Third-party purchasers seeking vacant possession of occupied property will want to know how quickly and at what cost occupiers may be removed. Recent cases are a reminder of the hidden risks of licence arrangements and the ways in which licensees may be able to rely on “hidden” rights to frustrate the process.
Estoppel
In West End Commercial Ltd v London Trocadero (2015) LLP [2017] EWHC 2175 (Ch); [2017] PLSCS 171, a company with the same director and shareholder as the claimant had occupied premises under the terms of a contractual licence for 12 months, having spent significant sums on fitting out.
On expiry of the first licence, a second licence was entered into, this time with the claimant permitting occupation for a further year. The second licence entitled the licensor to terminate the agreement at any time on 30 days’ written notice. This it promptly did within a matter of days, admitting that it had found a third party willing to pay more.
The claimant relied on proprietary estoppel to prevent the licensor from terminating the licence. According to the claimant, the licensor’s agent had assured him that notice would not be served if the licence fee was paid on time.
The claim failed as the court found that (i) as a purely contractual interest, the claimant’s interest was not sufficiently proprietary to allow the doctrine to be invoked and (ii) no detriment had been suffered.
The second conclusion was uncontroversial given the facts of the case. However, the dismissal of the argument that a proprietary estoppel could not operate in favour of a licensee needs to be treated with caution.
In National Provincial Bank v Ainsworth [1964] Ch 665, the Court of Appeal (later reversed on other grounds by the House of Lords – [1965] 194 EG 1085) accepted that where (i) a party occupied premises under a licence following an assurance as to his rights of occupation and (ii) thereafter altered his position to his detriment in reliance on that assurance, an equitable right might arise, given effect by the court in line with the representation.
Purchasers only see the documents evidencing occupation and are not privy to associated negotiations. Consequently, it is possible, in some circumstances, that a third-party purchaser would be bound by an estoppel or form of constructive trust (even though it would not be bound per se by a licence).
Notice
Factoring in notice periods is another essential part of any risk analysis, with particular care needed when “reasonable” notice is required lawfully to terminate a bare licence.
What sort of timeframe is reasonable, bearing in mind that, even following expiration of the notice, the licensee is likely to be permitted a further period of reasonable “packing up time” before his occupation will be treated as that of a trespasser?
The point was considered in Amey Highways Ltd v Sharp (2015, ChD). Amey had been permitted to occupy premises by a previous lessee and, on the expiry of the lease, Amey remained in occupation and in all probability did so under an implied licence. Nine months into the occupation, the owners purported to take back possession.
On Amey’s application for an interim injunction, the court accepted there was a serious question to be tried as to whether or not it was entitled to a reasonable period of notice and, if so, how much. On an interim basis, the court (having particular regard to Amey’s role as a designated highways contractor) ordered the owners to re-admit Amey and to permit occupation at least for a further two-and-a-half months. Despite Amey’s occupation appearing entirely precarious, it was able to frustrate the owners’ right to obtain immediate vacant possession.
Lease or licence
At first blush, an arrangement which allows use of property only for certain fixed periods each year would look like a contractual licence and one might readily assume that the arrangement could be terminated by appropriate notice. But although relatively rare in practice, it is possible to grant a lease of land that only confers exclusive possession for limited periods over a fixed or periodic term (Smallwood v Sheppards [1895] 2 QB 627). This is known as a discontinuous (or timeshare) lease.
In Holland v Oxford City Council [2016] EWHC 2545 (Ch); [2016] PLSCS 274, Dorinda Holland sought a declaration that she occupied a pitch at the St Giles Fair (held one weekend each September in Oxford city centre) as a periodic tenant. The court had to consider whether the arrangement was a lease or a licence. Ultimately, Holland was unsuccessful in her claim because two factors in particular pointed towards a licence, rather than a lease. First, there was an annual application process in respect of the allocation of the pitch; secondly, the council could freely access the pitch at any time, which countered any idea of exclusive possession. However, the court accepted as “axiomatic” that an annual periodic tenancy could arise, although occupation was permitted for only one weekend a year.
Property owners would be well advised to review arrangements that have often been in place for many years where property is used intermittently in this way. Although not straightforward, an occupier of this type – establishing that the tenancy is periodic or for a fixed term of longer than six months and that the occupation is sufficiently continuous – may have a case that the occupancy constitutes a business tenancy under the Landlord and Tenant Act 1954. That would necessitate giving six to 12 months’ notice and reliance on one of the statutory grounds of opposition to recover possession, together with a possible payment of statutory compensation.
All of the above cases reinforce the importance of analysing licence arrangements closely.
James Hanham is a barrister at Maitland Chambers and Rosalind Cullis is a senior associate at Kingsley Napley LLP
