‘Licence’ pending completion of agreement for lease: A Street v Mountford exceptional case?

In Cameron Limited v Rolls-Royce plc ([2007] EWHC 546 (Ch)) RR was C’s tenant (with the benefit of two leases contracted out of Part II of the Landlord and Tenant Act 1954). The parties exchanged agreements for the grant of two further leases of the same properties, also to be contracted out of the 1954 Act security of tenure provisions). The agreements were conditional on the obtaining of the necessary court order sanctioning the contracting out and on obtaining the superior landlord’s consent to the proposed leases. In the meantime, RR was to remain in possession pursuant to licences contained in the agreements for lease.

It was accepted that these licences gave RR exclusive possession for a term at a rent. Did the licence agreements actually give rise to leases?

The court held that they did not. They fell within one of the exceptions identified by Lord Templeman in Street v Mountford. The licences were not ‘stand-alone’ arrangements but formed part of a bigger picture. Mann J. said:

‘As I have said, Mr. Small accepted that if the licence did not fall to be treated as a stand-alone document, then the vendor/purchaser exception to the prima facie Street v. Mountford position would obtain. He is right to accept that. I have come to the conclusion that this is plainly a case of a licence being granted in the context of the acquisition of the larger interest and, as such, the nature of the interest granted by Cameron and obtained by Rolls-Royce under the agreement itself and pending the grant of the lease is that of a licence only.’ ([26])

Michael Lower

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