130: What is the difference between a lease and a licence?
A lease is the grant of legal interest in land which gives exclusive possession for a fixed period of time. A licence is merely a personal permission granting licence to occupy or do something on someone else’s property.
Case law has previously highlighted the differences between a lease and licence, in particular that a lease may give security of tenure to a business tenant whereas a licence does not. The law also confirms that even if an agreement purports to call itself a ‘licence’, it does not meant that it will actually be a licence. This has been important in two recent residential cases covering licences and leases.
Property guardians – licensee or tenant?
In Camelot Property Management Limited v Roynon , Camelot was a property guardian company which organised guardians to live in empty commercial property. Camelot placed Mr Roynon into part of a disused elderly person’s care home in Bristol along with other guardians who occupied other parts of the home.
Camelot and Mr Roynon entered a written agreement, which was stated to be a ‘licence’, allowing Mr Roynon to have a shared right to occupy the property. Importantly, the agreement did not contain any express reservations in favour of Camelot such as a right of entry. Mr Roynon had the keys to two specific rooms which other guardians did not have the keys to and could not access.
Camelot served notice to quit on Mr Roynon but he refused to vacate. Camelot brought possession proceedings and the court had to decide whether Mr Roynon was a licensee or a tenant.
The court decided that Mr Roynon did have exclusive possession, in particular in relation to two of the rooms in the property. Mr Roynon chose to keep these two rooms locked. Whilst Camelot could carry out visual inspections, these were not consistent with Camelot retaining rights of access and Mr Roynon did have exclusive possession of these areas.
Any restrictions that had been placed on Mr Roynon in the written ‘licence’ agreement only restricted the way he used the rooms and were not enough to defeat his exclusive possession. Even though Camelot had tried to grant a licence only, in reality this was not the case and Mr Roynon ended up with an assured shorthold tenancy under which he was tenant.
Residential alms-house – licensee or tenant?
More recently in Watts v Stewart , Ashtead United Charity gave Mrs Watts residential accommodation in one of its properties which was an alms-house in Surrey. She was given a letter of appointment stating that Mrs Watts was a beneficiary of the charity. The letter referred to the ‘tenancy’ arrangement under which she was required to pay a monthly rent, although later in the letter it stated that no resident would be a tenant of the Charity or have any legal interest in the alms-house.
The charity served notice to quit on Mrs Watts due to her anti-social behaviour which was in breach of the regulations in her letter of appointment. Possession proceedings were issued. The court at first instance decided that Mrs Watts occupied under a licence to occupy and not a lease. Mrs Watts appealed.
The Court of Appeal upheld the decision and did not accept that Mrs Watts had exclusive possession of the flat. Legal exclusive possession allows the occupier to exclude all others, including the owner, from the property and Mrs Watts did not have this right. She merely had a personal licence to occupy the flat subject to various rules and regulations.
These cases are both a useful reminder that a licence must clearly reflect the intention of the parties and that the legal drafting must be watertight to ensure that an occupier is not inadvertently given exclusive possession of the whole or part of a property.