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Lease or Licence - Land Law

A lease is a form of ownership of land, however, unlike freehold ownership which lasts forever, leasehold ownership lasts for a specified period of time. A lease may take the form of a legal estate (s1(1)(b) Law of Property Act 1925) or it may be an equitable interest depending on the formality used to create it. It is important to distinguish a lease from a licence. If a person occupies under a lease they have more protection than one who occupies under a licence. Leases created prior to January 1989 are protected by the Rent Act 1977 which provides tenants some protection from eviction and also provides that tenants are only obliged to pay a fair rent which may be less than market value. Tenancies created after January 1989 have less protection under the Housing Act 1988. Licensees, however, have limited protection, in many instances they may be evicted at will or in the event of a contractual licence the term of notice provided in the contract. Licensees have no interest (legal or equitable) in the land.

Initial objective approach:
Originally an objective approach was used to determine whether an agreement was a lease or a licence. The name the parties labelled the agreement could be overridden by the courts in an effort to avoid unscrupulous landlords avoiding their obligations under the Rent Acts:

Facchini v Bryson [1952] 1 TLR 1386  Case summary
Rise of a subjective approach:

There was concern that the Rent Acts conferred too much protection to tenants which discouraged people becoming landlords. This lead to a judicial change in attitude towards the question of whether an agreement was a lease or a licence:

Shell -Mex and BP Ltd v Manchester Garages Ltd [1971] 1 All ER 841  Case summary
Somma v Hazelhurst [1978] 1 WLR 1014  Case summary
Return to objective approach:

Street v Mountford reasserted the need for an objective approach and the description given by the parties to their agreement as a lease or a licence is no longer determinative of the legal nature of the agreement.
The objective approach to lease or licence also applies to commercial agreements:
Rochester Poster Services Ltd v Dartford BC (1991) 63 P & CR 88
It may be difficult to ascertain whether a particular agreement is a lease or a licence under the objective approach and a number of factors may be taken into account:
Aslan v Murphy [1990] 1 WLR 766   Case summary

A lease may be created even if the landlord does not have an estate which enables him to grant a lease:
Bruton v London and Quadrant Housing Trust [1999] 3 All ER 481   Case summary

A lease will only be created where all the requirements of a lease are present - otherwise a licence will result:


Lease or Licence - Land Law