Landlord and tenant — Individual non-exclusive licences or joint tenancy — Street v Mountford further considered — Court of Appeal divided — Leave to appeal to House of Lords — The present appeal was by occupiers of a flat in Hornsey Lane, London N6, from the decision of the county court judge that they were licensees, not tenants, of the flat — The flat consisted of four bedrooms, a sitting-room, and a bathroom and wc — The four individual occupants each had separate short-term licence agreements granting a right to use the flat in common with others with a like right and expressly negativing a right to exclusive possession of any part of the flat — The licence agreements began at different dates and there were some variations in the rents charged — The four occupants concerned in the present proceedings had replaced earlier occupants when vacancies had occurred — The time came when the leaseholders who had granted the licences wished to let the flats on long subleases and for this reason gave the occupants of the subject flat notices to quit — This prompted the local authority, acting under section 68 of the Rent Act 1977, to apply to the rent officer for the determination of a fair rent on the basis that the occupants were in law joint tenants of the flat — The leaseholders challenged the validity of this application and sought an injunction to restrain the authority from proceeding with it — As mentioned above, the county court judge accepted the leaseholders’ submission and declared that the occupants were licensees, not joint tenants — Three of the four occupants appealed to the Court of Appeal
decision of the Court of Appeal is contained in the judgment of Fox LJ (with
which Mustill LJ agreed) — After analysing Street v Mountford and the cases
where the arrangements were treated there as shams, the majority applied to the
facts of the present case the test that the hallmarks of a tenancy are
exclusive possession at a rent for a term — The four occupants had together
exclusive possession of the flat — Despite differences in the periods of
occupancy, it could be said that there was a joint right of occupancy for a
‘term’ — As regards rent (which in any case was not an essential constituent of
a tenancy) the aggregate amounts payable, although different and variable,
could be regarded as constituting a ‘rent’ — As regards the traditional ‘four
unities’ required for the creation of a joint tenancy (possession, title, time
and interest), the majority considered that they were satisfied in the present
case — Accordingly, when the notices to quit were given the occupants were
jointly entitled to exclusive possession of the flat for a term at a rent — Sir
George Waller, in a dissenting judgment, drew attention to the considerable
difficulties involved in regarding the transactions as constituting a joint
tenancy — ‘A joint tenancy is one where the tenancy commences on the same day
for all, where the term is the same for all, where the rent should not be
altered without due notice to all and possibly where all are jointly liable for
the rent’ — He entertained serious doubts as to whether any one of the ‘four
unities’ had been satisfied — He would have dismissed the appeal — In
accordance with the majority view the appeal was allowed, but leave to appeal
to the House of Lords was granted
The following
cases are referred to in this report.
Addiscombe
Garden Estates Ltd v Crabbe [1958] 1 QB 513;
[1957] 3 WLR 980; [1957] 3 All ER 563, CA
Aldrington
Garages Ltd v Fielder (1978) 37 P&CR
461; [1978] EGD 347; 247 EG 557, CA
Ashburn
Anstalt v Arnold [1987] 2 EGLR 71; (1987)
284 EG 1375, CA
Errington v Errington and Woods [1952] 1 KB 290; [1952] 1 All ER 149,
CA
Facchini v Bryson [1952] 1 TLR 1386, CA
Hadjiloucas v Crean [1987] 3 All ER 1008; [1987] 2 EGLR 60; (1987) 284
EG 927, CA
Radaich v Smith [1959] 101 CLR 209
Somma v Hazelhurst [1978] 1 WLR 1014; [1978] 2 All ER 1011; (1978)
37 P&CR 391; [1978] EGD 269; 246 EG 311, CA
Street v Mountford [1985] AC 809; [1985] 2 WLR 877; [1985] 2 All ER
289; [1985] 1 EGLR 128; (1985) 274 EG 821, HL
Sturolson
& Co v Weniz [1984] EGD 524; (1984) 272
EG 326, CA
This was an
appeal by Roderick Lyons, Simon Russell and Christopher Cook (the first
defendant, Nigel Vaughan, did not appeal) from the decision of Judge Aron Owen,
at Clerkenwell County Court, holding that they were licensees and not tenants
of Flat 25, Linden Mansions, Hornsey Lane, London N6. Together with Nigel
Vaughan and the London Borough of Haringey, they had been the defendants in an
action by A G Securities (an unlimited company), the leaseholders of Linden
Mansions, as plaintiffs (present respondents).
Stephen Sedley
QC and David Watkinson (instructed by Bindman & Partners) appeared on
behalf of the appellants; John Furber (instructed by I A Landy Laufer)
represented the respondents.
Giving
judgment, FOX LJ said: This is an appeal by the second to fourth defendants
from an order of Judge Aron Owen declaring that the first to fourth defendants
were licensees and not tenants of certain premises at Linden Mansions, Hornsey
Lane, London. Linden Mansions is a block of residential flats. The present case
is concerned with Flat 25. The flat, which is furnished, consists of six rooms.
Of those rooms, four are bedrooms, one is a sitting-room and the other is a
bathroom and wc. The flat, so the judge found, can, without difficulty, provide
residential accommodation for four persons.
