Tenancy Agreement Problem Question

Abstract

The primary scope of this paper is to consider whether parties who enter into an agreement that purports to be a licence can be said to have entered into a lease agreement. If a party can enter into a so called licence agreement and it later appears to be a lease, the tenant will be protected as an assured tenant under the Housing Act and the landlord will find him/herself subject to the provision of the Act. The paper first discusses the difference between a licence and a tenancy. With reference to cases and literature the paper proposes that the actual agreement between the parties is that of landlord and tenant. The paper further discusses the protection afforded to tenants under the Housing Act 1988.

Introduction

Tenants enjoy statutory protection and to avoid it, landlords require prospective occupants to sign licence agreements. What is the nature of the agreement between David and the occupants of the flats?

Licence to Occupy or Tenancy Agreement

A license gives the occupant the permission to occupy his/her premises but does not confer an interest in land.[1] A lease on the other hand creates an interest in Land.

In Street v Mountford [1985] 2 All ER 289 (299), Lord Templeman set out three hallmarks of a lease:

• Exclusive possession
• Rent and
• Term

Although rent payments will normally be payable, it is submitted that the requirement to pay rent is not essential to a lease agreement.[2]

A lease only has two requirements: Exclusive possession and a term. The licence also provides for a term but does not grant exclusive possession.

To determine whether there is a lease or a licence it is necessary to look at the form and substance of the agreement and the genuine intention of the parties is important. There is no hard and fast rule and it is not always easy to determine whether exclusive possession exists. What rights has the owner retained pertaining to use of the premises? If the agreement requires from the occupier to share with another or the owner, the occupier will not have exclusive possession.

Employee Occupancy

The service agreement between employer and employee entitling the employee to live in the employer’s accommodation in order to perform his duties as employee is an example of exclusive occupancy that does not confer an interest in land. The employee is not occupying for himself but on behalf of the employer.

In Street v Mountford, op. cit. the court said that the possession of the servant is treated as the possession and occupation of the master but it must be strictly ancillary to the performance of the duties which the employee has to perform within the employment relationship.

Cases

The leading case is Street v Mountford, op. cit. Mrs Mountford had the right to occupy a furnished room under a written agreement which stated that it was a licence and she had no protection under the Rent Act.

The court held that the true distinction between a lease and permission personally to occupy lay in the exclusivity of possession which Mrs Mountford enjoyed. Despite the wording the true nature of their agreement was that of landlord and tenant.

The court in Antoniades v Villiers & Anor [1988] EWCA Civ 3 (17 March 1988) followed the judgement of Street v Mountford op. cit. where Lord Templeman criticised the finding in Somma v Hazelhurst [1978] 1 WLR 1014 (Each occupant signed a separate agreement).

In this case the occupants were partners too. The owner presented an agreement that was drafted on the same terms of the agreement in Somma v Hazelhurst op. cit. Mr Villiers and his Partner signed two separate agreements stating that the nature of the agreement is a licence. The owner was entitled to put someone else in too and in fact a friend stayed with the respondents for a period of time. On appeal the court held that the respondents did have exclusive possession and called the agreements pretence. The agreements did not reflect the reality of the situation and the court held that a lease was created.[3]

The pretence doctrine can be seen as a three stage process:

• The courts must establish that there is a consensus ad idem between the parties.
• If the parties agreed to a term to avoid statutory protection, it should be struck out.
• The remaining part of the agreement will determine if it is a lease or not.

Multiple occupancy arrangements are more difficult to decide. In AG Securities v Vaughan, op. cit. the court referred to unity of possession, title, time and of interest and held that there was a licence only since unity of time, title and interest were missing.

There are three ways of looking at the nature of the agreements:

• There are a series of licences and no protection under the Housing Act.[4]
• Each individual has exclusive possession of a bedroom whilst sharing the other facilities and each has a lease providing security[5]

• There exists a joint tenancy of the whole as found in Antoniades v Villiers op.cit.

Advice

Ben, Clara and Alan are all living in the same flat. Ben and Clara live together in one room and Alan in his own room. They are sharing the rest of the flat. The position with Ben and Clara is the same as that in Antoniades v Villiers, op.cit. save that Alan is in the second room. Ben and Clara have exclusive possession of their room and one cannot validly argue that someone else can be placed in their room with them.

All three of them also fall under the second scenario since they have exclusive use of their bedrooms but they share other facilities. Section 3 of the Housing Act provides security to them.

The real nature of the relationship is that of a lease. The students are entitled to protection under the Housing Act. The tenant has tenure and a sale to Fred does not affect their security.

Edward is not in the flat as part of his job as clerk for David. There is no mention of the nature of the agreement but there is clearly a term and exclusive possession. The relationship between Edward and David is also a lease.

In all circumstances none of the students or Edward can be evicted without following the correct procedures.

The Housing Act 1988

In terms of Section 19A of the Act, the agreement between David and the Students and David and Edward are assured short hold tenancies. The landlord cannot validly terminate the tenancy without the obtaining an order of court, or in the case of a fixed term tenancy which contains power for the landlord to determine the tenancy in certain circumstances, by the exercise of that power.

Edward is protected by Section 5 of the Act as an assured short hold tenant.

The only way that Fred can end the assured short hold tenancy is by make the premises his principal residence and approaching the court for an order without any court appearance.

Bibliography:

Books

• Bright, S. and Gilbert, G., Landlord and Tenant Law: The Nature of Tenancies, (1995), Clarendon Press

Legislation:

• Housing Act, 1988
• Housing Act, 1996
• Housing Act, 2004
• Law of Property Act , 1925

Cases:

• Street v Mountford [1985] 2 ALL ER 289
• Ashburn Anstalt v Arnold [ 1988] 2 All ER 147
• Antoniades v Villiers & Anor [1988] EWCA Civ 3 (17 March 1988)
• Somma v Hazelhurst [1978] 1 WLR 1014
• AG Securities v Vaughan; Antoniades v Villiers [1988] 3 All ER 1058

Other sources:

• Law Commission, Landlord and Tenant. Reform of the Law:, Law Com No 162, 1987

Internet sources

• Tenants Know Your Rights as at 14 November 2008
• Housing- In England, Tenancy Agreements <http://www.adviceguide.org.uk/index/family_parent/housing/tenancy_agreements.htm > as at 14 November 2008
• Residential Tenancies What is a Tenancy as at 14 November 2008
• The Letting Centre – Factsheet 18 – Residential Tenancy Agreements <http://www.letlink.co.uk/letting-factsheets/factsheets/factsheet-18—residential-tenanc…> as at 14 November 2008
• Assured and Assured Shorthold Tenancies, A guide for tenants as at 14 November 2008

[1] Licences, Key points, at 14 November 2008

[2] Ashburn Anstalt v Arnold [ 1988] 2 All ER 147; Law of Property Act 1925, Section 205(1)(xxvii)

[3] AG Securities v Vaughan; Antoniades v Villiers [1988] 3 All ER 1058

[4] AG securities v Vaughan, op. cit. 7 Housing Act 1988, Section 3