9.1.3 Leases Lecture - Hands on Example
As you will recall from the foregoing discussion, questions on leases can be divided into two categories:
- Is the agreement in question a lease or a licence? Or,
- Does the landlord owe a specific duty to the leaseholder in the present case?
When answering either of the two questions, you can break them down into the following formulae:
Lease or licence
- Does the agreement explicitly confer a right of possession over the land?
- Does the agreement use such language as ‘licence agreement’?
- Is there a term indicating a waiving of tenancy rights?
- Does the agreement require that the owner of the premises provide certain services to the occupant, in the course of which they are required to enter the area occupied by the occupant on a regular basis?
- Are there terms relied on by the owner to claim the agreement is a licence yet are never exercised?
You can essentially divide the potential answers in this manner. If the answer to question 1 is yes, it is almost certainly a tenancy. A right of possession (meaning the right to exclude others, including the owner in most circumstances) is a hallmark of tenancies. If the answer is no (meaning there is no explicit guarantee of exclusive possession), it might still be a tenancy depending on the other questions.
If you answer “yes” to any combination of 2, 3 and 5 and “no” to 4, it is likely a tenancy that is disguised by the landlord as a licence. If however you answer “yes” to 4 then it is probably a licence.
Questions on whether a landlord does owe a duty (and if so whether they have breached that duty) are a balancing exercise based on the facts. In essence:
- Is the interference caused by an act or omission of the landlord or someone acting or omitting to act with the landlord’s permission?
- If so, then is that interference reasonable?
If you answer “no” to 1, there is no liability (see Southwark LBC v Mills). If you answer “yes” to 1, then it comes down to whether the interference is reasonable or not. Given your understanding of tort law, you’ll know that unreasonable or negligent behaviour in this area will generally result in liability.
Q1. Aaron is homeless and looking for shelter. He is offered shelter by Borough Council in one of their hostels. Aaron resides at the shelter for several years, and he is able to reside in the same room in that time. Following a change in management, staff at the hostel tell Aaron he needs to move room and that they will be inspecting his room on a regular basis. Aaron protests, saying he has a right to live in that specific room.
Q2. Delia and Eric enter into an agreement with Francis for occupation of a house owned by him. They would occupy the basement. Delia and Eric are asked to sign a document called a licence agreement, in which they are named the licensees and are asked to pay a license fee for occupation. Francis says he will need to go into the basement for his band practice, but offers to serve breakfast each day. After Delia and Eric sign the agreement, they later realise that Francis actually practices with his band elsewhere. Now, Francis has told them they have a week to leave. Francis never served them breakfast.
Advise Delia and Eric.
Q3. GoHomes Ltd are looking to sell a lease over Blackacre. They find an interested party, Ivan. He is somewhat eccentric, and wants to impose a special condition on the lease: he asks that the term of the lease should last “until such time as England win the World Cup.” GoHomes are keen to sell the lease but are unsure of this clause.
Q4. Juliet lives near the top of a high-rise block of flats. Her landlord is Kent County Council. She has recently discovered that the lift has stopped working. Kent say it is not their problem: they took ownership of the building some time ago and the fault with the lift is owing to the structure of the building. An expert report shows this to be the case.
A1. Following the case of Westminster City Council v Clarke this situation appears to be a licence rather than that of a tenancy. Given the nature of the accommodation (i.e. hostel) the owners are entitled to allocate Aaron an area of occupation as they see fit and to intrude upon his occupied space as is necessary. The “totality, immediacy and objectives” of the agreement are paramount.
A2. This points to the ‘sham’ agreement practices and labelling issues surrounding leases and licences. We are given a clue that this is a sham agreement: Francis never exercises the right to use the space for band practice, nor does he uphold his supposed obligation to provide breakfast. Therefore, the occupants will be deemed to be tenants following payment of the so-called “licence fee.”
A3. Applying Prudential v London Residuary Body, this kind of clause is lacking in the kind of time-bound certainty which is the requirement for all leases. It does not state the term in a numerical value, and as such would fail to be regarded as a lease for lack of certainty following the term of years requirement.
A4. Following Southwark LBC v Mills there are certain interferences with the quiet enjoyment of one’s property that will not result in liability. This is what Kent are saying in relation to the structure of the building. However, following Irwin, the failure of a lift in a high-rise effectively renders the agreement inefficacious and absurd because Juliet relies on the lift as an essential part of the property. It is therefore Kent’s responsibility to fix the faulty lift.
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