Archive for the ‘exclusive possession’ Category

Exclusive possession and property guardians

February 21, 2020

In Camelot Guardian Management Ltd v Khoo ([2018] EWHC 2296) the court had to consider whether an agreement with a ‘property guardian’ created a lease or a licence.

Facts

Westminster City Council (‘the council’) appointed Camelot Guardian Management Ltd (‘CGML’) to provide security services in respect of a temporarily empty office building (‘the property’). This agreement envisaged that CGML would grant licences to suitable guardians and carry out regular inspections of the property until the council wanted it back.

CGML entered into an agreement (‘the agreement’) with Mr Khoo giving him the right to occupy a room in the property.

The agreement had a number of features designed to emphasise that it created a licence and was not a tenancy:

  1.  it was headed ‘licence agreement’;
  2.  it included an ‘important note’ emphasising that Mr Khoo would share the property with others;
  3.  it recorded CGML’s agreement with the council concerning the property;
  4.  Mr Khoo could choose a room but could be required to move to another room by CGML;
  5.  Mr Khoo could change the room he used but had to notify CGML of the change;
  6.  Mr. Khoo could not have visitors stay overnight.

In August 2017 the council gave notice to CGML that it would shortly require the property back. CGML served notice to determine Mr. Khoo’s licence. Mr. Khoo refused to move out and claimed to be an assured shorthold tenant. It was agreed that if Mr Khoo was a tenant then he was an assured shorthold tenant and the claim for possession should be dismissed.

Legal analysis

Butcher J. explained that after  Street v Mountford ([1985] 1 AC 809) the court had to consider whether, properly interpreted, the agreement conferred exclusive possession on the occupier.

Construction of the agreement involves looking at the words used in the light of the relevant background. The court should be astute to detect a sham: it should be alert to the possibility that the words used were a dishonest attempt to mislead as to the true substance of the agreement between the parties. When considering the question of a sham the court was entitled to look at how the parties behaved after the agreement was reached.

Butcher J concluded that Mr Khoo did not have exclusive possession and was not a tenant.

The terms described above all pointed in this direction. CGML’s agreement with the council and its underlying purpose were part of the relevant background ([28] – [29]). The circumstances surrounding the agreement (the language used in the website and the fact that Mr Khoo was shown a particular room) were part of the background but did not detract from the conclusion that this was a licence.

On the idea of a sham, Butcher J. observed that:

it has to be borne in mind that not every departure from the terms of a contract and how it is operated indicates that the relevant agreement was a pretence when entered into. Furthermore, the fact that a contractual right is not exercised does not of itself mean that it ceases to exist. The relevant party may be entitled subsequently to insist on its performance nevertheless’ ([33]).

There was no sham, no ‘element of dishonesty’ here ([34] – [36]).

Michael Lower

 

 

‘Exclusive possession’ and property operated by charities

February 19, 2020

In Watts v Stewart ([2016] EWCA Civ 1247) Ashtead United Charity (‘Ashstead’) owned almshouses. Its governing instrument provided that the persons selected to occupy an almshouse had to be chosen from among ‘poor single women of not less than 50 years of age who are inhabitants of the ancient parish of Ashstead’. Mrs. Watts was given the right to occupy one of the almshouses.

Ashstead’s governing instrument empowered Ashtead to ‘set aside the appointment of any resident who in their opinion –

(a) persistently or without reasonable excuse either disregards the regulations for the residents or disturbs the quiet occupation of the almshouses or otherwise behaves vexatiously or offensively’.

Ashtead’s agreement with Mrs Watts provided that she could be removed for ‘serious misconduct’.

Ashstead sought to evict Mrs Watts because of her admitted misconduct. The English Court of Appeal heard Mrs Watts’ appeal against the order for eviction made at first instance. Sir Terence Etherton MR delivered the Court of Appeal’s judgment.

