Land Law Assignment: critically analyse the impact of the decision of the house of lords in Street-v-Mountford [1985] AC 809

Land Law Assignment: critically analyse the impact of the decision of the House of Lords in Street v Mountford [1985] AC 809.

In 1985, the House of Lords delivered their verdict on the case of Street v Mountford, and thereby ushered in a monumental change to the landscape of the law of property. The case concerned an agreement between the parties granting a right to occupy two rooms. The agreement was subject to notice period to quit of 14 days. The parties called the agreement a ‘licence agreement’. One of the parties, the occupant, signed an agreement, or rather a declaration, stating that she understood that the agreement did not create a lease protected by the Rent Act 1977. The occupant and her husband then moved into the premises, but subsequently sought a declaration as to whether they were there by virtue of a lease or a licence. The case therefore became a landmark case in distinguishing between a lease and a licence, and sought to clarify this difference for future purposes. Briefly, the House of Lords held that as there had been a grant of a term, at a rent, and crucially, with exclusive possession, the agreement constituted a valid lease. The simple fact that the parties (namely the landlord) had attempted to call the agreement a licence was immaterial, as there was in fact exclusive possession.

Why was this decision in Street v Mountford so significant? What was its impact on future cases in the same area? Briefly, it was a highly significant decision from the point of view of lessees (those who enjoy occupation by virtue of a lease) because it prevented landlords from seeking to avoid granting their lessees the protection afforded them by the Rent Acts. The case contradicted (and therefore disproved in the highest court) the earlier case on a similar issue of Somma v Hazelhurst, in which the court emphasised the intention of the parties. If this case had been followed in Street v Mountford, there would have been a very different outcome. The intention of the parties, at the outset, at least, was for the agreement to constitute a mere licence as opposed to a lease (therefore not covered by the protection of the Rent Acts; a preferable position for an unscrupulous landlord to be in).

Since Street v Mountford, then, and following that case, the courts have been more concerned with the reality of an agreement than the expressed intentions of the parties. This has made the courts more astute to identifying ‘sham terms’ which neither party to the agreement intend to rely on. These terms, since this landmark case, will now be ignored by the court in determining whether factual exclusive possession has in fact been granted. In other words, there is no freedom to stipulate by contractual provision, for a legal status which does not correspond with the parties’ actual dealings. As Lord Templeman put it, ‘the manufacture of a five-pronged instrument for manual digging results in a fork, even if the manufacturer, unfamiliar with the English language, insists that he intended to make, and has made, a spade.’ In this case, the parties could not contract out of Rent Act protection for the tenants by an erroneous description.

In order to assess the impact of the decision in Street v Mountford, it is first necessary to identify the key characteristics of a lease and a licence, and state how they differ. A leasehold estate is formerly known as the ‘term of years absolute’, and forms one of the two major ‘estates’ in land demarcated by the Law of Property Act 1925, s1(1)(b) (the other one being the freehold estate). The distinguishing characteristic of a leasehold estate is the conferment by the landlord (or ‘lessor’) on the tenant (or ‘lessee’) of a ‘right of exclusive possession of land for a period or prearranged maximum duration.’ It has been said that the leasehold is of a hybrid character, containing characteristics of both a proprietary estate, and also a contractual relationship.

This has often caused tensions in questions relating to the leasehold estate. In Street v Mountford, Lord Templeman addressed the tension between these two characteristics of the leasehold, by stating that the tenant is ‘fully entitled to exercise the rights of an owner of land, which is in the real sense his own land albeit temporarily and subject to certain restrictions.’

The House of Lords, in Street v Mountford, identified three inherent components of any lease or tenancy. This was one of the most significant aspects of the case, as prior to this, there had been no real statutory or common law definition of the ‘term of years’. Lord Templeman stated that the lessee must be granted exclusive possession of the land (or area) for a fixed or periodic term certain, in consideration of a premium (that is, a lump sum), or periodical payments (that is, a regular rent). (This final requirement was subsequently questioned in Ashburn Anstalt v Arnold.) These components of a lease will be considered, briefly, one at a time. Lord Templeman, in identifying the history of the leasehold, stated that it originally gave a right to occupy another’s land for a defined period of time. It was considered to confer no estate in the land, but merely to create rights in personam.

The first component of the modern leasehold was that a lease or tenancy must have a fixed maximum duration (the fixed or periodic term certain). This must be ascertainable from the outset. The requirement was not introduced by Street v Mountford; rather it is a very old ‘certainty of term’ rule. The rule embodies a ’property-oriented perspective that it is simply not competent for landlord and tenant, as a sheer act of contractual volition, to bargain for open-ended or indefinite term of years.’ It is important to demarcate with certainty the maximum term so that the parties to the agreement, strangers, and the courts can easily identify cases of breach.

