Tenants beware. Is a lease called a lease actually a lease?

Tenants beware. Is a lease called a lease actually a lease?

Published: 6 September 2017

Imagine this scenario. You, as a tenant, enter into an agreement with a landlord and you think that you have gained all the rights and privileges that are afforded to tenants under the law. The problem is that when you try and enforce those rights, you discover that you are not, in fact, a tenant at all and the “lease” is actually not a lease!!

Two recent cases have highlighted the importance of ensuring that the documentation used accurately reflects the intention of the parties.

A licence to occupy, not a lease

In the case of Stewarts and others v Watts [2016] EWCA Civ 1247 a charity, Ashtead United Charity, owned three almshouses comprising a total of 14 residential flats. Mrs Watts qualified as a resident and was allocated a flat in one of the almshouses by the trustee of the charity. The allocation was done by way of an appointment letter whereby Mrs Watts was appointed as a beneficiary of the charity.

The letter stated that a weekly maintenance contribution was payable as well as a monthly rent. It also made several references to the “tenancy”. Nevertheless, the letter also set out various rules, regulations and statements including the following:

1.     Neither the resident(s) nor any relation of the residents shall be a tenant of the charity or have any legal interest in the almshouse.

2.     The charity reserves the right to ask the resident to vacate their dwelling and move, either temporarily or permanently, to another almshouse belonging to the same charity.

Possession proceedings were issued in May 2015 and the Court decided that Mrs Watts had merely a licence to occupy as the beneficiary of the charity and had not been granted a lease.

Why?

The Court did not recognise that Mrs Watts had exclusive legal possession of the flat. It was held that there is a distinction between legal exclusive possession and a personal right of exclusive occupation. Legal exclusive possession entitles the occupier to exclude all others, including the legal owner from the property.

The Court said that it was clear from the appointment letter that the charity did not intend to create a tenancy. It was expressed in the letter that no legal exclusive possession was given and therefore, Mrs Watts only had a licence to occupy.

The use of the words “tenancy” and “rent” in the appointment letter were explained by the Court as being due to the fact that the trustees of the charity were lay volunteers.

An easement, not a lease

The case of De Le Cuona v Big Apple Marketing Ltd, Chancery Division, April 2017 involved the interpretation of a deed for the use of two parking spaces in a car park within the landowner’s property.

A deed was entered into which referred the parties as “landlord” and “tenant”. The deed was granted for a fixed term. Annual rent and service charge were payable. The deed also contained terms which would normally be found in a lease, i.e. a termination clause, landlord’s covenant of peaceful enjoyment, as well as a clause requiring the landlord to give a previous notice to access the car parking area to carry out repairs. The deed was also described as a “lease of parking rights”. 

The Court held that instead of a lease, the deed in fact granted an easement.

Why?

The Court held that that there was no exclusive possession. The deed granted rights to park in the parking spaces, rather than demise the parking spaces themselves. Further, for a lease to be a lease, there must be exclusive possession. Although it is unusual for an easement to be granted for a fixed term of years, the Court held this to be possible.

In addition, the parking rights granted were not so excessive that it excluded the landowner and left them without any use of land. The landowner could still walk across the parking spaces concerned when no cars were parked there and could also change the surfacing, provided that he did not interfere with the grantee’s ability to park in the two spaces.

The deed should therefore be interpreted as an easement and not a lease.

A lesson for tenants

The lesson to be drawn from these cases is that the Court is more likely to construe a document based on the parties’ conduct, intention and the circumstances, rather than the labels and language used in the document – the “substance over form” approach. As such, tenants should take great care when entering into such documents and should always seek appropriate legal advice.

Philippa Lai

 

For more information regarding the legal implications of entering into a lease, or how we can assist with your lease matters (commercial or residential) please contact Paula Abrahamian on +44(0)20 7632 1443 or email paula@fletcherday.co.uk

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.