Exclusive possession

Mrs. Watts argued that she was not a licensee but was at first a tenant at will and, once she began to make rent payments, a periodic tenant. The question was whether she had exclusive possession.

The Court of Appeal distinguished between the ‘legal exclusive possession’ of the tenant and the ‘personal right of exclusive occupation’ of licensees such as lodgers ([31]).

The court pointed to a number of provisions in Ashtead’s governing instrument which pointed away from an intention to grant legal exclusive possession. This provided that residents would not be tenants, could be required to leave, could only have visitors stay with them with Ashstead’s consent, could not leave the almshouse empty for more than 28 days in any year without consent and could be required to leave on the grounds of serious misconduct ([39]).

There was no hint that these terms could be regarded as ‘sham’ ([40]). Rather:

‘the Trustees could only properly discharge the trusts of the Charity, which limited its objects to those in need, hardship or distress, if a personal revocable licence was granted (which could be revoked if, for example, the occupier no longer became qualified under the Scheme because they became wealthy). ([40]).

A little later the court said:

‘The status of a beneficiary occupying trust property will depend upon the terms and conditions on which the occupation was permitted.’ ([45])

The terms of the governing instrument are an important part of the context for the purposes of the interpretation of the agreement.

Mrs. Watts had a personal licence to occupy the property. She did not have ‘legal exclusive possession’ and was not a tenant ([46]).

Michael Lower

 

 

Exclusive occupation: licence granted as part of a ‘bigger picture. Lease or licence?

May 22, 2013

In Street v Mountford ([1985] A.C. 809, HL) Lord Templeman said:

”To constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of a premium or periodical payments.’ (818)

In two passages, however, Lord Templeman points out that there are exceptional cases where these factors are present but there is no tenancy. In the second of these, he says:

‘The intention to create a tenancy was negatived if the parties did not intend to enter into legal relationships at all, or where the relationship between the parties was that of vendor and purchaser, master and service occupier, or where the owner, a requisitioning authority, had no power to grant a tenancy.’ (821)

The ‘vendor and purchaser’ exception was explored in Essex Plan Ltd v Broadminster ((1988) 56 P & C.R. 353). In that case, the relevant agreement granted the occupier the right to call for the grant of a lease. During the option period, and until the option was exercised (if it was), the occupier had the benefit of a licence. The option was never exercised, but the occupier contended that the licence satisfied the Street criteria and was, in fact, a lease.

This argument failed. Although the Street factors were present, the licence fell within the vendor and purchaser exception. Hoffmann J. took the opportunity to explain the underlying rationale:

‘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)

The occupation was primarily attributable to the equitable interest created by the option.

The same approach was taken by the English Court of Appeal in Cameron Limited v Rolls-Royce plc ([2007] EWHC 546 (Ch)). This time, the licence was contained in a conditional agreement for the grant of a lease. Here again, the occupier’s contention that the licence was actually a tenancy was unsuccessful.

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

Adverse possession: shared possession not enough

May 13, 2013

Lee Theatre Realty Ltd v Tong Wah Jor ([2013] HKEC 646, CA) was an adverse possession claim relating to a lane on land owned by L. T had built structures on the lane (indeed had both brought up a large family and run a business there). This occupation had begun in 1961. The evidence showed, however, that the lane remained passable and was in use by the public. T’s main adverse possession defence failed on the basis that there had not, therefore, been exclusive possession but only shared possession.

Cheung J.A. said:

‘As Powell pointed out whether or not acts of possession done on parts of an area would establish title to the whole area is a matter of degree. In the present case if pedestrians could use and actually used the Lane for access throughout the day, then this is certainly material upon which the Judge could find that the defendants had not exclusive possession to the whole area that they had claimed adverse possession.’ ([28])

The defendants’ alternative claim to a much smaller portion of the lane did succeed. As regards the alternative claim, Cheung JA said:

‘In my view the defendants had established both the factual possession and the intention to possess. The boarding up of the two stalls at night must be the strongest indication of the intention to exclusively possess those parts. During the day, in order to carry out business at the stalls, the boards had to be dismantled. But this does not mean that the defendants did not have exclusive possession of the area covered by these two stalls.’ ([36])

Michael Lower

Service occupier: what if the relevant work began after the employment contract commenced?

