Critical Analysis of Lords Decision in Street v Mountford

Critically analyse the impact of the decision of the House of Lords in Street -v- Mountford [1985] AC 809

This assignment will consider the case of Street v Mountford and consider the decision and speech of Lord Templeman and analyse whether or not the correct conclusions were reached. The assignment will then go on to consider the implications of the case and its subsequent application, concluding that the correct decision was reached and, despite some difficulties in the application of the tests set out by Lord Templeman, the correct approach can now be taken when considering the distinction between a lease and a licence.

The facts of Street v Mountford were fairly straightforward. The building known as Number 5 St. Clements Gardens has at all material times been divided into “flatlets”. In December 1982, Mr Boyce was appointed by the plaintiff as his agent to manage the property. At that time the defendant and her husband had, for at least some months, been occupying a single furnished room in the building, known as Number 5, under a written agreement which called itself a Licence Agreement, entered into between the plaintiff and the defendant. In or about March 1983 the defendant mentioned to Mr Boyce that she and her husband were looking for another flat. At about the same time the occupant of Room Number 6 left the premises. Since Rooms 5 and 6 were on the same floor, Mr Boyce, on behalf of the plaintiff, according to his oral evidence, offered the defendant a right of occupation of what he described as the whole of the top floor, save for the attic room. The top floor, with this exception, comprises Rooms 5 and 6 and a shower and lavatory.

In Street it was conceded by the parties that the agreement in question granted exclusive possession so that the sole question for the appellate courts to consider was whether you looked to the sum of the terms of the agreement to see whether in substance it had the ‘badges’ of a tenancy or a licence or whether exclusive possession was the decision ‘badge’ and if that were present a tenancy would be found to exist. The Court of Appeal in Street said that everything in the agreement pointed to a licence barring exclusive possession so the occupier was a licensee. Lord Templeman in the House of Lords said that so to find made nonsense of the fundamental distinction between a lease granting an interest in land and a licence granting only a permission to occupy. In future, Lord Templeman said, there will be a presumption of a tenancy wherever exclusive occupation is granted and wherever there is nothing to show, for example, that the parties did not intend to enter legal relations.

Lord Templeman’s judgment in Street v Mountford laid down the three essential elements that must be present if a tenancy is to exist. First, there must be exclusive possession. In residential property this means that the landlord does not provide either attendance or services. Secondly, there must be consideration in the form of a premium or periodical payments. Thirdly, there must be a grant of the land for a fixed or periodic term. There may be an express grant or one may be inferred because the owner of the land accepts periodical payments from the occupier. If these three features are present there will be a tenancy.

Therefore following on from this case it can be seen that four questioned should be addressed when considering whether or not an arrangement creates a lease or a licence. The first of these is obviously to consider whether or not the “tenant” has exclusive possession. The second consideration must be whether or not there is an intention to create legal relations as the existence of exclusive possession will not always create a tenancy. Lord Templeman did make it clear that even where they are present, in exceptional circumstances, there may still be a licence rather than a tenancy. He gave as an example of such exceptional circumstances, an arrangement where there is no intention to create legal relations. This may be so where there is a family arrangement or an act of friendship or charity .

Thirdly, Lord Templeman’s speech suggests that the circumstances giving rise to the occupier’s possession should be considered. Lord Templeman suggested in his speech a wide range of situations in which an occupier could have exclusive possession but not be a tenant. He might be an owner in fee simple ; a trespasser; a mortgagee in possession; a purchaser allowed into possession of the property before completion; or a service occupier. As recognised by Pill LJ in P Dunwell v Hunt , this list is not exhaustive, and the Court of Appeal has added to it the relationship between a beneficiary and the trustees who allow him to occupy trust property .

The fourth requirement is whether or not the occupier has the power to grant a tenancy. Whilst there is only a brief reference to this point in the case this has been explored further in proceeding case law. In the case of Bruton v London & Quadrant Housing Trust Millet L J considered whether this exception was limited to cases where the grantor has no capacity to grant a tenancy or whether it extends as well to cases where the grantor has no estate or interest in the land. The House of Lord’s decision in this case adopts the more limited interpretation and confines the exception to lack of capacity.

In the case of Gray v Taylor , the Court of Appeal accepted the view of the trial judge that granting a tenancy of accommodation in an almshouse would be outside the powers of the trustees, because it might infringe the objects of the charity by permitting the grantee to remain in occupation although he had ceased to satisfy the conditions for residence.