Prior to 1974,
the plaintiffs, who are leaseholders of Linden Mansions, let the flats on
short-term furnished tenancies. Such tenancies did not at that time have full
security of tenure under the existing legislation. By the Rent Act 1974,
however, residential furnished tenancies were brought into full control. The
judge’s finding as to the consequences of that were as follows:
The
plaintiffs took counsel’s opinion and were advised to grant short-term
licence agreements separately to individual occupiers. The plaintiffs admit
frankly that the purpose of such agreements was to avoid granting tenancies
falling within the Rent Acts. Counsel settled the form of agreement which he
advised the plaintiffs to use and from that time the plaintiffs did use such [a
form of] agreement.
The form of
agreement which the plaintiffs have used and which they used in the present
case is as follows:
THIS AGREEMENT
is made the day of BETWEEN A G SECURITIES of 116 Stanmore Hill, Stanmore,
Middlesex (hereinafter called ‘the Owner’) of the one part and (hereinafter
called ‘the Licensee’) of the other part.
WHEREBY IT IS
AGREED as follows:
1 THE Owner grants to the Licensee the right to
use in common with others who have or may from time to time be granted the like
right the flat known as 25 Linden Mansions, Hornsey Lane, N6, but without the
right to exclusive possession of any part of the said flat
TOGETHER with
the fixtures furniture furnishings and effects now in the said Flat for six
months from the day of 19 and thereafter until determined by either party
giving to the other one month’s notice in writing to take effect at any time.
2. THE
LICENSEE agrees with the Owner as follows:
(1) To pay the sum of £per month for the right to
share in the use of the said flat such sum to be payable by equal monthly
instalments on the first day of each month the first payment to be made on the
day of
(2) Not to damage or cause any damage to the
walls or floors of the said Flat or to the fixtures furniture furnishings and
effects therein.
(3) To share the use of the said Flat peaceably
with and not to impede the use of the said Flat by such other persons not
exceeding 3 in number at any one time to whom the Owner has granted or shall
from time to time grant Licence to use the said Flat in common with the
Licensee and not to impede the use by such other persons of the gas electricity
and telephone services supplied to the Flat PROVIDED that each shares the cost
of such services.
(4) If at any time there shall be less than 3
persons authorised by the Owner to use the said Flat in common with the
Licensee upon reasonable notice given by the Owner to meet with any prospective
licensee nominated by the Owner at the Flat to provide an opportunity to such
prospective licensee to agree terms for sharing the cost of services in
accordance with Clause 2(3).
(5) Not to assign this Agreement nor permit any
other person except as licensed by the Owner to sleep or reside in or share
occupation of the said Flat or any part of it at any time.
(6) Not to do or suffer to be done any act or
thing which may be a nuisance or cause damage or annoyance to the Owner or to
the other users of the Flat or to the tenants or occupiers of any adjoining
property or which may vitiate any insurance of the said building against fire
or otherwise or increase the ordinary premium thereon.
3. PROVIDED as
follows:
(1) If the said sum or any part thereof shall be
in arrear or unpaid for at least 14 days after the same shall have become due
or
(2) in the event of any breach of the Licensee of
the agreements therein contained
then the Owner
may by notice forthwith determine this Agreement but without prejudice to any
other remedies of the owner hereunder.
4. IF the Flat
becomes uninhabitable as a result of fire then the Licensee shall be entitled
to terminate this Agreement forthwith.
5. THE OWNER
AGREES with the Licensee to pay all general and water rates payable in respect
of the Flat but not any charges for the supply of gas or electricity or for the
use of the telephone.
6. THE Licensee
shall pay the sum of £which shall be retained by the Owner until the
termination of this Agreement as a deposit to secure to the Owner the
performance by the Licensee of the agreements on the part of the Licensee
herein contained but without prejudice to the Owner’s rights under and in
respect of the Agreement. At the termination of this Agreement and upon the
Licensee’s vacating the said Flat and subject to proper performance by the
Licensee of the Licensee’s obligations herein contained the Owner will refund
the said deposit to the Licensee.
7.
NOTWITHSTANDING Clause 1 the Licensee shall have the right at any time after
the expiration of three months from the date in Clause 1 to terminate this
Agreement by giving the Owner one month’s notice in writing.
8. THE Owner
may give notice hereunder to the Licensee by leaving a Notice addressed to the
Licensee at the said Flat.
AS WITNESS
the hands of the parties hereto the day and year first before written.
Each of the defendants in the present case signed such an agreement.
They signed them separately and at different times. The dates of the agreements
with the various defendants and the monthly amounts paid by them were as
follows:
|
Defendant |
Date |
Amount |
|
Vaughan (1st defendant) |
August 1 1982 |
£86.66 |
|
Russell (2nd defendant) |
August 1 1984 |
£125.00 |
|
Lyons (3rd defendant) |
March 2 1984 |
£99.00 |
|
Cook (4th defendant) |
January 28 1985 |
£104.00 |
There was great demand for the flats which came from young single
people — secretaries, nurses, students and persons working in various
capacities in the City or the West End of London.
