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Legal principles in tenancy and licenses

189511 Title: EXERCISE ONE Two sisters, Jane and Rachel, have had unfortunate experiences. (In 1100 words) Jane had developed a successful career, based in London. However, she started a relationship with Ahmed, who lived in Leeds. After a few months Ahmed invited Jane to move into his house in Leeds. However, this entailed Jane forgoing her career interests in London. As a result she asked that the house be transferred into their joint names. Ahmed assured her that "in the near future when we marry the house will be yours." Jane undertook extensive gardening in the large grounds of the house, redesigned the interior of the house to make it more homely, paid for some central heating to be installed, and helped build and pay (£25,000) for an extension. Ahmed and Jane have never married. The house is worth £350,000. Rachel, still living in London, began a relationship with Tom and they decided to buy a house. The house, in London, was purchased for £200,000 in the sole name of Tom. Rachel's parents made a gift to Tom and Rachel of £10,000 which was used to help pay for the house, with the balance of the price being provided by a mortgage loan. Rachel has later admitted that there had not been any discussion regarding the beneficial ownership of the house as she was too busy looking forward to a happy life with Tom. Although the mortgage was in Tom's name, Rachel paid the installments for 12 months when Tom was out of work. During the relationship, Rachel had supervised some renovation work on the house, had subsidised the housekeeping and hence allowed Tom to pay less, and had paid for family holidays. Both relationships have now ended. A. You are a trainee in the firm of solicitors consulted by Jane and Rachel. Your principal has asked you to research and prepare a short report (of not more than 1,200 words) outlining the legal principles as to (i) whether any beneficial rights in the relevant houses may be claimed by (a) Jane or (b) Rachel and (ii) if so, how the size of their shares will be calculated. Your report should identify whether there are any particularly relevant or recent cases on these issues, so that your principal can follow these up and give the appropriate advice. Seventy per cent. B Explain precisely (in 500 words) what was your research strategy and how you carried out the research, giving details of the electronic searches that you made. Outside the word limit, give a bibliography of all books and databases used to carry out the research, and give a list of all cases that you consulted (whether or not actually used in Part A of your answer), with their references Thirty per cent EXERCISE TWO Part A (1,400 words. 70% weighting) (i) In 2004, Raj allowed his sister-in-law, Joyce, to take up occupation, at a consideration of £600 per month, of the first floor apartment in a house of which Raj is the freeholder. Raj at first was reluctant to agree to this because he intended to let this apartment on a long lease for a capital sum, however because Joyce was homeless, Raj felt he had to help accommodate her. Raj and Joyce signed a written agreement headed "Occupation Agreement", which contained the following terms: - - The occupier hereby acknowledges that no lease has been created by this agreement but rather a licence. Raj is the licensor and Joyce is the licensee. - The licensor is entitled to nominate any third party to share occupation of the apartment. - The licensee is obliged to keep the apartment in good repair and installations therein in proper working order. - The licensee shall pay the fee of £600, in advance, on the 28th of each and every month. - This licence agreement shall be for a fixed-term of 4 years commencing on 1st October 2003. - The licensee shall vacate the apartment, each and every Sunday morning between the hours of 9 am and 11 am, in order that the licensor can clean the apartment and check on the general condition of the same. - If the apartment is not kept in repair, or, the installations therein not kept in proper working order, or the licence fee, or any part thereof, be unpaid for 21 days, the licensor can terminate this agreement You are a trainee in the firm of solicitors consulted by Joyce. Your principal has asked you to research and prepare a short report (of 900 words ) outlining the legal principles as to whether the agreement created a tenancy or a licence. Your report should identify whether there are any particularly relevant or recent cases on these issues, so that your principal can follow these up and give the appropriate advice. (ii) Your principal has also asked you to do a separate piece of research to produce a short report (of 500-600 words) on decisions in the cases in the last fifteen years in which s.11 of the Landlord and Tenant Act 1985 has been considered and/or applied. Seventy per cent Part B (500 words; 30%) Explain precisely (in 600 words) what was your research strategy and how you carried out the research, giving details of the electronic searches that you made. Outside the word limit, give a bibliography of all books and databases used to carry out the research, and give a list of all cases that you consulted (whether or not actually used in Part A of your answer), with their references Thirty per cent

Exercise One

Part A

Although the house is in the name of Ahmed only this does not totally extinguish any claim that Jane might have with regard to the property[1]. To deny Jane any form of compensation for the amount of time and money she has put into the repairs and improvements in the house would be inequitable[2]. In law Jane would not be recognised as having an interest in the property as her name is not on the register, however Equity would vest her with rights over the home[3].