It is in the area of the second requirement which the case identified, that Street v Mountford had the most significant impact; that is that a lease or tenancy must confer a right of exclusive possession. The idea that ‘the proper touchstone’ of a lease or tenancy should comprise the legal right to exclusive possession was identified in the case of Radaich v Smith, per Windeyer J. This reflects the ancient idea that exclusory power is the essence of proprietary estates. In Street v Mountford, the House of Lords confirmed this idea, and brought it to the forefront of the common law. Lord Templeman stated that the tenant is, in reality, the owner of the estate pro tempore, and is entitled to ‘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 review and repair.’ This is a direct contrast with the licence (a distinction which was at issue in the case), under which the licensee enjoys no such legal power to permitting him to exclude other persons. The lease, then, as distinct from the licence, following Street v Mountford guarantees the tenant exclusive control of the premises and an immunity from detailed supervision of his activities on the premises. This distinction has helped to clarify many previously uncertain cases such as contractual licensees or lodgers such as those in student accommodation, who clearly hold no tenancy or lease (see Mehta v Royal Bank of Scotland).
An important question is how proprietary is the modern licence? It is a question that Street v Mountford was significant in addressing. Briefly, the various forms of licence can be seen as a spectrum of proprietary content. At the bottom end, where it is strictly only of a personal nature rather than proprietary is a dinner party invitation, which constitutes a bare licence. The significant fact here is that it can never bind a third party. At the other end of the spectrum are those licences which would generally be regarded as having a substantial proprietary significance. Licences which would certainly fall into this category would include those coupled with an equity (originally found in the seventeenth century case of Webb v Paternoster), or with the grant of an interest (such as in Wood v Leadbitter).

A licence which falls somewhere around the boundary is the contractual licence, and it is this which Street v Mountford was significant in addressing. One view is that the ‘property’ component of the contractual licence should be measured by its capacity to bind a third party (that is, in this case, a purchaser of the licensor’s estate). Two recent cases have suggested that according to this approach, the contractual licence confers no proprietary interest. These cases are Ashburn Anstalt v Arnold, and Lloyd v Dugdale. The alternative view is that proprietary quality turns, instead, on the ‘defensibility’ of an interest against trespassers. According to this view, it is fair to say that certain licences have acquired some proprietary status. In Street v Mountford, Lord Templeman stated that a licensee could not sue to recover possession from a stranger. The case therefore belongs to the old, increasingly outdated view of the proprietary quality of a licence, which has been superseded by such cases as Manchester Airport plc v Dutton.

Two cases in which the decision in Street v Mountford was applied were AG Securities v Vaughan, and Antoniades v Villiers, which were both heard together (hence the same case reference as to where they were reported). In AG Securities v Vaughan, four agreements were made at different times between different occupants to share a house. The agreements were each on different terms, and because of this, there was no joint tenancy with collective exclusive possession. The occupants also moved rooms within the house, and because of this, there was no individual exclusive possession of the individual rooms of the house. In the second case of Antoniades v Villiers, separate but, crucially, identical agreements were made with a couple. The agreements asserted that no exclusive possession was granted, and also that the licensor (or nominee) could use the premises from time to time. This, if it had been strictly applied, would of course have conferred only a licence on the couple, as a requirement of a lease is exclusive possession. When the cases reached the House of Lords, however, it was held that the provision in the agreement in Antoniades v Villiers was simply a pretence designed, as in Street v Mountford, to avoid granting the occupants the protection of the Rent Acts. It had been intended, despite this provision, for their to be exclusive possession by the couple, and as such, a valid lease did exist. Following Street v Mountford, then, the courts will attempt to strip away misleading descriptive terms in such agreements (in Antoniades v Villiers, the relevant term was ‘pro non scripto’), and then determine ‘whether the residue of agreed terms genuinely discloses the presence of a lease of tenancy.’

The decision in Street v Mountford has had an effect on a number of subsequent, important cases, which serve to illustrate the significant of the decision. One such case was Westminster City Council v Clarke. In this House of Lords case, it was held that Westminster City Council had not granted exclusive possession to the occupant of a room in a homeless hostel. This was a different outcome to the two previous cases, as the council had never intended exclusive possession for the occupant. There were genuine terms in the agreement which precluded exclusive possession, such as the right to change the accommodation without notice. It was also found to be inconsistent with the purpose of providing housing in the hostel to grant one occupant exclusive possession. This case can be contrasted with the rather unusual case of Mehta v Royal Bank of Scotland, in which it was held that the occupant of an hotel room did in fact have exclusive possession, and therefore enjoyed a lease.