The normal
length of an agreement was six months. But it often happened that the occupier
would stay on for a further six months or on a month-to-month basis. The
turnover was large. From 1980 to 1985, Flat 25 was occupied as follows:
|
1978 |
1980-81 |
1982 |
1983 |
1984 |
1985 |
|
A Abbas |
C Bolt |
R Lyons |
|||
|
M Clarke |
M Ramsey |
S Russell |
|||
|
D Clarke |
N Vaughan |
||||
|
S Walters |
J Adams |
C Cook |
Thus, in 1980-81 Adams replaced Walters; Vaughan (first defendant)
replaced D Clarke in 1982. In 1983 Bolt replaced Abbas and Ramsey replaced M
Clarke. In 1984 Lyons (second defendant) replaced Bolt and Russell (third
defendant) replaced Ramsey. In 1985 Cook (fourth defendant) replaced Adams.
The judge
found the following facts regarding the system of letting operated by the
plaintiffs:
(1) Each person who was accepted by the
plaintiffs for a particular flat had to sign a separate agreement and pay a
deposit as provided in the agreement. And it would be explained to such person
that he was entering into a separate agreement with separate obligations.
(2) The flat No 25 . . . has four of its rooms
used as bedrooms and the agreements relating to the residential user of this
flat strictly limit the total number of occupants to four.
So this flat
would be fully occupied within the terms of the agreement when it contained
four residents.
(3) What happened if, for example, one of the
residents left creating a vacancy? In
these circumstances Mr Saffrin [a solicitor and director of the plaintiffs]
would enquire of the remaining residents whether they had someone whom they
would like to fill the vacancy. Sometimes they did. In that case, the person
put forward as a prospective new resident would be asked to contact Mr Saffrin
who would refer that person to his co-director, Mr Laufer, for an interview.
(4) Mr Laufer, in conducting the interview, would
enquire about the occupation of the applicant and, if a student, what grant was
being received. He would inform the applicant about the deposit and the amount
of the monthly payment. Such an applicant to fill a vacancy may have known the
approximate monthly payments from having been told by the current residents.
But the sums paid varied because of the ebb and flow of residents and the
monthly payments were from time to time increased by modest sums to provide for
rate increases and inflation. Later residents accordingly paid more than
earlier ones.
(5) Where no candidate for a vacancy was
proffered by the existing occupiers, the plaintiffs would themselves find a
person to fill the vacancy . . .
(6) In the case of a candidate found by the
plaintiffs, Mr Saffrin would get in touch with the current residents of the
flat and ask them to see this candidate who had applied to fill the vacancy.
The plaintiffs
had the final decision as to what person would fill the vacancy. But, and this
was obviously good estate management, the plaintiffs would not, in order to
fill a vacancy, foist on the existing residents of the flat any person to whom
they, the existing residents, objected.
(7) What often happened in practice, when a
vacancy occurred, was that an advertisement was inserted in the London ‘Evening
Standard’ under a column in that newspaper headed ‘Flat Sharing’.
And, as a
matter of convenience, the plaintiffs would ask the existing residents to
insert the advertisement, for which the plaintiffs would pay . . . As a result
of such an advertisement, applicants would go directly to the flat, they would
see the accommodation offered and would see, and be seen by, the other
residents in the flat.
I was told by
one of the defendants, Mr Nigel Vaughan, that the response to one such
advertisement in the ‘Evening Standard’ resulted in the phone at the flat
‘ringing for a week’ producing, for one advertised vacancy, a hundred
applicants from whom the residents took 60 names and conducted a number of
interviews before choosing one particular person.
(8) The plaintiffs were anxious to ensure that
the prospective incoming person should be acceptable to those already in
residence and for that reason allowed them to choose the one they, the
residents, thought to be the most suitable. But that person also had to be
interviewed by the plaintiffs and thereafter only if the plaintiffs approved
would that person be accepted and required to pay the deposit and sign the
agreement.
(9) At no time did the plaintiffs tell the
incoming resident which particular bedroom he was to occupy. The internal
arrangements were left entirely to the residents themselves. What usually
happened in practice, when a vacancy occurred and a newcomer subsequently
entered to fill the vacancy, was this: The current occupiers, or some of them,
switched rooms so that the newcomer got the smallest and least desirable
bedroom. The ‘pecking order’, if I can call it that, appears to have been
determined by seniority: the longest-residing occupant got the first choice of
whatever particular bedroom had been vacated. The plaintiffs never concerned
themselves with these internal arrangements.
I should add
that the judge also found that, when vacancies occurred so that there were less
than four persons living in the flat, the
payments which the plaintiffs would have received if the flat had been fully
occupied. Nor did any of the residents ever expect that they would have to do
so.
In April 1985,
the plaintiffs decided that they wished to let all the flats on long subleases
to reduce, so we were told, the burden of management.
In May 1985
the fifth defendant (the Borough of Haringey), in consequence of the service by
the plaintiffs of notices to quit upon the first to fourth defendants, made an
application to the rent officer under section 68 of the Rent Act 1977 for the
determination of a fair rent of the flat on the basis that the first to fourth
defendants were tenants of the flat and held such tenancy jointly. The
plaintiffs contend that the application was unlawful and of no effect because
there was no tenancy and they sought an injunction restraining the borough from
proceeding with the application. The plaintiffs also sought judgments for
arrears of rent against the first to fourth defendants. The judge held that the
first to fourth defendants were licensees and not tenants. He made a
declaration accordingly. The appeal is by the second to fourth defendants only
— Mr Vaughan does not appeal.
