likely wrongly decided.

The court’s second holding, that rent is not necessary for the creation of a tenancy, has yet to be overruled despite conflicting with the requirements of Street v Mountford.

The court also held that if a lease had not existed, the license would not have bound the defendant, as licenses do not bind third parties. A constructive trust required it to be unconscionable to deny the claimant occupation, and the mere fact that the defendant knew about the license was insufficient to give rise to unconscionability.