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Insights // 01 January 1970

Lease or Licence: Labelling an Agreement a ‘Licence’ Does Not Necessarily Mean That it is!

Partner Katja Wigham, in our Commercial Property team, discusses leases, licenses and the importance of ensuring that agreements are correctly labelled.

Deciding how to document the short term occupation of a property can be difficult but ensuring that the documentation put in place at the start accurately reflects the intention of the parties can save a great deal of time and money further down the line.

The recent case of Camelot Property Management Limited (1) and Camelot Guardian Management (2) v Grey Roynon acts as a reminder of the distinction between a lease and a licence and how easy it can be to inadvertently grant a lease, when only a licence was intended.

The case concerned a former care home (‘the property’) in respect of which Mr Roynon entered into an agreement to occupy two rooms, with shared use of the communal living area, kitchen and bathroom. It was clearly documented that the agreement was a licence only. Two years later, notice to quit was served on Mr Roynon, who refused to vacate the property and the company charged with managing the property and securing residents for it (Camelot Property Management Limited and Camelot Guardian Management) brought proceedings against him.

Notwithstanding the label given to the agreement, the key to deciding this case was whether or not Mr Roynon was a tenant or a licensee, having regard to the substance of the agreement.

A key feature which distinguishes a lease from a licence is the grant of exclusive possession. An occupier is generally considered to have exclusive possession if it can exercise the rights of the landowner to the exclusion of others, including the landlord (subject to any rights of entry that may be reserved).

On the facts, the Court concluded that Mr Roynon had exclusive possession of two rooms and was therefore a tenant and not a licensee. Interestingly, the agreement had set out a scheme of occupation which provided that the residents would agree, amongst themselves, the allocation of rooms and would then be given a key to their room. In practice, however, this procedure was not adhered to and whilst the agreement did not expressly provide for exclusive possession of the two rooms occupied by Mr Roynon, he chose the rooms upon viewing the property (without engaging with the other residents) and was the only resident with a key to his rooms. If the correct procedures had been followed regarding room allocation, it is likely that the decision would have been different.

This case highlights the importance of ensuring that the agreement on paper reflects the reality of the occupation, which in most cases will be decisive. The label given to a document will not conclusively determine its status.

For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800. 

This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.

Katja Wigham

Katja Wigham

Partner, Commercial Property Law

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