Following on from the decision in Street v Mountford there has been many cases which have been concerned with the distinction between leases and licences. In general they have involved no more than an application of the Street v Mountford principles to the facts of the arrangement that is in question. However in Bruton v London & Quadrant Housing Trust the court dealt with the issue of whether or not the landlord had the estate in the land. This case is worthy of further consideration here. The Trust held various properties as a licensee of Lambeth Council, and used them to provide short term housing for the homeless, entering into licence agreements with the individual occupiers. One of the occupiers, Mr Bruton, subsequently claimed that he had exclusive possession of his self –contained flat and that, despite the wording of the agreement, he was a tenant under the principles of Street v Mountford. His purpose in doing so was to bring himself within s11 of the Landlord and Tenant Act 1985, which imposes a repairing obligation on landlords in respect of certain tenancies, but which does not apply to licences. The Trust itself had no estate in the land, and so could not grant a tenancy but it was allege that it was estopped from denying that it had done so. The claim was rejected by the Court of Appeal but the Court’s decision was reversed by the House of Lords, which held that a tenancy had been created between the parties.

Lord Hoffmann, in the leading speech, cited Street v Mountford as establishing that a lease, or tenancy, was a contractually binding agreement, not referable to any other relationship, giving a right to exclusive occupation for a fixed or renewable period, usually in return for a periodic payment. If those characteristics existed, wording more appropriate to a different kind of agreement, such as a licence, was irrelevant. The meaning of the agreement depended upon the intention of the parties, objectively determined by reference to its language and the relevant background. This agreement clearly gave exclusive possession for there was no evidence of an obligation to share with anyone else or of a measure of control by the owner inconsistent with such possession. Limited rights of entry for specific purposes emphasised the occupier’s exclusive possession. The fact that the Trust, a responsible landlord performing valuable social functions, had agreed with the occupier he was not to have a tenancy and with the council that it was not to grant one did not constitute special circumstances to require the agreement granting exclusive possession to be construed as only a licence. The absence of a legal estate out of which to create a tenancy was also irrelevant. If there was a breach of the Trust’s own licence, it arose because what it had created was a tenancy. It fell within the scope of s11 of the 1985 Act.

Therefore On the facts of the case, the occupier had exclusive possession for a term at a rent; this raised a prima facie conclusion that he was a tenant, and the House of Lords did not agree that the special nature of the Trust was sufficient to take it out of the rule in Street v Mountford. More importantly the Law Lords also rejected the argument that the arrangement between the parties could not give rise to a tenancy because the Trust itself held only a licence, and, having no estate itself, was therefore not able to grant one to the occupier. The House of Lords emphasised the contractual aspects of the lease; it is the agreement between the parties which creates the tenancy and gives rise to the relationship of Landlord and Tenant. Thus although the express agreement between the parties was for the grant of a licence, the House of Lords followed Street v Mountford in construing the real agreement from the facts before it, and consequently held that the parties had created a tenancy.

Cases which have involved no more than the application of the Street v Mountford principle have still proved to be problematic as the court has often faced the difficult task of deciding whether or not the occupier has exclusive possession. It will be seen that in the aftermath of the Street v Mountford case landlords wishing to avoid the security of tenure provision will go to great lengths to make it appear that the occupier did not have exclusive possession, and many cases have involved the courts deciding whether the written agreement represents the true state of affairs between the parties. Even where there is no intention to avoid the Rent Acts, the question of whether an occupier has exclusive possession can present difficulties. This causes particular problems in relation to housing for the homeless and to shared accommodation.

A further analysis of parts of Lord Templeman’s judgment in Street v Mountford and a demonstration of its application can be found in the judgment of O’Connor LJ in the Court of Appeal decision in Brooker Settled Estates Limited v Ayres . An overview of the facts is necessary here. The respondent was the occupant of a double bedsitting-room forming part of a flat belonging to the appellant landlords which had its own entrance from the street and consisted of one double bedsitting-room, two singles, a kitchen, a dining-room and a bathroom with a lavatory. The landlord said the respondent was a licensee, the respondent initially said that she was a tenant protected by the Rent Acts.

The landlord had used a standard form of agreement described as a licence which purported to give a licence to each individual occupant of a room to occupy the whole flat. It repeatedly asserted that nobody had exclusive occupation of anything. On the other hand there was no evidence that attendance or services were provided.