Similarly, in Uratemp Ventures v Collins, the House of Lords decided that an hotel room was held under a lease, because the room was part of a property over which the occupant had exclusive possession. In this case, the hotel room was held to be a separate dwelling as opposed to being part of larger shared premises. If it had been the latter, the room would have been held under a licence. Lord Millett, in this case, defined a ‘dwelling’ as the place where a person ’lives and to which he returns and which forms the centre of his existence.’ In Aslan v Murphy (No 1), the Court of Appeal upheld a claim of tenancy, stating that a term which stated that the ‘licensee’ should vacate his rented room every day between 10.30 am and noon was ‘wholly unrealistic’, and the ‘true bargain between the parties’ could not include this. Finally, in the case of R v Trinity Development Co Ltd, ex p National Car Parks Limited, an agreement to operate a car park on certain premises was held to be a licence rather than a lease because, on the facts, there was no exclusive possession.
The decision in Street v Mountford has, rather than simply affecting individual cases in a rather abstract way, been to alter fundamentally the nature of the law of leasehold property. One area in which this is most noticeable is in the theory of property as a socially constituted fact. In other words, property is simply a product of behavioural reality. According to this theory, ‘property’ in land, is a socially accepted assertion of possessory control over that land. It is, in our society, socially acceptable to claim property in land as a result of sustained territorial domination over that land. ‘If we defend the title to our land we do it for reasons no different, no less innate, no less eradicable, than do lower animals.’ As Gray and Gray state, ‘to have ‘property’ in land is not to allege a mere casual affinity with a particular piece of land, but rather to stake a claim to the legitimacy of this land as one’s personal space.’

The impact of Street v Mountford, in this context, can be found in Lord Templeman’s comment that the estate owner, as distinct from the mere licensee, can ‘call the place his own’. This reflects, in a modern context, the words and thoughts of Coke CJ in the early seventeenth century, when he stated that ‘the house of everyone is to him as his castle and fortress’. The tangible effect of this is that, as trespass to land is ‘essentially a wrong against possession, not against ownership’, it can only be actionable at the instance of a person with a present right to possession of the land. In Street v Mountford, however, Lord Templeman also suggested that exclusive possession may be enjoyed by a licensee, and even a tolerated trespasser. A leaseholder, according to the case, has an uncontrollable discretion to exclude an unwanted stranger from his land.
Today, then, following Street v Mountford, the leasehold is no less a form of proprietary control over the estate that is a freehold. The effect of the case has been to extend the role of the leasehold as a medium of proprietary ownership through statutory extension of leasehold enfranchisement and council tenants’ ‘right to buy’ (in the Housing Act 1985). The case clarified the difference between a leasehold and a licence. A lease or tenancy confers upon occupier a proprietary estate to which is annexed a right of exclusive possession enforceable against the world (including the landlord). By contrast, a licence simply confers a personal permission to occupy. The case was also the first example of the courts stripping away ‘sham’ terms in agreements in order to seek out the true nature of the agreement, so as to assess whether there was, in actuality, a leasehold agreement. This was significant as it closed a major loophole available to landlords who sought to avoid giving their tenants the statutory protection of the Rent Acts.

BIBLIOGRAPHY
Statute
Housing Act 1985
Law of Property Act 1925
Rent Act 1977
Cases
AG Securities v Vaughan [1990] 1 AC 417
Antoniades v Villiers [1990] 1 AC 417
Ashburn Anstalt v Arnold [1989] Ch 1, CA
Aslan v Murphy (No 1) [1990] 1 WLR 766, CA
Lloyd v Dug dale [2001] EWCA Civ 1754
Manchester Airport plc v Dutton [2000] QB 133, CA
Mehta v Royal Bank of Scotland, The Times, 25 January 1999
R v Trinity Development Co Ltd, ex p National Car Parks Limited, Lawtel, 18 October 2001
Radaich v Smith (1959) 101 CLR 209
Semayne’s Case (1604) 5 Co Rep 91, 77 ER 194
Somma v Hazlehurst [1978] 1 WLR 1014
Street v Mountford [1985] AC 809
Uratemp Ventures v Collins [2001] 3 WLR 806
Webb v Paternoster (1619) 2 Roll Rep 143
Westminster City Council v Clarke [1992] 2 AC 288
Wood v Leadbitter (1845) 13 M & W 838, 153 ER 351
Secondary sources
Ardrey, R., The Territorial Imperative (London, 1967)
Gray, K., and Gray, S.F., Land Law (Butterworths, 2003)
Gray, K., and Gray, S.F., Elements of Land Law (Oxford, 2005)

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