Land Law Palgrave Fifth Edition

In the case of Minister of Agriculture and Fisheries v Matthews it was held that the Minister had granted the occupier a licence and not a tenancy because it was ultra vires the powers conferred on him to grant a lease. But the House of Lords in Bruton rejected this line of reasoning drawing a distinction between a grantor's lack of capacity and lack of title. Interestingly, it had ruled that the absence of a legal estate does not prevent a grantor from entering into a relationship of landlord and tenant for it had the capacity to do so.

Further, Lord Hoffmann suggested that not all leases necessarily give rise to a leasehold estate. According to his Lordship: "The term 'lease' or 'tenancy' describes a relationship between two parties who are designated landlord and tenant. It is not concerned with the question of whether the agreement creates an estate… which may be binding on third parties". What then should we make of the House of Lords' ruling in Bruton?

The effect of this case is that now not all tenancies give rise to a leasehold estate and that some may be purely contractual in nature6, with apparently no proprietary characteristics; a concept up till now unknown to property lawyers. It seems, therefore, that Courts are moving steadily towards a major restructuring of a landlord and tenant law (along contractual lines). Surely, the whole point of the so-called lease/licence distinction was to draw a clear dividing line between personal and proprietary rights, where leases are proprietary and licences are personal.

It also appears that, the Landlord and Tenant (Covenants) Act 1925 and the Landlord and Tenant Act 1988 could still apply to such a personal tenancy. In Bruton the House of Lords also considered whether the objective of the housing trust in maintaining a stock of housing, over which it had maximum control in order to provide accommodation for the homeless, prevented a tenancy from arising even though Mr Bruton had exclusive possession. In Street, Lord Templeman identified a number of "special circumstances" displacing the presumption of a tenancy.

However, the fact that the Housing Trust was a charitable organisation was considered to be irrelevant when determining whether an agreement is a lease or a licence, for it would be erroneous to claim that a lease granted by one landlord would become a licence if granted by a different landlord. The House of Lords approved of the decision of the Court of Appeal in Family Housing Association v Jones in which, on very similar facts, a licence agreement was construed as a lease.

The 'mischief' behind the Street v Mountford, namely, an objective approach to ascertaining the intention of the parties, was to counteract the unequal bargaining strength of the parties. 7 This decision was reached to right the balance between landlords who under the guise of freedom of contract were able to impose their own terms in the agreement and tenants who were seeking protection under the Rent Acts.

However, housing charities may have particular reasons for granting a licence instead of a lease, for example, as, in Bruton, there are instances when council property, awaiting redevelopment, can be made available for short-term housing needs but would not be available for letting. If a lease were granted the landlord would be subject to statutory repairing obligations and that would be inappropriate and inconsistent with the proposed redevelopment.

It is apparent that the Bruton decision will find little favour with numerous public bodies which are charged with the responsibility of providing housing for the homeless. As Sir Brian Neill observed (in his dissenting judgment in the Court of Appeal in Bruton), it is by no means clear whether "this result will necessarily inure to the benefit of the class of homeless persons in this country viewed as a whole".

The fear is that, following this decision, housing charities and public authorities may be reluctant to provide short-term accommodation for homeless persons, unless the facts are similar to those in Westminster City Council v Clarke [1992]. ' This is unfortunate as there will undoubtedly be many situations in which a licence will be the most appropriate means of allowing homeless persons into occupation of temporary housing thereby avoiding the rights and obligations incumbent on the parties to a lease. The result is that such premises will now become unavailable to assist the homeless.