Jane should be able to acquire equitable ownership rights in the property as Ahmed had promised her that upon their marriage he would have the property transferred into both names[4]. The general principle on which the equitable ownership has been established is on the basis of a trust[5]. It has been held by the courts on numerous occasions that the promise by the legal owner that the property will at some future point be transferred into joint ownership creates a trust situation. The effect of this is that the property is registered in one name but held in trust for the other party in the relationship.

Even if there is no express declaration of trust contained in the registration documents of the property the partner in the relationship may still be able to establish a share in under equitable ownership rights[6].

If Jane had contributed towards the purchase price of the property a resulting trust would have been created which would have given her an interest in the property proportional to the amount contributed to the purchase price[7]. Unfortunately in this instance Jane has not contributed to the purchase price and therefore cannot rely on the construction of a resulting trust.

Jane would have to rely on the principle of an implied or constructive trust to establish a claim for any money she has put into the house to cover repairs and maintenance of the property[8]. There are several cases that would assist Jane in her claim that a constructive trust has been duly created. The essence of a constructive or implied trust is that the person not named on the register has been led to believe that when they set up home together as a couple the property will be jointly owned[9].

When deciding whether such a trust has been duly created the courts must find on the basis of express discussions between the parties that the parties had come to an agreement or arrangement that Jane would acquire an equitable interest in the property[10].

It is not always necessary for the party seeking to gain the equitable interest to have put any monies into the property at all[11]. Case law has recognised in some cases that the contribution to the running of the household, repairs affected in the property and money expended on household bills is sufficient to establish an equitable interest.

In order for Jane to succeed in her claim she would have to prove some detrimental reliance on the express agreement between her and Ahmed. In this instance Jane could show that she gave up her career on the understanding that they were soon to marry and she would gain an interest in the property. Jane has also contributed financially to improvements in the house for which she should be compensated[12].

With Rachel the situation is slightly different in that the money used as a deposit on the property was given to her and Tom by way of a gift from Rachel’s parents. This would effectively mean that a resulting trust would have been created as Rachel has made a direct contribution towards the purchase of the property[13]. Although there was no express discussion between Rachel and Tom as to her beneficial interest in the property that fact that she contributed to the purchase price would give an automatic right to the assumption of a resulting trust. Difficulties could arise if the money had been given solely to Tom, however, Equity would still be likely to infer an implied trust[14] into the actions of the parties which would give Rachel an equitable interest in the property.

A further point that strengthens Rachel’s claim to a share of the value of the property is the fact that she paid the mortgage payments during the 12 months when Tom was unemployed, as well as money she has contributed towards repairs in the property and family holidays.

When calculating the amount that both Jane and Rachel would be entitled to from the property the court will take into account the amount contributed by each in monetary terms as well as making allowances for non monetary contributions such as repairs in the property.

If there had been an express agreement on the issue of the shares of each in the property the courts will accept the amount expressed in the agreement as the amount applicable to each[15]. Where there is no express agreement the courts are free to use their discretion to reach a decision as to what they deem to be fair in the present circumstances[16].

In Jane’s case she has contributed £25000 to the construction of the extension and the repairs and so a starting point should be that proportion of the value of the property. On top of this the court are likely to make an allowance for the fact that she gave up her career in London to set up home with Ahmed and has also contributed to improvements in the house and garden by the work she has done. Even if Jane had not contributed any money into the property it is still likely that she would have been granted an equitable interest in the property as she would be deemed to have made a contribution in kind to the acquisition of the property from the work she had done[17].