April 5, 2013

In Norris v Checksfield ([1991] 1 W.L.R. 1241, CA (Eng)) N employed C as a semi-skilled mechanic. A little later N asked C whether he would like to live in N’s bungalow. The conditions were that he would drive coaches for N. He would live in the bungalow so as to be available for this work at short notice. N dismissed C and sought possession of the bungalow. One of the questions was whether C was a licensee or a tenant. In particular, the English Court of Appeal had to consider whether it made any difference that the arrangement concerning the bungalow and the driving duties arose after the commencement of the employment. The Court of Appeal held that this made no difference and that C was a licensee and not a tenant.

Service occupancy: requirement arising from terms of service

April 4, 2013

In Langley v Appleby ([1976] 3 All E.R. 391) the question (for tax purposes) was whether police officers were ‘occupiers’ of rent-free accommodation provided by the police force. There was no express requirement that the officers should live in a police house and not all officers did. Officers understood, when joining the force, that they would have to live in property indicated by the chief constable. The court found that this was for reasons that were for the better performance of their duties (was integral to the contract of employment). The officers were not the occupiers.

Fox. J. reviewed the authorities and said:

‘[T]he authorities lead me to the following conclusions. First, the correct formulation is that of Lord Upjohn in Northern Ireland Comr of Valuation v Fermanagh Protestant Board of Education ([1969] 3 All ER 352 at 359, [1969] 1 WLR 1708 at 1722), namely that it must be established either (a) that it is essential to the performance of the duties of the servant that he should occupy the particular house or (b) that it is an express term of the employment that the servant shall occupy the premises, and that by doing so he can better perform his duties as a servant to a material degree.

Secondly, it does not seem to me that the employer’s entitlement to move the servant out of the premises is a factor of much consequence in favour of representative occupation. If the servant only has a licence he can be required to move out whatever his status (beneficial or not) for present purposes. Indeed, it is only if the servant is a representative occupier that it might not be possible for the employer to require him to move out, since it might then constitute repudiation of the contracts in a case where it is essential for the servant to reside on the premises to perform his duties.

Thirdly, I agree with counsel for the taxpayers that in order to constitute representative occupation the premises need not be the only suitable premises for the employee to occupy in order to perform his duties. That, I think, is accepted by Lord Reid in Glasgow City Corpn v Johnstone ([1965] 1 All ER 730 at 735, [1965] AC 609 at 621) and in Fox v Dalby ((1874) LR 10 CP 285 at 293, 295) by Lord Coleridge CJ and by Denman J. But I think that this limitation must be placed on that proposition. If it is asserted that it is essential for the servant to occupy the house in order to perform his duties, it seems to me that the servant must establish affirmatively that for the performance of his duties he must live in that house and in no other.

Fourthly, counsel for the taxpayers contends that benefit to the servant by occupation of the premises is not inconsistent with representative occupation. That, I think, is correct. Fifthly, counsel for the taxpayers contends that the premises need not be part of or physically connected with the premises of the employer. That is correct, but it is not, I think, of much significance. The fact that the premises do form part of other premises belonging to the employer may, I think, be a circumstance in determining how far the residence is essential for or assists in the performance of the servant’s duties. This circumstance is not, however, it seems to me, of consequence in the present case.’ (413)

The fact that residence was advantageous to the officers was irrelevant if they had been required to live in the houses as a result of their terms of service and this was a material advantage to them in performing their duties.

Service occupancy: tenancy or not?

