Lease or licence: a useful reminder

Summary

This case is a useful reminder that it is the circumstances, conduct and intention of the parties that determines the basis of an individual’s occupation of a property. If the circumstances negate any intention to create a tenancy, the wording of the document itself will not turn a licence into a tenancy.

The Facts

The Ashtead United Charity had three properties containing 14 residential flats. Mrs Watts was allocated almshouse accommodation in one of the flats and occupied the flat pursuant to a letter of appointment. The letter of appointment stated that Mrs Watts was appointed as a beneficiary of the Charity. It stated that a monthly rent was payable and made various references to the “tenancy”. However, it also set out various regulations that were to apply to residents, once of which stated that neither the resident, nor any relation of the resident, would be a tenant of the Charity or have any legal interest in the almshouse.
In August 2014, the trustees of the Charity served a notice to quit on Mrs Watts. Possession proceedings were issued in May 2015. As a preliminary issue the Court was required to decide the basis on which Mrs Watts occupied the flat. At first instance, the Court decided that Mrs Watts occupied the flat as an appointee made by the trustees, had a licence to occupy the property as a beneficiary and had not been granted a lease.

The Appeal

Mrs Watts appealed. It was Mrs Watts’ case that she occupied the flat as a periodic tenant. Mrs Watts argued that she had exclusive possession of the flat and so had always been a tenant of the flat. The argument was put that, even if Mrs Watts occupied the flat in her capacity as a beneficiary of the Charity, she entered into occupation as a tenant at will and, on payment of the periodic sums due under the appointment letter, her tenancy at will became a periodic tenancy.

The Court of Appeal disagreed. The Court did not accept that Mrs Watts had exclusive legal possession of the flat. The Court confirmed the distinction between legal exclusive possession or a legal right of exclusive possession on the one hand and a personal right of exclusive occupation on the other hand. Legal exclusive possession entitles the occupier to exclude all others, including the legal owner, from the property.

The Court considered that the appointment letter did not grant legal exclusive possession to Mrs Watts, notwithstanding its references to “rent” and to the “tenancy”. The references to a tenancy and rent in the appointment letter were explained as being due to the fact that the trustees of the Charity were lay volunteers. In addition, there were express provisions in the appointment letter which pointed away from the grant of legal exclusive possession and a tenancy. As such, Mrs Watts was granted a personal licence to occupy the flat on the terms of the appointment letter. A tenancy had not been created.

Practical Implications

This is a useful reminder that parties must ensure that the documentation governing occupation by one party of property belonging to another accurately reflects the intention of the parties when the arrangement was entered into. Whether an occupier is a licensee or a tenant is not necessarily determined by the labels or language used by the parties but instead turns on the intention of the parties having regard to all the admissible evidence.

Case: Stewart and others v Watts [2016] EWCA Civ 1247