With Rachel the gift of £10000 was to both her and Tom which would effectively mean that Rachel could claim that she had paid £5000 towards the purchase of the property. Rachel also made direct payments towards the mortgage when Tom was unemployed. In essence Rachel would be entitled to the £5000 she paid for the purchase price as well as the sum of the repayments made on the mortgage. Allowance will also be made to cover for the work undertaken by Rachel in the house and the monies paid into the household for housekeeping expenses[18].

It is not possible to give an exact figure as to how much might be awarded in either Jane’s or Rachel’s case and case law does not assist in deciding on the way the court may apportion the ownership of the property. In some cases the courts have granted the claimant a 25%[19] share in the property whereas in other a 50%[20] share has been agreed. It is fair to say in both cases the plaintiffs will be entitled to a proportion of the property value. The amount calculated will be calculated with reference to the present value of the property and not the value of the property at the time the cohabitation commenced.

(1198)

Part B

When compiling the above my primary source of research was textbooks on land law and statutes. My research strategy was to start with the legal ownership issue for each. This was important as a starting point as on the face of it the plaintiffs have no legal rights or claims on the properties of the defendants. Having established at law there is no legal right of the plaintiffs I went on to look at ways in which the plaintiffs could procure an interest in the properties. It was obvious from the research that an interest could only be obtained in equity and therefore I needed to show that the conditions for making a claim under equity were satisfied in each case.

I researched several cases where constructive, implied or resulting trusts have been created by the person not named on the register seeking to gain equitable ownership Then I developed an argument to show similar facts in the instances of Rachel and Jane to the cases researched. My aim was to show that the actions of the defendants in not including them on the register was unjust and that the courts should accept that the plaintiffs are entitled to an equitable interest to correct this injustice.

As well as using text books I also accessed electronic law sites such as Westlaw and Lexis Nexis to increase the range of cases available. I was specifically looking for cases containing similar facts to the problems as outlined above so as to use them as an authority to establish that Jane and Rachel could rely on these when presenting their arguments to the court for a claim towards an equitable interest.

When attempting to calculate the amount that Jane or Rachel might expect to receive I referred to the Family Law in Practice text book 5th Ed as published by the Inns of Court Law School. This book is designed for family law practitioners and contains detailed information on how court settlements are worked out following divorce. Although much of the information contained within the text is specific to married couples the courts have a tendency to use similar calculations when assessing the monetary awards for cohabiting couples.

The various cases I researched from the internet and textbooks also helped to create a formula from which calculations of the amounts that Rachel and Jane might be able to claim in respect of the properties can be made.

The conclusion of my research was compiled in the above report so that specific advice could be given to each as regards their entitlement to an equitable interest in the property. I also included in the report the proof required by each of the parties to establish a claim for equitable interest. An exact figure that each could expect is impossible to calculate, however, I did include in my report the minimum each might expect to receive.

All cases examined for this report have been included by way of footnotes at the bottom of each page.

(500)

Exercise 2

Part A

The main distinction between a licence and a lease is that with a licence the tenant does not have the right to exclusive occupation of the property[21]. One example of where some one would be classed as a licensee would be in the case of a lodger. With a lodger he is just a paying guest in the house of another and his room is his only in the sense that he has use of the room[22]. He cannot keep the householder out of the room and does not keep the householder out when it comes to matters of cleaning or redecoration. The same would also be true of students in a university hall of residence.

From the information above it would appear that Raj has created a licence agreement between himself and his sister in law Joyce. The insertion of the clause in the agreement that he can nominate a 3rd party to share the occupation of the apartment means that Joyce does not have exclusive occupation of the property. Alongside this is the inclusion that Joyce will vacate the premises on a specific day each week so that Raj can inspect and clean the apartment.

The courts have created a formula whereby exclusive possession[23] for a term at a rent creates a lease except in exceptional circumstances. Using this formula could mean that Joyce would be classed as a tenant despite the fact that Raj can nominate a 3rd party to share the occupation[24]. In Lynes v Snaith [1899] 1 QB 486 Lawrence J stated

It is clear that the defendant was a tenant and not a licensee; for the admissions state that she was in exclusive possession, a fact which is wholly inconsistent with her having been a mere licensee.

