Essay: Differentiate between leases and licences

There are many reasons as to why the courts have attempted to differentiate between leases and licences, different statutory protections exist for both; but the main problem in distinguishing the difference between the two is how the courts have attempted to differentiate between licences and leases especially due to the exclusive possessions test.
The court’s first concern would be that the term ‘licence’ is very extensive and protects all types of permission, but when the term is used in relation to land it means that “the licence is not merely a personal right to occupy the land but also, a right to use the land in anyway” . A licence is a personal arrangement which is made between two party’s, which comprises authorization to occupy land for some specific reason; licences do not give the grantee any proprietary interest’s in the land which would be transferable or bind a successor in title, alternatively it simply stops what would otherwise be an unlawful trespass. An ordinary licence could satisfy an individual for short term reasons such as granting a driver to temporarily park their car in a car park, “alternatively licences could also satisfy longer term commitments such as the rights of a contractor to work on a building site” .
In comparison, a lease unlike a licence does convey an interest in land and that in-definite circumstances will be binding on a beneficiary in title, “A lease produces a legal estate but the expression ‘term of years absolute’ could be seen as challenged through the case of Bruton v London & Quadrant Housing Trust (1999) 3 All ER 481” . The individual who has the lease is called the ‘lessee’, this individual is able to enjoy entire ownership of the land which includes the right to eliminate all others from that specific property, additionally they could be allowed considerably greater protection than what is permitted to a licensee for example, “security of tenure and protection of relief from forfeiture” .
The Law of Property Act 1925 rearranges the amount of legal estates and legal interests; the guiding principle of the act was to condense the amount of legal estates down to just two which are cited in Section 1(1) of
The Law of Property Act 1925, which explains that “the only estates in land which are capable of subsisting or of being conveyed or created at law are an estate in fee simple absolute in possession (freehold).”
The first case prior to Street v Mountford (1985) 2 WLR 877 that contested the difference between licences and leases was the case of Wells v Hull Corporation (1875) , this case involved commercial property, the pivotal element for differentiating lease from licence was if the grantee acquired ‘exclusive possession’ of the dock; “exclusive possession would exist where it could be shown that they had been granted overall general control of the dock” . In this case it was proved that the Corporation persistently operated the dock gates, pumps and supervised cleaning on a regular basis which therefore lead to it being held at court, that the ship owners failed to have exclusive possession.
The difference between lease and licences was again contemplated in the case of Marchant v Charters (1977) 1 WLR 1181 , it was held in this case that the grantee did not comply with requirements in order to be a lodger, instead the grantee was said to have been the occupier of a service flat and therefore was only under a licence; the courts came to this conclusion as the grantee’s landlady executed duties such as changing bed linen and cleaning the flat daily. Since this case the significant case for deciding if a lease or licence has been established is Street v Mountford (1985) 2 WLR 877 ; this case involved an agreement that claimed to be “a contractual licence granting occupation of two furnished rooms at a dwelling house at a licence fee of £37 per week”
In the given scenario Regina sublet the premises over a year ago to Quentin without John’s knowledge or permission which is a breach of the restrictive covenants which were set out by John; if Regina wanted to
breach any of the restrictive covenants she must have consulted John in writing.
Occasionally a lease will exclude subletting ‘part of the property’, this means that the property can be leased as a whole but part of the property cannot be sub-let. John has set out in the covenants that the office premises are not to be sub-let whatsoever. If the tenant was not allowed to sublet due to their tenancy agreement; or if they failed to get their landlord’s permission beforehand this means that the subletting itself is unlawful and breaches the terms and conditions attached to the lease.
Despite the subletting being unlawful in this scenario this will not affect Quentin’s tenancy, Quentin’s tenancy is still valid because his landlord Regina who is the mesne tenant created a tenancy which is Quentin’s sub-tenancy, this brings about a relationship of landlord and tenant between Quentin and Regina. This means that Quentin can lawfully occupy the property under the sub-tenancy until, Regina decides to end the tenancy in the proper way or Regina’s lease with John comes to an end.
Regina was not allowed to sublet the office premises to which she leased of John therefore the tenancy agreement will most likely be broken; if John decides to take possession proceedings against Regina because she’s broken her tenancy agreement this could affect Quentin’s rights to stay in the office premises. Generally, when a mesne tenancy ends, the sub-tenancy which is the agreement between Regina and Quentin will also end and the head landlord being John is entitled to get the office premises back in the same state which he leased them out in, however there are some exceptions to this which include if the head landlord being John agrees to the sub-tenancy although he was not aware for the past year then the subletting can carry on or; if the mesne tenancy ends between Regina and John with Johns agreement then this is called surrender. Another covenant set by John in his lease agreement was that the exterior of the premises must be painted every five years, since finding out that Regina had illegally sublet the office premises, John also realised the exterior of the premises hadn’t been painted for 10 years which is another covenant that has been broken by Regina, even though it hasn’t been made clear when Regina was given the remaining time of the lease by Sarah the fault will still be with Regina as she now holds the lease.
Numerous cases prior to Street v Mountford (1985) 2 WLR 877 had tried to distinguish between “a right to possess land and a personal right to occupy land” . Lord Denning identified the dissimilarity as “the nature and quality of the occupancy” , put simply this means a lawful right of exclusive possession of the land for a term would form a lease and a mere permission to utilize land would form the requirements of a licence.
Exclusive possession focuses more on lawful rights instead of what is practically going on; there-fore it needs to be separate from exclusive occupation. Exclusive occupation relates to what is going on in practice, for that reason if an individual has exclusive occupation this automatically increases the presumption of exclusive possession and it also works the other way if an individual fails to have exclusive occupation then they also do not have exclusive possession and consequently fail to satisfy the requirements of a lease.
The test which was established in the case Street v Mountford (1985) 2 WLR 877 was ‘the exclusive possession test’. This test was put into place by Lord Templeman who explained an occupier wouldn’t fail the requirements to be a tenant if they failed to have exclusive possession for a definite duration, this case since 1985 has been considered as having “marked a ‘sea-change’ in land law”.
If the lease between John and Regina had been granted after 2004 and for the duration of twenty years the difference in what could hap-pen after the lease covenants had been broken would massively dif-fer; this is due to the change in law under The Landlord and Tenant Act 1954 . since created this act has been seen as creating a huge imbalance between the rights of tenants and landlords, reforms to The Landlord and Tenant Act 1954 came into effect on 1st June 2004, these reforms established “procedures and time limits relating to the termination and renewal of leases of business premises” .
The new reforms in the act point out that discontinuation of a lease could be instigated by either the tenant or the landlord, but the main aim of the act is to protect the tenant. Regina could possibly oppose to John’s refusal to allow a renewal lease and can demand that new lease is accepted unless John could demonstrate unquestionable grounds; however John can’t oppose to Regina’s conclusion to dis-continue the lease and can’t demand that Regina takes a new lease if she doesn’t want one.