Legal 101

Lease or Licence to Occupy? How the law decides. 

Lorraine Dindi
·
August 28, 2021

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If it looks, walks and talks like a tenant, can it be a lodger?


To understand the difference between a lease and a licence to occupy, one needs to appreciate the impact of each agreement. This requires going back in time where, in response to the dire state of private housing in post-World War II England, the Rent Acts of 1957 and 1977 were enacted. To many landlords, these Acts made having a lodger much more attractive than having a tenant. Naturally, the courts faced several cases where it was not immediately clear whether the arrangement in question was a lease or a license. This article examines these cases and the framework the law now uses to tell a tenant from a lodger.

Does the title of the agreement determine its nature?

One thing the Rent Acts did was grant tenants the right to demand a fair rent. The tenant in Street v Mountford [1985] AC 809 tried to claim this right, so his landlord sought a court declaration that the agreement between them was not a tenancy. After all, it was titled a “license agreement” and a licensee did not have a right to a fair rent. The Court of Appeal considered the key elements of a lease and ruled that exclusive possession was the conclusive factor. Since Mountford had been granted residential accommodation with exclusive possession for a specified term and there was no provision of services which would require the landlord to enter the property, the court held that it was a lease. 

Does exclusive possession determine the nature of the agreement?

Exclusive possession is given to someone on the basis that no one else will be given the same right to the same property at the same time. Interestingly, the same can be true for a license as well. Take Clore v Theatrical Properties [1936] 3 All ER 48 for instance, where the claimant, in an attempt to establish an overriding interest over part of a theatre, argued that they had a lease to sell refreshments and programmes at the front of the building. Their written contract was in fact worded like a lease. The court held this agreement to be a license and accepted that even licenses can be granted on the basis that no one else will have the right to occupy the same premises at the same time. This begs the question of exactly what is the nature of the exclusive possession that defines a lease in the eyes of the law.


This question could probably have been answered by the defendant in Aslan v Murphy [1990] 1 WLR 766 who, to make his tenant appear like a lodger, required the tenant to vacate the premises for 90 minutes every day so he could allegedly enter and clean the room. The court realised that this arrangement was a sham: the landlord never actually intended to make use of the spare key or provide services. The court said that an occupier would be a lodger if the landlord provides attendance or services which require them (or people authorised by them) to exercise unrestricted access to and use of the premise.

Is the language of an agreement enough to determine its nature?

Another sham was found in Antonaides v Villiers [1990] 1 AC 417 where the agreements in question explicitly stated that the Rent Acts would not apply and that the tenants would share occupation with their landlord. In seeking repossession of the flat, the landlord relied on provisions in the agreement, such as the fact that it put no limit on the number of persons who could occupy the flat, to argue that the agreement did not have any characteristics of a tenancy. The court rejected these arguments and saw through the sham which had been purposefully designed to avoid the Rent Acts.


Adopting the language of a lodger agreement is a very common move for those who did not wish to fall within the scope of the Rents Acts. The landlord in Westminster City Council v Clarke [1992] 2 AC 288 granted a license agreement to the occupier which even had a clause which said he could be asked to change rooms or share his room with another occupier. The House of Lords said that neither public nor private landlords can free themselves from the legal protection offered to tenants by simply adopting the language of a license to occupy. In this case, however, the agreement was found to be a license for reasons such as the fact the landlord was a provider of hostel accommodation for homeless people. The grant of exclusive possession would clearly have been inconsistent with the purpose for which the occupier had been provided with accommodation.


The facts are slightly similar in Gray v Taylor [1998] 1 WLR 1093, where the defendant lived in an almshouse (a type of charitable housing for people on low income). When she was asked to leave, she argued that a court-issued eviction was necessary since she was an assured tenant under section 1 of the Housing Act 1988. The court held her agreement to be a license because for a number of reasons, notably the fact that granting a tenancy in an almshouse would undermine the objects of the charity if the occupier was allowed to remain even when they stopped satisfying the conditions for residency. Thus, she was a licensee and excluded occupier.


When is an agreement a tenancy or a licence?

When trying to determine whether a particular agreement grants a tenancy or a licence to occupy, it is crucial that the agreement itself is studied. What does it purport to be? What is the nature of the rights it expressly or implicitly grants occupiers? Are its provisions intended to be acted upon? Is it even possible to act upon them? It is also crucial to look at the actual arrangement: how do the landlord and occupiers behave? What is the nature of their relationship

Read our tutorial if you would like to create a lodger licence agreement or book an introductory call with one of our team members if you have questions.


The content on this page is for general information purposes only and does not constitute legal advice on which you should rely.


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