Whilst we await the reforms proposed on the Landlord and Tenant Act 1954, which are likely to make it easier to contract out of the provisions of the Act, parties continue to seek to avoid its protection by granting short term licences or tenancies at will.
The granting of such a commercial licence was under the spotlight in the recent High Court decision in National Car Parks Limited -v- Trinity Development Company (Banbury) Limited - Chancery Division - HHJ Rich QC (sitting as a High Court Judge) - 9th November 2000.
The question for the Court was whether or not the agreement described as a "licence" was in fact a lease and accordingly attracted the protection of the Act.
In this case the "licensor" granted to the "licensee" an agreement to occupy certain premises as a car park. The agreement required the licensee to manage and administer the premises, laying down regulations for the conduct of the licensee's business. The licensee was required to make payment for use of the premises in an amount as a percentage of "net profit" and the agreement provided for a three months' notice termination provision. The licensor purported to give such notice and the licensee argued that the agreement was in fact a lease and therefore the notice was invalid.
The key question for the Court was whether or not the licensee had been granted exclusive possession by the agreement.
The Court decided that the agreement did not grant exclusive possession and it therefore was indeed a licence. The regulations imposed on the licensee as to how it should run its business and the fact that the licensor could potentially use the premises itself for parking its cars meant that the agreement did not grant exclusive possession.
This case is a useful reminder of the familiar principles laid down in Street -v- Mountford [1985] I AC 809. When granting a licence, an owner should always ensure that it retains a degree of physical control as, in the absence of exclusive possession, the agreement will only be a licence. Of course, it is important that the agreement not only denies the licensee exclusive possession but that this is also reflected by the way in which both parties actually carry on their business at the premises.
For further information, please contact Patrick Wetherall at [email protected] or on +44 (0)20 7367 2423.
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