March 28, 2013

In Fox v Dalby ((1874 – 75) L.R. 10 C.P. 285) D was a sergeant in the army. He was required by army rules to live in a house near stores where ammunition and equipment were kept if his commanding officer so required. This was so that he could look after the stores. Not everyone with his job was required to live near the stores and those who did not could still properly perform their duties. The question was whether he was a tenant or whether he was in possession on behalf of his employer. It was held that he was not a tenant since (i) he was required to live in the house, and (ii) this was for the better performance of his duties.

Lord Coleridge C.J. said:

‘[I]f either ingredient exists, – if the occupation be necessary for the better performance of the duties required to be performed by the party, or if, though it be not necessary for their performance, he is required by the authority by which he is appointed to reside there in order to perform them, the occupation is not an occupation as tenant.’ (294)

Brett J. said:

‘[W]here a person situate like the respondent is permitted (allowed if so minded) to occupy premises by way of reward for his service, or as part payment, his occupation is that of tenant; but … , where he is required to occupy them for the better performance of his duties, though not specifically required, his occupation is not that of tenant.’ (295)

Service occupancy: meaning of ‘for the better performance’ of duties

March 27, 2013

In Wragg v Surrey County Council ([2008] EWCA Civ. 19, CA (Eng)) W was a countryside ranger employed by the Council to carry out duties relating to the management and conservation of areas of common land in Surrey. His employment contract required him to live in a house provided by the council and declared that this was for the better performance of his duties. W sought to exercise the right to buy under the Housing Act 1985. Whether he could do so or not depended on whether the arrangement fell within an exception that applied to tenancies where the tenant’s contract of employment required him to occupy the dwelling-house for the better performance of his duties.

On its face, the contract clearly did fall within the exception but the English Court of Appeal held that one had to look at the substance and not merely the terminology employed. Although the judgment arises in a particular statutory setting, it gives guidance on the meaning of ‘for the better performance of his duties’ that is rooted in more general authorities and helps to explain those authorities.

The phrase, ‘for the better performance of his duties’  invites a consideration of the parties’ intentions when including the express term in the contract. The intention is an objective intention: there is a need for a real, objective link between the requirement and the better performance of the duties ([40] per Richards L.J).

‘Better’ does not mean ‘efficient’. It is a true comparative. The question is whether the inclusion of the term rests on a reasonable judgment that performance of the duties would be materially assisted by the occupation (better with the occupation than without it) ([48] per Richards L.J.). Richards L.J. gives guidance on relevant considerations at [46]. The test is not necessity: the fact that the duties can still be performed without the occupation does not settle the matter.

The arrangement was for the better performance of the ranger’s duties and so fell within the exception ([55]).

Licence of houses on school grounds: necessary to performance of teacher’s duties?

March 26, 2013

In Commissioners of Valuation for Northern Ireland v Fermanagh Protestant Board of Education ([1969] 1 W.L.R. 1708, HL) school teachers had licences of houses in the school grounds. There was no express term of their employment requiring them to live in the houses. Thus, following Glasgow Corporation, it was a question as to whether an obligation to occupy the houses could be implied on the basis that this occupation was necessary for the performance of their duties. In the majority of the cases considered by the House of Lords in this decision, there was no such necessity. Accordingly, the occupation was that of the teacher and not of the school. One of the arrangements being considered, however, concerned the vice-principal of a school. Living on school grounds was necessary for the performance of his duties. Accordingly, the house was occupied by the school and not the vice-principal.

Lord Diplock said that:

‘[T]he servant’s residence on the premises must constitute a part of the consideration from him to the employer for which he is paid his salary or wages.’ (1730).

It is not enough, for the employer to be in occupation, that the employment agreement contain an express obligation to reside in the property. Even then, living in the property must materially assist the employee in the performance of his duties under the employment contract.

