Lease or licence ?

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Whether a person's occupation of land can amount to a Lease, or is merely a licence, has traditionally been of very great importance. One reason for this importance is that, as the lease is an interest in land, it is capable of enforcement against the landlord's successors in title. If tenant T's landlord (L) sells his Freehold interest to M, T may want to be able to enforce his right of occupancy against M. M may very well want the opposite. Traditionally, if T is merely a licencee, his right of occupation arises from his agreement with L, and is not attached to the land itself. T's right of occupation can therefore not be enforced against M. Traditionally a licence is not a form of propery right at all, but merely a personal right (Thomas v sorrel (1673)).

Another reason for insisting that there is a lease has traditionally been that a leasee has a greater protection from eviction than a licencee. A great deal of convoluted judicial logic has been employed to hold that a lease exists, rather than a licence, in order to prevent tenants being evicted by capricious landlords.

A further reason to be concerned whether we are dealing with a lease rather than a licence is that a lease can be associated with covenants that are capable of running with the land, and binding successive owners. This is impossible with a licence.

In some circumstances, the existence of a lease will be incontestable. If the lease is for seven years or more, granted by deed, and registered with its own title with the Land Registry, there will be no argument. It is generally the shorter periods of occupancy, particular where they are recurrent (e.g., weekly) that give rise to argument. Traditionally it was felt that the deciding factor was the intentions of the parties, but the law has been considerably simplified by Lord Templeman's speech in Street v mountford (1985). Now, apart from exceptional cases, a person who pays regular rent to enjoy exclusive possession of some piece of land (even a room) has a lease. The exceptions include, for example, where occupancy is charitable rather than commercial, or where possession arises by action of law. Apart from these exceptions, any person who is not a leasee must be a lodger. A lodger is someone who receives some sort of services (perhaps cleaning or meals), or who is given accomodation for better performance of his employment duties.

At the same time as the category of leases has expanded, there have been suggestions that the courts are prepared to treat mere licences as a form of property right, despite a long history of not doing so. The first intimation comes from Denning MR in Errington v errington (1951), who seemed to accept that a person who inherited a property that was occupied under licence could not evict the licencee. In other words, the licence was enforceable after the death of the original licensor. In Binnions v Evans (1972) a purchaser who knew of the licence affecting the property, but bought it anyway, was held to be bound by it. A variety of reasons were given, but the most enduring - Denning again - was the the purchaser was subject to a Constructive Trust in favour of the licencee, as it would be inequitable for him to renege on his agreement to honour the licence.

In summary, the current view is that although a lience is not a property right, in some circumstances it can be enforced against third parties. This may be a highly technical distinction - the ability to enforce property rights against subsequent owners of interests in the land is what typifies a property right. The most striking case of a court treating a licence as effectively a property right is probably Bruton v london and quadrant housing trust (1977), where the House of lords held that a lease could be granted out of a licence. If a licence is not a property right, how can it support something which is?

Land and Property Law