The case
turns, in the main, upon the application of principles stated by the House of
Lords in Street v Mountford [1985] AC 809. In that case a written
agreement between Street and Mountford granted to Mountford the right to occupy
two rooms for £37 per week subject to determination on 14 days’ notice. The
agreement was entitled ‘licence agreement’ and contained a declaration by
Mountford that she understood that the agreement did not give her a tenancy
protected by the Rent Act. Mountford and her husband went into occupation of
the rooms of which they had exclusive possession. After a few months, Street
sought a declaration that the occupancy was under a licence. The House of
Lords, reversing the decision of the Court of Appeal, held that Mountford was a
tenant.
The principles
stated in Street v Mountford so far as relevant to the present
case are as follows:
(1) Exclusive possession is of the first
importance in deciding whether an occupier is a tenant (p 823D).
(2) Exclusive possession is not decisive because
there are circumstances in which an occupier who has exclusive possession is
not a tenant. Thus, he may be an owner in fee simple, a trespasser, a mortgagee
in possession, an object of charity or a service occupier (p 618E).
(3) The House, as I understand it, approved (p
826F) the view of Denning LJ in Facchini v Bryson (1952) 1 TLR
1386 at p 1389 that:
In all the
cases where an occupier has been held to be a licensee there has been something
in the circumstances, such as a family arrangement, an act of friendship or
generosity, or such like, to negative any intention to create a tenancy.
The occupier
there referred to I take to be an occupier for a term or other ascertainable
period.
(4) Street v Mountford was a
letting of residential accommodation at a rent for a term. Lord Templeman said
at p 826E:
Unless these
three hallmarks are decisive, it really becomes impossible to distinguish a
contractual tenancy from a contractual licence save by reference to the
professed intention of the parties or by the judge awarding marks for drafting.
(5) The House expressly approved (p 827B-E) the
language and logic of Windeyer J sitting in the High Court of Australia in Radaich
v Smith (1959) 101 CLR 209 at p 222 where he said:
What then is
the fundamental right which a tenant has that distinguishes his position from
that of a licensee? It is an interest in
land as distinct from a personal permission to enter the land and use it for
some stipulated purpose or purposes. And how is it to be ascertained whether
such an interest in land has been given?
By seeing whether the grantee was given a legal right of exclusive
possession of the land for a term or from year to year or for a life or lives.
If he was, he is a tenant. And he cannot be other than a tenant, because a
legal right of exclusive possession is a tenancy and the creation of such a
right is a demise. To say that a man who has, by agreement with a landlord, a
right of exclusive possession of land for a term is not a tenant is simply to
contradict the first proposition by the second. A right of exclusive possession
is secured by the right of a lessee to maintain ejectment and, after his entry,
trespass. A reservation to the landlord, either by contract or statute, of a
limited right of entry, as for example to view or repair, is, of course, not
inconsistent with the grant of exclusive possession. Subject to such
reservations, a tenant for a term or from year to year or for a life or lives
can exclude his landlord as well as strangers from the demised premises. All
this is long established law: see Cole on Ejectment (1857) pp 72, 73,
287, 458.
(6) While the Rent Acts must not be allowed to
alter or influence the construction of an agreement, the courts are required to
‘be astute to detect and frustrate sham devices and artificial transactions
whose only object is to disguise the grant of a tenancy and to evade the Rent
Acts’ (p 825H).
(7) The decisions in Somma v Hazelhurst
[1978] 1 WLR 1014, Aldrington Garages Ltd v Fielder (1978) 37
P&CR 461 and Sturolson & Co v Weniz (1984) 272 EG 326 (pp
825H-826A) were disapproved.
In Somma
v Hazelhurst a young unmarried couple, Hazelhurst and Miss Savelli,
occupied a bed-sitting room (containing two beds) for which they paid weekly
sums. The landlord did not provide any services. Savelli and Hazelhurst had
exclusive possession of the room. The owner required them to sign separate
agreements, in the same terms. Under the agreements the room was not let to
either Hazelhurst or Miss Savelli nor to Hazelhurst and Miss Savelli. Instead,
the agreements required each to share the room with such persons as the
landlord might from time to time nominate. The Court of Appeal held that
Hazelhurst and Savelli were licensees. In Street v Mountford the
House of Lords was of the opinion that they were tenants and that the form of
the agreements was a sham. ‘The room’, said Lord Templeman at p 825F, ‘was let
and taken as residential accommodation with exclusive possession in order that
[Hazelhurst] and [Miss Savelli] might live together in undisturbed
quasi-connubial bliss making weekly payments. The agreements signed by
[Hazelhurst] and [Miss Savelli] constituted the grant to [them] jointly for
exclusive possession at a rent for a term’ (p 825G).
In Aldrington
Garages v Fielder the respondent entered into occupation of a flat
in Highgate with a woman with whom he was living. The premises consisted of two
rooms together with a kitchen, bathroom and wc. Each of the occupiers signed a
separate agreement with the landlord. The agreements provided that each
occupant might use the flat ‘in common with others who may have been granted
the like right’. Each agreement provided for the payment by the occupant
signing it of £54.17 per month. Subsequently the woman exercised her right
under her agreement to determine her ‘licence’ and went out of occupation. The
Court of Appeal held that the case was not, in substance, different from Somma
v Hazelhurst and that no tenancy was created. As I read the decision in Street
v Mountford (p 825H), the House of Lords regarded Aldrington Garages
as another case of a sham transaction which was, in truth, a tenancy.