Unfortunately in this instance the exceptional circumstances as mentioned above would apply as the exclusive occupation could be categorised as not intending the parties to enter any sort of legally enforceable relationships. This is particularly the case in family and domestic arrangements[25] or where the arrangement is one of charity on the part of the owner.

Having established that a licence rather than a tenancy will have been created it is necessary to explain to Joyce the problems she may face as a licensee as opposed to a tenant. The definition of a licence equates to nothing more than permission[26]

A licence to occupy gives only personal rights to the licensee in the form of a contract[27]. If Joyce was classified as a tenant she would gain proprietary rights over the estate. Licences can only bind individuals and generally cannot bind 3rd parties, though there are cases where licensees have been held to have rights that bind a 3rd party.

Unlike with a tenancy agreement a licence is far easier to revoke. Any breach of the contract between the licensor and licensee and the licence can be instantly revoked. With a lease the tenant is afforded the protection under statute. A tenancy agreement can be terminated but the law requires a period of notice be given to the tenant for the termination of the agreement[28].

Even if there has been no breach of the contract Raj can still revoke the licence. This would put him in breach of the contract[29] and liable for damages but would still mean that Joyce could be faced with being homeless at a moments notice.

The courts have in some instances adopted an equitable approach when dealing with the revocation of contractual licences. There have been some occasions in which the courts have restrained the licensor from revoking a contractual licence but this is only were it is practicable to do so[30]. In general although there is an option for the court to assist the plaintiff in equity it is frequently the case that the licence has been irrevocably revoked and the courts do not attempt to interfere as the plaintiff has a remedy in damages for the breach.

No such notice is required under a licence which means that Joyce could face eviction at the will of Raj if she breaches any of the terms of the agreement between them.

With a tenancy breaches of the tenancy agreement can lead to a termination of that agreement but the landlord must still give notice to the tenant of his intention to terminate the tenancy. If the tenant refuses to leave a court order would have to be obtained to regain possession of the property.

Under a licence if Joyce breaches the terms of the agreement she could face a claim for damages from Raj for the breach. She could also face charges for trespass if she was required by Raj to leave the property and refused to do so. With a tenancy a claim for damages can only be pursued if the tenant has caused specific damage to the property.

A further downfall for Joyce is that as a licensee only she is not afforded the protection of rent control[31] that she would have if she were to be classed as a tenant.

It is obvious from the information above that because Joyce is a licensee and not a tenant she does not have the same legal protection over her rights of occupancy of the apartment. Her occupation of the property is precarious and could be terminated without notice despite the agreement that exists between her and Raj.

(902)

Section 11 of the Landlord and Tenant Act 1985 deals specifically with the requirements of the lessor in respect of the repair and maintenance of the leased property. Part of the obligation relates also to the regular inspection and maintenance of the installations for the supply of water, gas and electricity along with sanitation appliances such as basins, baths and toilets. The obligation cannot be transferred to the tenant, but it also does not extend to repairs which the tenant is liable for under his duty to use the premises in a tenant like manner.

The case of O’Brien v Robinson [1973] AC 912 made the point that the obligation under s11 does not extend to defects on the premises unless and until the landlord has notice of them.

Dinefwr BC v Jones [1987] 2 EGLR 58 further elaborated on the above case stating that the notice to the landlord did not have to come directly from the tenant.

Subsequent cases seem to suggest that the ruling in O’Brien v Robinson was an exception to the normal rule as recent case law in Telecommunications Plc v Sun life Assurance Society Plc [1996] Ch69 stated that the obligation of the landlord arises irrespective of notice.

Passley v Wandsworth LBC (1996) 30 HLR 165 suggests that the rule in respect of covenants to repair should include covenants to keep in repair, thereby requiring regular inspection by the landlord to ensure that defects are discovered immediately or avoided in total.

Under the Defective Premises Act 1972 s4 the landlord owes a duty to all persons who might reasonably be affected by the defects in the property to repair or maintain the property. In Smith v Bradford Metropolitan Council (1982) 44 p & CR 171 the court stated that the duty under this Act should be construed as being owed to the tenant, however this duty is not an implied covenant.