Street v Mountford

March 21, 2013

Introduction

Lord Templeman’s judgment in Street v Mountford ([1985] A.C. 809) was an authoritative restatement of the defining characteristics of a lease. It provided clarity as to the factors that distinguish the lease from the contractual licence. In Street itself, this mattered because of the protection afforded to tenants (but not to licensees) by the Rent Acts. That such a restatement was necessary was due to the fact that certain Court of Appeal decisions (for example, Marchant v Charters [1977] 1 W.L.R. 1181, 1185 (per Lord Denning M.R.)) had muddied the waters by denying that the presence or absence of exclusive possession was the central issue.

Street v Mountford

Mr. Street entered into an agreement under which Mrs. Mountford would, as Mr. Street conceded, have exclusive possession of two rooms in a property owned by Mr. Street. The agreement described itself as a licence. It ended with a clause declaring that the parties did not intend to create a lease. Mrs. Mountford applied for the registration of a fair rent under the Rent Acts. Mr. Street sought a declaration that Mrs. Mountford was a licensee. The House of Lords (Lord Templeman giving the main judgment) held that Mrs. Mountford was a tenant since the agreement provided for her to have exclusive possession for a term and at a rent.

The essential elements of a lease

Lord Templeman explained the essential elements of a lease:

‘To constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of a premium or periodical payments.’ (Street v Mountford [1985] A.C. 809, 818).

Lord Templeman also said that ‘the only intention which is relevant is the intention demonstrated by the agreement to grant exclusive possession for a term at a rent.’ (Street v Mountford [1985] A.C. 809, 826). The Court of Appeal later explained that Lord Templeman had not intended to suggest that the payment of a rent was an essential characteristic of a lease (Ashburn Anstalt v Arnold [1989] Ch.1, 9 -10, Fox L.J.). Thus, one is left with the statement that the essential elements of a lease are exclusive possession and certainty of term. This is consistent with nearly all previous authority in England and in other jurisdictions (see, for example, Radaich v Smith (101) CLR 209).

Exclusive possession

To say that occupation by a tenant is exclusive possession, while that of a licensee is not, is to invite the accusation of circular reasoning or of simply replacing one term with another without explaining either. The court has ‘to ascertain the nature and quality of the occupancy’ (Street v Mountford [1985] A.C. 809, 825). Thus, Lord Templeman went further and sought to offer guidance as to how exclusive possession differs from the right to occupy enjoyed by a licensee:

‘The tenant possessing exclusive possession is able to exercise the rights of an owner of land, which is in the real sense his land albeit temporarily and subject to certain restrictions. A tenant armed with exclusive possession can keep out strangers and keep out the landlord unless the landlord is exercising limited rights reserved to him by the tenancy agreement to enter and view and repair.’ (Street v Mountford [1985] A.C. 809, 816).

The guidance offered here is that a tenant is one who (under the terms of the lease) has the control rights associated with ownership. In particular, the tenant has the right to exclude others (including the landlord).

This right to exclude others is compatible with (and may even be reinforced by) the fact that there are limited exceptions (such as the reservation of easements or a landlord’s right to enter for certain limited purposes) (Street v Mountford [1985] A.C. 809, 818). If, however, the landlord’s obligations require unrestricted access on his part then there is no exclusive possession and the agreement is a contractual licence (Westminster City Council v Clarke [1992] 2 A.C. 288). The result is that the licensee (a lodger perhaps), ‘is entitled to live in the premises but cannot call the place his own.’ (Street v Mountford [1985] A.C. 809 818).

Importance of a proper understanding of the agreement: labels and shams

The agreement in Street described itself as a licence. At the foot of the agreement was the following declaration made by Mrs. Mountford:

‘I understand and accept that a licence in the above form does not and is not intended to give me a tenancy protected under the Rent Acts.’

