Lease or License? The Age Old Question Was Asked Again in Global 100 Limited v Maria Laleva (2021)
When a landlord grants a tenant the right to occupy premises in exchange for rent this can be done by way of a license or a lease/tenancy.
There has been much case law on how you distinguish the two and the Court of Appeal were called upon to address this issue again in the recent case of Global 100 Limited v Maria Laleva (2021).
The difference between a Lease and License
A lease/tenancy grants one party the right of exclusive possession of land for a specified period of time.
Possession of land is not necessarily the same as occupation of land as a tenant can sublet the land.
A lease/tenancy creates an interest in land.
In contrast a license is a personal right or permission for one party to do something on the other party’s land.
The leading case on this distinction was Street v Mountford (1985). The relevant elements which would indicate a lease/tenancy exists include:
- The occupier was granted exclusive possession
- For a fixed or periodic term
- At a rent
A court will look at the substance of the arrangement as well as the form so that the mere labelling of an agreement will not be conclusive; just because it is called a lease/tenancy or licence does not make it so.
Why does it matter: the implications?
Save for exclusive possession, the main reason that it makes a difference is whether the tenant/occupier has security of tenure.
This means that the landlord can only obtain possession of the land under certain circumstances and having followed the correct legal procedures.
A license can be terminated on much less notice so possession can be obtained quicker and easier.
Security also means that the occupancy rights are not affected by a change of ownership of the landlord.
The Facts in Global 100 Limited v Maria Laleva (2021)
The main element of a lease/tenancy is whether exclusive possession has been granted. But the importance of exclusive possession was water down in this recent case.
The property in question was owned by NHS Property Services. They entered into an agreement with Global Guardians Management Limited (GGM) to provide property guardian services to prevent squatting, vandalism etc in vacant buildings. GGM then entered in to an agreement with G100 allowing them to grant temporary non-exclusive licenses. G100 then entered into a temporary license agreement with Ms Laleva.
NHS Property Services then terminated the agreement with GGM and gave them a right of possession for the sole purpose of enabling eviction of licensees/occupiers of the property. G100 served a notice to quit and then sought possession against Ms Laleva. Ms Laleva sought to defend the claim on the basis that she was in fact a tenant and not a licensee, as she had exclusive occupation of a lockable room which she paid a weekly rent for.
The Decisions in Global 100 Limited v Maria Laleva (2021)
The judge at first instance decided against Ms Laleva. Ms Laleva appealed.
On appeal HHJ Luba reversed the decision and found in Ms Laleva’s favour. Global 100 then appealed.
It came before the Court of Appeal in November 2021 with a decision handed down in December 2021.
The Court of Appeal said that exclusive possession was not necessarily conclusive, following comment in Street v Mounford that “there can be no tenancy unless the occupier enjoys exclusive possession; but an occupier who enjoys exclusive possession is not necessarily a tenant.” Further they explained that sole use was not the same as exclusive possession. When looking at the surrounding circumstances you need to look at the reason the occupier was let into occupation.
The Court of Appeal allowed the appeal and decided against Ms Laleva because:
- The purpose of G100 allowing Ma Laleva into occupation was to provide guardian services. An essential part of being able to fulfil that purpose was that G100 should be able to hand back the property to NHS Property Services as and when required
- Ms Laleva was required to occupy the designated space to perform the services required
- G100 was entitled to alter the location and extent of the living space (which was inconsistent with a grant of exclusive possession)
- Ms Laleva was also required to amicably and peacefully share the property with others selected by G100
- The description of the rights granted was ‘non-exclusive’ occupation of the whole property not any particular part of it
They drew comparisons of Ms Laleva’s situation to that of a service occupier. Occupation was essential to the performance of their duty and they were obliged to occupy the particular property or a particular property within a particular area.
“It was necessary for the provision of guardian services that Ms Laleva should occupy the Property…Here Ms Laleva has enjoyed everything that the licence purported to grant her. Having done so, she must now perform her part of the bargain by leaving the Property.”
The form of an agreement can be an important starting point. Exclusive possession is a key element and you need to determine whether exclusive possession has in fact been granted. Even if exclusive possession has been granted, you should also look at the purpose that the agreement was entered into and why occupation was required.
Make sure you are clear what you want to grant and that any agreement properly reflects the intentions of the parties.
If you’re seeking legal advice relating to property disputes please call our highly experienced property dispute experts on 0808 252 5231 to talk through your situation with us. Alternatively, you can request a call back online.