Factual and Procedural Background
Company A, a charitable housing organisation, obtained a licence from Company B (a local authority) to use a block of flats for temporary accommodation of homeless persons. On 31 January 1989 Company A entered into a written agreement with the Appellant, offering weekly occupation of a flat for £18 from 6 February 1989. The document was labelled a “licence,” required the Appellant to vacate on reasonable notice, and reserved limited rights of entry for Company A and Company B.
Subsequently, the Appellant alleged disrepair and sued in the county court, relying on section 11 of the Landlord and Tenant Act 1985, which applies only where a “lease or tenancy” exists. Company A served a notice to quit and sought a declaration that the Appellant was merely a licensee with no statutory repairing rights. The trial judge and a Court of Appeal majority held that only a licence had been created. The Appellant appealed to the House of Lords.
Legal Issues Presented
- Whether the written agreement, despite being described as a licence and despite Company A’s limited interest, created a tenancy giving the Appellant a statutory right to repairs under section 11 of the Landlord and Tenant Act 1985.
- Whether the absence of proprietary title in Company A, or “special circumstances” linked to its charitable functions and obligations to Company B, precluded the creation of a tenancy.
Arguments of the Parties
Appellant's Arguments
- The agreement conferred exclusive possession for a weekly rent and thus satisfied the criteria for a tenancy under Street v. Mountford.
- Labeling the document a licence cannot defeat the statutory implication of repairing obligations.
- Company A’s lack of proprietary estate is irrelevant to the existence of a contractual landlord–tenant relationship.
Respondent's Arguments
- Special circumstances—namely Company A’s charitable role, its limited licence from Company B, and an express intention not to grant tenancies—meant the arrangement should be treated as a licence.
- Because Company A held no estate in the land, it could not create a tenancy “binding on the world,” and at most a licence or tenancy by estoppel could arise.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Street v. Mountford [1985] AC 809 |
Exclusive possession for a term at rent ordinarily creates a tenancy irrespective of labels. |
Primary authority establishing that the agreement gave the Appellant a tenancy. |
| Westminster City Council v. Clarke [1992] AC 288 |
Background circumstances can negate exclusive possession. |
Cited to show that, unlike in Clarke, Company A retained no extensive control defeating exclusive possession. |
| Family Housing Association v. Jones [1990] 1 WLR 779 |
Charitable housing bodies can still create tenancies despite only holding licences. |
Relied on as precedent for rejecting “special circumstances” arguments. |
| Lewisham Borough Council v. Roberts [1949] 2 KB 608 |
Entity without estate cannot create proprietary interests. |
Discussed and distinguished; absence of estate held irrelevant to contractual tenancy. |
| Minister of Agriculture and Fisheries v. Matthews [1950] 1 KB 148 |
Lack of statutory capacity negates agreements. |
Cited to emphasise that capacity was not lacking here; agreement valid. |
| Reardon Smith v. Hansen-Tangen [1976] 1 WLR 989 |
Importance of surrounding circumstances in contract construction. |
Acknowledged but found not to displace tenancy conclusion. |
| Morton v. Woods (1867) LR 4 QB 292 |
Tenancy by estoppel arises when a party who grants a lease without title is estopped from denying it. |
Used to show estoppel flows from, rather than creates, the tenancy. |
Court's Reasoning and Analysis
All five judges (Judge Slynn, Judge Jauncey, Judge Hoffmann, Judge Hope, and Judge Hobhouse) accepted that the agreement granted exclusive possession for a rent and therefore prima facie constituted a tenancy under Street v. Mountford. They examined whether surrounding circumstances—Company A’s charitable purpose, its contractual promise to Company B not to grant tenancies, the parties’ expressed intention, and Company A’s lack of estate—could rebut that conclusion.
The court held that none of those factors displaced the tenancy. The character of the landlord and the wording of the licence with Company B were irrelevant; the parties cannot contract out of statutory landlord-tenant obligations. Lack of title does not prevent the formation of a contractual tenancy; at most it gives rise to estoppel, but estoppel presupposes the existence of a tenancy rather than creating it.
Judge Hoffmann, delivering the principal opinion, rejected the Court of Appeal’s view that a lease must create a proprietary estate to qualify as a “tenancy.” He explained that the tenancy relationship is established contractually, and the proprietary consequences flow thereafter, subject to nemo dat. Judge Hobhouse emphasised that the dispute centred on contractual rights, not proprietary interests, and that Company A had capacity to contract.
Holding and Implications
APPEAL ALLOWED. The agreement between the Appellant and Company A created a tenancy; accordingly, section 11 of the Landlord and Tenant Act 1985 applies, imposing repairing obligations on Company A.
The immediate effect is that the Appellant may pursue statutory repair claims against Company A. The House of Lords confirmed that charitable housing bodies, even when themselves licensees, can nonetheless grant contractual tenancies to occupiers; no new precedent was set regarding secure tenancies or Company B’s rights, which remain undecided.