Lord Templeman had to consider whether these facts should carry any weight in the analysis. He leaves no room for misunderstanding on this point: it is entirely a question of whether, properly construed, the agreement offered exclusive possession for a certain term (Street v Mountford [1985] A.C. 809, 823 and 826). The parties ‘cannot turn a tenancy into a licence merely by calling it one.’ (Street v Mountford [1985] A.C. 809, 821). The court should, ‘be astute to detect and frustrate sham devices and artificial transactions whose only object is to disguise the grant of a tenancy.’ (Street v Mountford [1985] A.C. 809, 825. See also A.G. Securities v Vaughan and Antoniades v Villiers [1990] 1 A.C. 417). There is a slightly troubling statement in National Car Parks Ltd v Trinity Development Co (Banbury) Ltd ([2001] EWCA Civ. 1686) to the effect that, when making the lease / licence distinction, some weight might be given to the label employed by two professionally advised parties with equal bargaining power.

The lease as an estate in land

Lord Templeman takes it for granted that a lease is always an estate in land. At the very beginning of his judgment he explains that if the agreement created a tenancy then Mrs. Mountford had acquired a legal estate in land (Street v Mountford [1985] A.C. 809, 814).When the court ascertains the nature and quality of the occupancy with a view to seeing whether or not exclusive possession has been granted, the ultimate question is ‘to see whether the occupier has or has not a stake in the room’ (Street v Mountford [1985] A.C. 809, 823). Is the degree of control that the occupier can exercise in accordance with the terms of the agreement so extensive as to amount to ownership for the time being? Is the land ‘his land albeit temporarily and subject to certain restrictions’? Or, by contrast, is the occupier a mere licensee with the result that he ‘cannot be said to own any estate in the land’? (Street v Mountford [1985] A.C. 809, 816).

Lord Templeman’s express understanding, then, is that the lease is always an estate in land. In Bruton v London & Quadrant Housing Trust ([2000] 1 A.C. 406), however, the House of Lords decided that the lease need not be an estate in land. Once there is an agreement that offers exclusive possession for a term then a lease has been created. This is true even though the ‘landlord’ has no estate in land (is himself a licensee for example). Paradoxically, a literal reading of Street has resulted, in the eyes of some commentators at least,  in a blurring of the distinction between the lease and the contractual licence. The paradox is that Lord Templeman had insisted that the grant of exclusive possession for a term would be what distinguished the lease (an estate in land) from the contractual licence (a non-proprietary arrangement).

Exceptional cases

Lord Templeman states that while exclusive possession is an essential element of a lease, an occupier with exclusive possession is not necessarily a tenant (Street v Mountford [1985] A.C. 809, 818). In discussing these special cases, Lord Templeman draws a distinction between ‘conduct which negatives an intention to create legal relations’ and ‘special circumstances which prevent exclusive possession from creating a tenancy’ (Street v Mountford [1985] A.C. 809, 822). The former category catches informal arrangements where a landowner allows someone else (perhaps a family member or friend) to occupy property but where there is no contractual intent (as in Marcroft Wagons Ltd v Smith [1952] 2 K.B. 496).

As for the latter category, Lord Templeman says:

 ‘Sometimes it may appear from the surrounding circumstances that the right to exclusive possession is referable to a legal relationship other than a tenancy. Legal relationships to which the right of exclusive possession might be referable and which would or might negative the grant of an estate include occupancy under a contract for the sale of land, occupancy pursuant to a contract of employment or occupancy referable to the holding of an office.’ (Street v Mountford [1985] A.C. 809, 826 – 7)

It would have been better to say that while the occupier in such cases might appear to have exclusive possession, the reality is that he does not. One reason for saying so is that it would have avoided any blunting of the message that a person enjoying exclusive possession as a result of an agreement with a landowner is a tenant. Another reason is that the occupiers in these exceptional cases do not have exclusive possession at all. One who occupies property between contract and completion will do so either as licensee or as tenant; either is possible and whether a lease or licence has been created will depend on the terms agreed between the parties. In the other two cases mentioned, it would be appropriate to say that the occupier is there on behalf of the employer or the organisation in which he holds an office. It is the employer or organisation which is in exclusive possession through its employee or office-holder.  In fact, this is the explanation given by Lord Templeman himself earlier in the judgment (Street v Mountford [1985] A.C. 809, 818).