The same
applies to Sturolson & Co v Weniz. In that case the
defendant, his wife and a Mr May together inspected a flat which they were
contemplating sharing. Mr Weniz (the defendant) and Mr May, after the visit,
each signed an agreement in identical terms on the same day. The agreement
provided (inter alia) by clause 1:
(a) that the Sharer (ie the signatory) should have
the right to share the flat with such other persons as might be approved or
nominated by the landlord;
(b) that the Sharer should have no right to
exclusive occupation of any part of the flat;
(c) that the Sharer should pay a monthly fee of
£100 in consideration of the grant of the right of occupancy.
The evidence
was that the parties, prior to the signature of the agreements, had been told
by the agents for the landlords that all that the landlords were concerned
about was the payment of £200 per month and that they could forget about clause
1, which was merely designed to get around the Rent Acts, and that they could
be assured that the landlords would not put anybody into the flat. The
landlords eventually served notice to quit and sought possession of the
premises and arrears of payments due. By the time of the proceedings Mr May had
left. It seems that a Mr Strudwick came in at some time, but the only defendant
to the proceedings was Mr Weniz. In this case also the Court of Appeal held
that the transaction was a licence. The House of Lords in Street v Mountford
considered that that was wrong and that a tenancy was created.
I come now to
the application of the law to the present case. Mr Sedley QC, for the second to
fourth defendants, submits that those defendants are jointly entitled to a
lease of the flat. Mr Sedley expressly disclaims any argument:
(1) that the agreements entered into by the
occupiers were shams or
(2) that any of the defendants is or was
individually entitled to exclusive possession of any part of the flat;
accordingly he does not suggest that any of the defendants was entitled to
exclusive possession of his bedroom with a right in common with the other three
to use the common parts.
I will
consider in turn the questions of exclusive possession, term and rent. First,
the question of exclusive possession. Each licensee is, by clause 1 of the
agreement, granted the right to use the flat in common with others who have, or
may from time to time be granted, the like right. Under the provisions of
clause 2(3) the number of other persons who may be authorised to use the flat
is three. Each of the four occupants could thus have one room.
If one looks
at the position as it was when the first to fourth defendants were all in
occupation of the flat (so that it was fully occupied) it seems to me that they
had, between them, exclusive possession of the flat. They were entitled to
exclude anybody; the plaintiffs had no right of entry. That right to exclusive
possession belonged, in my opinion, to the occupants as joint tenants. I do not
see any other means of giving effect to it. I appreciate that clause 1 of the
agreement expressly excludes the creation of any right in the licensee ‘to
exclusive possession of any part of the said flat’. But a joint right to
exclusive possession of the whole flat gives no right to the individual
licensee to exclusive possession of part. On the other hand, clause 1
confers upon the ‘licensee’ the right to use the flat in common with the other
authorised occupiers. The combination of those rights of all four occupiers
constitutes the joint right to exclusive possession of the whole flat. I will
return later to the question of the constituents of a joint tenancy. I do not
think that this interpretation of the arrangement between the parties involves
giving any forced or artificial meaning to it at all. I think it simply
represents the reality of the position. Strangers have, on any view, no right
to interfere with the occupants. And the agreement confers no right on the
plaintiffs (nor was any right ever subsequently conferred on them) which allows
the plaintiffs to interfere with the full enjoyment of the flat by the four
occupants so long as the provisions of the agreement are observed. I conclude,
therefore, that the element of exclusive possession which the House of Lords
regarded as being of the ‘first importance’ in deciding whether occupiers are
tenants is present here.
The next
matter is the term. A lease must be for some ascertainable period which, for
the purposes of the present case, must be either for a fixed term or for a
period continuing from month to month (or other period) until determined under
some power of determination. The period of occupancy of the defendants
differed. The initial six months’ ‘term’ of the first, second and third
defendants had expired when the notices to quit were given. The six months’
period of the fourth defendant was still running, though it may be (I am not
certain as to the dates) that he could give one month’s notice under clause 7.
In my view, as
from the date when the fourth defendant’s agreement took effect, the joint
right to exclusive possession would continue until the right of occupancy of
any one of the four occupants was determined under the provisions of the
agreement. There would be no difficulty in deciding when that date occurred.
The first to third defendants had monthly occupancies (ie continuing from month
to month on either side). The fourth defendant had a six months’ occupancy from
January 28 1985 (determinable if he wished after three months) and subject
thereto on a monthly basis.
As regards
rent, the feature of this case which was not present in either Street v Mountford,
Somma v Hazelhurst, Aldrington Garages v Fielder or
Sturolson & Co v Weniz is that each of the occupants was paying
a different monthly amount. That is certainly not a common form of rent, but
even if it is not rent at all I do not think that prevents a lease coming into
existence. A rent is not, in my view, essential to the creation of a valid
lease. It is true that in Street v Mountford Lord Templeman
refers on a number of occasions to the fact that exclusive possession of
property at a rent for a term will constitute a lease. That is certainly the
law. But I do not read Lord Templeman as saying that a rent is essential to the
existence of a lease. Section 205(1)(xxvii) of the Law of Property Act 1925
defines ‘term of years absolute’ as ‘a term of years (taking effect either in
possession or in reversion whether or not at a rent) . . .’. And Windeyer J in
the passage in Radaich v Smith (supra) expressly approved
by the House of Lords in Street v Mountford says:
What then is
the fundamental right which a tenant has that distinguishes his position from
that of a licensee? It is an interest in
land as distinct from a personal permission to enter the land and use it . . .
