[1985] AC 809; [1985] 2 WLR 877; [1985] 2 All ER 289; (1985) 17 HLR 402; (1985) 50 P&CR; [1985] 1 EGLR 128, HL
Agreement for exclusive possession at a rent for a term a tenancy, despite label
Mr Street was the owner of a house divided up into furnished rooms. Mrs Mountford signed a ‘licence agreement’ giving her the right to occupy two rooms. It was conceded by Mr Street that under the agreement Mrs Mountford was entitled to exclusive possession of those two rooms. The agreement contained ten ‘rules’ which were to be observed by Mrs Mountford. No one apart from her was to sleep in the rooms. The owner was entitled to enter the rooms to inspect their condition, to empty meters, to carry out repairs, etc. The owner reserved a right of re-entry and was entitled to terminate the agreement on giving 14 days’ notice. The agreement also stated that the occupant understood that she did not have protection under the Rent Act 1977.
The House of Lords held that the agreement created a tenancy, not a licence. In the absence of special circumstances, if it is agreed that an occupant should have exclusive possession for a fixed or periodic term in return for paying rent, a tenancy is created, irrespective of how the parties may describe the arrangement. Lord Templeman stated that the key distinction is between tenants on the one hand and lodgers, who are merely licensees, on the other:
An occupier of residential accommodation at a rent for a term is either a lodger or a tenant. The occupier is a lodger if the landlord provides attendance or services which require the landlord or his servants to exercise un-restricted access to and use of the premises. ([1985] 2 All ER 289 at 293f)
The fact that the parties describe an agreement as ‘a licence’ cannot turn a tenancy into a licence:
If the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties cannot alter the effect of the agreement by insisting that they only created a licence. The manufacture of a five-pronged implement 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. (Ibid at 294h)
Exceptions to the basic rule that the grant of exclusive possession for a term in return for the payment of rent creates a tenancy include:
1)Service occupants. ‘Where the occupation is necessary for the performance of services, and the occupier is required to reside in the house in order to perform those services, the occupation being strictly ancillary to the performance of the duties which the occupier is to perform, the occupation is that of a servant.’ (Smith v Seghill Overseers (1875) LR 10 QB 422 at 428);
3)Other exceptional circumstances which negative the prima facie intention to create a tenancy.