Lease or licence? Licence coupled with option to call for the grant of a lease

In Essex Plan Ltd v Broadminster ((1988) 56 P & C.R. 353) D gave E a licence to occupy premises. It also gave E an option to call for the grant of a lease. The licence and option periods expired but E remained in possession. Negotiations for the grant of a further licence did not come to fruition. D conveyed the property to B. B gave notice to terminate the licence. E argued that it was a tenant, not a licensee, with the benefit of the security of tenure conferred by part II of the Landlord and Tenant Act 1954. They argued that they had exclusive possession for a term at a rent and therefore the Street v Mountford criteria for the grant of a lease were present. 

E failed. The case belonged to one of the exceptions identified by Lord Templeman in Street (occupation by a purchaser pending completion):

‘The option gave Essex Plan the right to call for the grant of the lease and therefore gave it in equity an immediate interest in the land. Its entry into occupation pending the exercise or expiry of the option was ancillary and referable to that interest. There is therefore no need to infer the creation of a tenancy which would give Essex Plan a different interest in the same land.’ (Hoffmann J, 356)

Hoffmann J. addressed the separate question as to whether E had exclusive possession. Had it been necessary, he would have held that E did not have exclusive possession. The licence expressly provided that D retained possession and there was no evidence to show that this was a sham. Had D entered during the licence period E could not have brought an action in trespass. The absence of any express right for D to enter was an interesting indicator that it did not need to be given a right to enter since it retained possession (356 – 357).

Michael Lower

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