And how is it to be ascertained whether such an interest in land has been
given? By seeing whether the grantee was
given a legal right of exclusive possession of the land for a term or from year
to year or for a life or lives. If he was, he is a tenant.
For these
reasons this court in Ashburn Anstalt v J Arnold & Co
(reported in The Independent on October 29 1987)* concluded that a rent
is not an essential constituent of a lease. No doubt the existence of
consideration may be material to the determination of the question whether the
parties intended to enter into legal relations at all. That, however, is not in
issue here. The parties were plainly entering into commercial transactions and
the occupants were paying a substantial monetary consideration. In these
circumstances, I see no reason why the absence of a joint liability to pay a
single rent should prevent a lease from coming into existence. A lease is an
estate in the land for the duration of the lease. The parties are free to
create it for such considerations as they choose.
*Editor’s
note: Now reported in [1987] 2 EGLR 71; (1987) 284 EG 1375.
___________________________
That, however,
is not the end of the matter. It seems to me that the payments in the present
case do constitute a rent. If there was a grant of exclusive possession for a
term to the four occupants jointly and they are each making periodic payments
in respect of their occupation, it seems unreal to regard those payments as
other than rent. Halsbury’s Laws of England, 4th ed, vol 27 at para 211
states: ‘Rent is the recompense paid by the tenant to the landlord for the
exclusive possession of corporeal hereditaments’. That seems to me to describe
the nature of the aggregate monthly payments made by the four occupants in this
case. And not the less so because the amounts payable by the individual joint
tenants vary. If a landlord chooses to grant a lease to joint tenants in
consideration of sums of differing amounts paid by them individually, it seems
to me that there is still a tenancy and still a rent. It would, no doubt, look
better if there were a provision for the payment of a single rent with a
proviso limiting the amounts to be recovered from the individuals, but that is
a drafting device.
I should add
that the Law of Property Act 1925, section 205(1)(xxiii) defines ‘Rent’ as
including ‘a rent service or a rentcharge, or other rent . . . or annual or
periodical payment in money or money’s worth, reserved or issuing out of or
charged upon land . . .’ The aggregate
payments of the occupants would, I think, come within that wording also.
The conclusion
which I have reached does not mean that the monetary obligation of the
individual tenants is increased. The fact that the payments constitute a rent
does not, in my view, alter the nature of the payments or turn the obligation
to pay them into joint liabilities.
The result, in
my opinion, is that when the notices to quit were given the defendants were
jointly entitled to exclusive possession of the flat for a term at a rent.
Following the statement of the law in Street v Mountford and by
Windeyer J in Radaich v Smith (supra), to which I have
referred, that constituted a tenancy. This is not a case where the landlord
provided any services; the defendants were plainly not lodgers. Further, the
case is not within any of the exceptions referred to by Lord Templeman (eg
mortgagees in possession or service occupiers etc). Nor does the case come
within the sort of transaction referred to by Denning LJ in Facchini v Bryson
(supra) such as family arrangements and acts of generosity. The
arrangements between the plaintiffs and each of the defendants were
transactions of a business nature for full consideration.
I should add
that the matter does not depend upon the intention of the parties. It is quite
clear that the plaintiffs, upon advice, intended to create a relationship which
was outside the operation of the Rent Acts, and the defendants may well have
been content to accept that in order to get accommodation. The question,
however, is not, ‘What did the parties intend?’
The question is what is the effect in law of the rights which they
actually created. As I have indicated, it seems to me that they created a joint
right of exclusive possession of land for a term and that constitutes a lease.
The judge
referred to the four unities which must be present for the creation of a joint
tenancy, namely the unities of possession, interest, title and time (see Megarry
and Wade: The Law of Real Property, p 419 et seq). I deal with these
in turn.
Possession. Each co-owner is as much entitled to any part of the land as the
others. This does not, in my opinion, conflict with the provision in the
agreements that the licensee is not to have the right to exclusive possession
of any part of the flat. None of them does. Each has to share it with the
others.
Unity of
title. Each joint tenant must claim his title to
the land under the same act or document. In my opinion, the joint tenancy was
created by a single implied agreement for the grant of exclusive possession to
the defendants between the defendants and the
individual agreements are, no doubt, evidence of the transactions, but it seems
to me that the single implied agreement is what finally brings the relationship
into being.
Unity of
time. The interest of each tenant must vest at the
same time. That is satisfied in the present case. The joint tenancy arose when
the fourth defendant’s agreement was signed.
Unity of
interest. The interest of each joint tenant must be
the same in extent, interest and duration. Thus one joint tenant cannot act by
himself (eg to surrender a lease or give a notice), for by himself he does not
have the whole estate. But it is, I think, necessary to distinguish the joint
tenancy from the property on which the joint tenancy exists. What we have here
is a joint tenancy of a lease. As I have indicated, it seems to me that the
term of the lease is until any individual occupancy is determined under the
provisions of the relevant agreement. Once the six-month period has expired,
that can be done upon one month’s notice either by the occupant himself or by
the plaintiffs. It does not seem to me that the existence of the joint tenancy
prevents that or that the giving of such a notice by the occupant interferes
with the principle of unity of interest. The joint tenancy of the term cannot
alter the term for which the lease exists. The defendants, as joint tenants,
had unity of interest in the property of which they were joint tenants.
