Facts
In 1983, Roger Street agreed to let Wendy Mountford occupy two rooms in a house in Bournemouth for £37 a week, terminable on 14 days' written notice. The agreement was described as a "licence". Mrs Mountford also signed a declaration that she understood the agreement didn't give her a tenancy protected under the Rent Acts.
She had exclusive possession of the rooms. She later applied to have a fair rent registered under the Rent Act 1977, which was only available to tenants. Mr Street sought a declaration that she was a licensee.
Issue
Was the agreement a tenancy or a licence? In particular, what weight should the court give to the parties' description of it as a licence?
Decision
The House of Lords unanimously held that the agreement created a tenancy. Lord Templeman gave the only speech.
Reasoning
Exclusive possession, term and rent. Lord Templeman said that where residential accommodation is granted for a term at a rent with exclusive possession, the grant is a tenancy, unless there are special circumstances that negate the intention to create one.
Labels don't matter. The parties can't turn a tenancy into a licence by calling it one. Lord Templeman illustrated this with a memorable image: a five-pronged implement for manual digging is a fork, even if its maker insists on calling it a spade. If the agreement has the characteristics of a tenancy, it's a tenancy.
Special circumstances. Lord Templeman listed situations where exclusive possession doesn't create a tenancy, including:
- where there's no intention to create legal relations, such as a family arrangement or an act of friendship or generosity;
- where the occupier is a service occupier, required to live there to do their job better;
- where the owner has no power to grant a tenancy;
- where the occupier is in possession as a purchaser under a contract of sale, or as a mortgagee.
Lodgers. A lodger is a licensee, because the landlord provides attendance or services that require unrestricted access to the premises, so the occupier doesn't have exclusive possession.
Shams. The court should be alert to "sham devices" and artificial transactions whose only purpose is to avoid the Rent Acts.
Why it matters
Street v Mountford is the leading case on the distinction between a lease and a licence. The distinction matters because:
- a lease is an estate in land (s 1(1)(b) of the Law of Property Act 1925) and can bind third parties, while a licence is generally a personal permission;
- tenants may have statutory protection, for example under the Housing Act 1988 or, for businesses, the Landlord and Tenant Act 1954.
Later cases developed the approach:
- In AG Securities v Vaughan; Antoniades v Villiers [1990] 1 AC 417, the House of Lords looked at the reality of shared occupation, holding that a couple who signed separate "licences" for a flat were joint tenants, while four unrelated people who moved in at different times weren't.
- In Bruton v London & Quadrant Housing Trust [2000] 1 AC 406, an agreement giving exclusive possession was a tenancy between the parties, even though the grantor had no estate in the land.
How it comes up in exams
In a lease or licence problem:
- Does the occupier have exclusive possession? Look at keys, services, the owner's rights of access, and whether occupation is shared.
- Is there a term, fixed or periodic, and (usually) a rent?
- Do any special circumstances apply?
- Are any terms a sham, inconsistent with what really happened?
Then consider formalities and registration: a legal lease of more than three years must be made by deed (ss 52 and 54(2) of the Law of Property Act 1925), and leases of more than seven years must be registered (Land Registration Act 2002, s 27).
Frequently asked questions
What was decided in Street v Mountford?
The House of Lords held that Mrs Mountford was a tenant, not a licensee, even though her agreement was called a licence. She had exclusive possession of the rooms for a term at a rent, and no special circumstances applied.
What is the test for a lease after Street v Mountford?
Exclusive possession, for a fixed or periodic term, at a rent. If those are present, the arrangement is a tenancy unless there are special circumstances, whatever the parties call it.
Is rent essential for a lease?
Lord Templeman included rent in his description, but in Ashburn Anstalt v Arnold [1989] Ch 1, the Court of Appeal held that a lease can exist without rent, consistent with s 205(1)(xxvii) of the Law of Property Act 1925.
Why does it matter whether someone has a lease or a licence?
A lease is a proprietary interest that can bind third parties and may attract statutory protection. A licence is a personal permission that generally doesn't bind a buyer of the land.