The judge at first instance considered the following words of Lord Templeman:

“An occupier of residential accommodation at a rent for a term is either a lodger or a tenant. The occupier is a lodger if the landlord provides attendance or services which require the landlord or his servants to exercise unrestricted access to and use of the premises . . . If, on the other hand, residential accommodation is granted for a term at a rent with exclusive possession, the landlord providing neither attendance nor services, the grant is a tenancy”.

Colbey argues that “only once the House of Lords ruled in Street v Mountford, that exclusive occupation was the crucial factor did the law develop a degree of rationality”. However he also points out that “The Lords’ decision in Street still gave scope for landlords to avoid the legislation”. This point is highlighted by the cases of AG Securities v Vaughn, Antoniades v Villiers , which were cojoined appeals in which decisions of the Court of Appeal-one deciding a tenancy, one a licence-were both overturned. Antoniades involved a couple sharing a one-bedroom flat. The landlord entered into separate but identical “licence” agreements with Mr Villiers and his girlfriend. The Court of Appeal was prepared to accept that neither had exclusive possession. The idea that this could create several rather than joint obligations on the couple was dismissed as artificiality by Lord Templeman. However in AG Securities the four occupiers of a flat each had separate agreements for different terms. Lord Bridge was equally adamant that their obligations could not be regarded as joint.

In Crancour Ltd v Da Silvaesa two people were allowed to use a furnished room in a house on each day between midnight and 10.30 am and noon and midnight for 26 weeks “for temporary accommodation for the licensees personal use only”, with the licensor retaining keys and reserving an absolute right of entry at all times to exercise management and control. The licensor could require the licensee to remove his possessions from the room during the blank one and a half hour period. It was held on appeal that a trial of the issues was needed and that the case was not suitable for a summary possession order under Order 13.

In Aslan v Murphy there was a similar provision to that in Crancour, with the occupier of a basement room entitled only to occupy with a one and a half hour gap in the morning to noon and doing so in common with “the Licensor and such other Licensees or invitees as the Licensor may permit from time to time” and on condition that “the Licensor is not willing to grant the Licensee exclusive possession”. It was held on appeal that the licensee was a tenant and that the sharing provision was unrealistic and a patent pretence.

The Court of Appeal formulated general principles to be followed in such cases, as:

– The basic question is what was the true bargain between the parties

– Labels are inconclusive, the homeless will agree to any label

– The touchstone is exclusive possession but the spectrum is wide, ranging from a full repairing lease to a room for the night.

– The court must be alert for pretences which do not necessarily render the agreement as a whole a sham but indicate that the true bargain is not as it appears on the face of the agreement.

– A Rent Acts occupier does not necessarily lose that protection by agreeing to substitute in the future a shared right of occupation for an exclusive one should the owner so require

– Provisions withholding exclusive possession from the occupier need not mean that he is a lodger only; the reason must be examined for its significance

In conclusion Wilkinson makes the correct assessment of the Street v Mountford decision “However many different instances may come before the courts, the basic issue remains that formulated by Lord Templeman in Street v Mountford: “the only intention which is relevant is the intention demonstrated by the agreement to grant exclusive possession for a term at a rent. ”

Bibliography

Cases

Aslan v Murphy (No 1) [1989] 2 EGLR 58

Booker v Palmer [1942] 2 All ER 67

Brooker Settled Estates Limited v Ayres (1987) EG April 18

Bruton v London & Quadrant Housing Trust [1999] 3 WLR 150

Crancour Ltd v Da Silvaesa [1986] 1 EGLR 80 (CA)

Dunwell v Hunt (1996) 72 P & CR D6

Errington v Errington [1952] 1 All ER 149

Gray v Taylor 1998] 1 WLR 093

Street v Moutford [1985] AC 809

Journal Articles

Colbey R, (2001) “Detecting a Sham”, New Law Journal 151.7006 (1612)

Wilkinson H, (2001) “The Lease/Licence Distinction – Again?”, New Law Journal 151.7003(1489)

Books

Evans D, (2002) “The Law of Landlord and Tenant”, Sixth Edition, Butterworths

Garner S, (2004) “A Practical Approach to Landlord and Tenant”, Fourth Edition, Oxford University Press

Wilkie M, (2000) “Landlord and Tenant Law”, Fourth Edition Palgrove Macmillian