I conclude,
therefore, that there is no objection in principle to the existence of such a
joint tenancy as I have indicated.
It is not in
doubt that this flat is property which is within the control established by the
Rent Act 1977 and amending legislation. For the reasons that I have indicated,
it seems to me that at the material times the defendants were lessees of the
flat at a rent and not licensees.
We were
referred to Hadjiloucas v Crean [1987] 3 All ER 1008*. I do not
think that the conclusions which I have reached are in conflict with anything
decided in that case. In the present case, we have a much fuller knowledge of
the facts than had the court in Hadjiloucas and, as I understand from
Mustill LJ, the argument has taken a different course.
*Editor’s
note: Also reported at [1987] 2 EGLR 60; (1987) 284 EG 927.
I should add
that I have concentrated on the position as it exists in the present case. If,
after a tenancy has arisen, in the manner which I have indicated, in
consequence of four persons occupying the flat, one or more of them goes out of
occupation and a new occupant (or new occupants) is or are admitted under the
form of agreement used in this case, I think that by implied surrender and
regrant a new tenancy will arise.
The present
appeal should, in my view, be allowed.
MUSTILL LJ
agreed with the judgment of Fox LJ and did not add anything.
Dissenting,
SIR GEORGE WALLER said: I do not need to repeat the facts which have been fully
set out in the judgment of Fox LJ.
Two
possibilities arise in this case. If the agreements can be accepted as stating
the true legal position and if in those circumstances it can properly be said
that no one has exclusive possession, there is no problem and the arrangements
will work out with no rewriting of the contract. On the other hand, if the four
persons have to be looked at together as one, then as a group they have exclusive
possession, they will be joint tenants, they may have taken on obligations of
which they have no notice, and the consequences of any change among the
occupants may be serious. There are a number of cases where the courts have had
to consider similar problems, in particular Street v Mountford
[1985] AC 809, where Lord Templeman, with whom the other members of the House
of Lords agreed, gave guidance on what is a very difficult problem. In none of
these cases, however, were the facts similar to the present. In this case,
unlike the others, each of the occupants started his or her occupation on a
different day with a different monthly payment.
I will
therefore first consider the agreements. Although they were drafted so that the
Rent Acts would not apply, it was not submitted to us that this could be said
to be a sham device or an artificial transaction. It clearly was not. I can
therefore bear in mind Lord Templeman’s words that the Rent Acts must not be
allowed to alter or influence the construction of the agreement. Prima facie,
therefore, at the time we are considering there were four separate agreements,
one running from August 1 1982, one running from August 1 1984, one running
from March 2 1984 and one from January 28 1985. The sums payable were £86.66,
£125, £99 and £104 monthly. The agreements were all in the same form and
granted the right to share the use of the flat and not to impede the use by not
more than three others. There were four bedrooms and these were each occupied
by one of the ‘licensees’. Who had which bedroom was a matter of mutual
arrangement and when one became vacant there might be a change among those left
behind. The cost of services had to be shared. There were changes from time to
time and that is why each agreement began on a different day.
The House of
Lords in Street v Mountford, was admitted that there was
exclusive possession, considered the principles which have to be applied in
residential cases and Lord Templeman in his speech considered a number of cases
where the question which had to be decided was whether there was a licence or a
tenancy. In all the cases where there was more than one person in occupation,
the agreements, if there were more than one, related to an occupation which was
to start on the same day, for the same term and for the same rent. In Somma
v Hazelhurst [1978] 1 WLR 1014, which was disapproved by the House of
Lords, a young unmarried couple occupied a double bed-sitting room by virtue of
two identical agreements. The trial judge held that the agreement was a sham
but the Court of Appeal reversed that finding. Lord Templeman in Street
v Mountford, having expressed the view that the agreement was a sham,
said in the course of his speech: ‘The agreements signed by H and S constituted
the grant to H and S jointly of exclusive possession at a rent for a term for
the purposes for which the room was taken and the agreement therefore created a
tenancy.’
Immediately
after dealing with Somma Lord Templeman said that he disapproved of the
decision in Aldrington Garages Ltd v Fielder (1978) 37 P&CR
461 and Sturolson & Co v Weniz (1984) 272 EG 326. In Aldrington’s
case, although there were two agreements, they were identical, they were both
signed at the same time and the two parties moved in at the same time. The
trial judge found exclusive possession and held that the true intention of the
parties was a joint tenancy. The Court of Appeal reversed this decision
following the decision in Somma’s case. In Sturolson’s case the
defendant, his wife and a friend looked at a flat, the defendant and the friend
each signed a sharing agreement and they were in effect being given exclusive
possession. When the landlord sought to obtain possession the trial judge held
that the agreement was a sham and found that they had exclusive possession and
held that they were joint tenants. The Court of Appeal, mentioning Somma‘s
case, rejected the suggestion of sham and reversed the judge’s decision. Since
in both cases there was a finding of exclusive possession I have no doubt that
Lord Templeman would have upheld the trial judge’s decision for that reason as
in Somma’s case.
In Street
v Mountford the fact that exclusive possession was agreed was decisive
because, unless the case could be brought within the exceptional cases of
service tenancy or family relationship or those mentioned in Errington v
Errington [1952] 1 KB 290 at p 297 by Denning LJ, exclusive possession
would result in a tenancy. And, as I have already mentioned, where there was
multiple occupation which began on the same day and was for the same term and
the same rent there would be exclusive possession and therefore a joint tenancy
would result (see Somma, Aldrington and Sturolson). In the
present case the only way in which the defendants can be said to be tenants is
as joint tenants with exclusive possession, because if each is looked at
separately he or she does not have exclusive possession. The suggestion was
made before us that each of the occupants might be said to have exclusive
possession of a bedroom. In my opinion this is not so. The licence was for the
whole flat and the internal arrangements made by the occupants which were
varied from time to time cannot affect the limits of the licence. Furthermore,
although each has a bedroom which is personal and private, possession of it
cannot be said to be exclusive; it is merely an arrangement with the other
occupants.
If these
proceedings had been taken at a time when the original four were there it might
well have been possible to argue that the agreements were a sham and that the
four were joint tenants, but subsequent events showed clearly (as is agreed)
that the agreements represent what is actually happening and are not a sham.
While the first four were there it might have been possible to argue that there
was unity of possession, interest, title and time. But by the time that Vaughan
arrived the presence of these unities was, to say the least, doubtful.
Vaughan, who
was the earliest of the appellants to go into the flat, did not have exclusive
possession because he had to share with three
case I do not think that he would disapprove of the test set out in the
judgment of Geoffrey Lane LJ (at p 471):
In order to
succeed, the defendant must show that the two agreements must be read together,
and that, being read together, are effective to create a joint tenancy between
himself and [the second occupier], on the one hand, and the owners on the other
. . . If the two agreements are separate then there is no exclusive possession
and no tenancy.
A joint tenancy
is one where the tenancy commences on the same day for all, where the term is
the same for all, where the rent should not be altered without due notice to
all and possibly where all are jointly liable for the rent.
Fox LJ has
referred to the four unities set out in Megarry and Wade as the
requirements for a joint tenancy and I will consider them.
Unity of
interest. The extent, nature and duration of each
occupant’s interest is different. Each one started on a different day and as a
result the extent was different because the duration was six months in each
case and then monthly. Although each one became monthly after six months, there
is no ‘act’ to create a joint tenancy as I shall refer to under unity of title.
Unity of
title. The unity of title for a joint tenancy has
to be the same act or document. Megarry and Wade were repeating that
which was contained in Blackstone’s Commentaries (vol 2, Kerr’s ed, p
155):
Joint-Tenancy
cannot arise by descent or act of law: but merely by purchase, or acquisition
by the act of the party: and unless that act be one and the same the two
tenants would have different titles.
Each occupant
started with a different document on a different date. Can it be said that it
was the same act? In my opinion a new
joint tenancy could not arise each time a new person came because the new
occupant had six months to run whereas every other occupant was monthly, and it
could not arise at the expiration of six months because there was then no ‘act’
which could create a joint tenancy.
Unity of
time. The interest of each must vest at the same
time. If we were considering the first four occupants it would follow that
their interest vested at the same time, but as each new occupant arrived the
interest of the others had already vested and at the time when the notices to
quit were delivered each occupant’s interest had vested on different days.
Unity of
possession. This must be possession of the whole.
Each occupant was given the right to use the flat and so it could be said that
there was unity of right to use the flat. But was that possession of the
whole? In Addiscombe Garden Estates
Ltd v Crabbe [1958] 1 QB 513, a case where the ‘licence’ contained a
clause entitling the landlord to enter the land, Jenkins LJ said:
. . . The
importance of that is that it shows that the right to occupy the premises
conferred on the grantees was intended as an exclusive right of occupation, in
that it was thought necessary to give a special and express power to the
grantors to enter. The exclusive character of the occupation granted by a
document such as this has always been regarded, if not as a decisive
indication, at all events as a very important indication to the effect that a
tenancy, as distinct from a licence, is the real subject-matter of [the]
document.
The indication
is in the opposite direction in this case, but the plaintiff never claimed the
right.
I am prepared
to accept that there may be an exceptional case where there might be a special
arrangement about one of these characteristics, but in my opinion there cannot
be a joint tenancy where there are serious doubts about each of the four
unities.
This agreement
represents the true situation. To try to make it into a joint tenancy would be
to create a wholly artificial situation. Even if there were the strongest
reasons to try to make the Rent Acts apply it would be a joint tenancy that
departed from all the principles of joint tenancies. All occupants would have
to be parties to the same agreement. All would have to start on the same day.
Whenever one changed there would have to be a new agreement signed by all. All
would be liable for the rent. But there is no good reason at all for making the
Rent Acts apply. This is a flexible arrangement, generally fairly short term,
for which there is a substantial demand evidenced in this case by the large
number (100) who answered Vaughan’s advertisement. These agreements accurately
represent the relationships between the parties.
I regret that
I am in disagreement with Fox LJ but I would dismiss this appeal for the
reasons I have given.
The appeal
was allowed and declaration made that the first, second, third and fourth
defendants were joint tenants at date of commencement of proceedings. Leave to
appeal to the House of Lords was granted.