The law Commission Consultation Paper No 123 Landlord and Tenant: Responsibility for State and Condition of Property (1992) laid down statutory requirements to ensure the residential property is fit for human habitation. One such case that highlighted the need for this to become a statutory requirement was Quick v Taff Ely BC [1986] QB 809.

S11 of the Act was further used in Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055 to demonstrate that there could be deemed to be a breach of s11 if the defect in the property made a part of the building unusable. In this case the basement was ankle deep in water whenever the water table rose due to the construction of the building. Although the basement was never used in the course of the business this was held to be in breach of s11 and required the landlord to take action to prevent a recurrence.

A further Law Commission Report No 238 in 1996 made specific recommendations in respect of fitness of human habitation which have been incorporated into the wording of section 11 of the Landlord and Tenant Act 1985.

(507)

Part B

My starting point for research into whether Joyce was a licensee or a tenant was to examine the difference between leases and licences. My primary source for this was text books on property law and land law as well as various websites dealing with landlord and tenant issues such as www.direct.gov.uk. My research covered the reading of many cases where the courts have examined the status of the parties to establish whether the agreement between the parties was that of landlord and tenant or licensor and licensee.

All cases of relevance have been listed as footnotes at the bottom of each page of the research and the details of each case have not been discussed in detail, but cited as an authority to back up the assertions regarding licensee or tenant accordingly.

Having made the distinction between licences and leases I moved onto looking at the disadvantages to Joyce in being a licence holder as opposed to a leaseholder. The obvious disadvantage was in the security of the tenancy.

Having recognised the disadvantages of being a licence holder I then researched the various areas of legislation which would assist a tenant but did not offer any assistance to a licensee. The conclusion to be drawn from this research is that the rights of the licensee are significantly deficient to those of a tenant and remedies in general lie in damages if the licensor breaches the terms of the licence.

My research showed that there are some instances in which the courts will act in equity to restrain the licensor from revoking the licence but in general terms they are powerless to intervene.

Information gleaned from the internet reinforced the notion that the Government has attempted over the years to reduce the number of places which are let by way of licence, but the fear of creating a situation where owners are reluctant to lease properties because they will be bound by a tenancy agreement has prevented the Government from insisting on tenancies as opposed to licences.

I also used the internet when looking for information regarding s11 of the Landlord and Tenant Act and was able to get a substantial amount of information from the Law Commission website. My main source of information for this area of research was text books as I was able to find many cases where s11 of the Act had been cited by the plaintiff to compel the landlord to carry out the repairs as dictated by the Act.

Having researched both the information requested for the question on licences and the section on the Landlord and Tenant Act I compiled the report as requested outlining the pros and cons in respect of Joyce being a licence holder. I then compiled the further report into the Act and demonstrated by the use of case law the duties of a landlord under the Act.

I then compiled a bibliography and a table of cases and statues which was added at the end of the entire document. The bibliography and table of cases has not been split up into separate sections to deal with Exercise 1 and Exercise 2 but the inserted footnotes make it clear which sections apply for each problem.

(535)

Bibliography

Bryn Perrins, Understanding Land Law, 3rd Ed, 200, Cavendish Publishing Ltd

Garvells, N P, Land Law Text and Materials, 2nd Ed, 1999, Sweet and Maxwell

Thomas, M, Statutes on Property Law, 8th Ed. 2001, Blackstone’s

The law Commission Consultation Paper No 123 Landlord and Tenant: Responsibility for State and Condition of Property (1992)

http://www.landregistry.gov.uk

www.direct.go.uk

Table of Cases

Ashburn Anstalt v Arnold [1989] Ch 1

Dinefwr BC v Jones [1987] 2 EGLR 58

Eves v Eves [1975]1 WLR 1338

Facchini v Bryson [1952] 1 TLR 1386

Gissing v Gissing [1971] AC 886

Goodman v Gallant [1986 Fam 106

Grant v Edwards [1986] Ch 638

Hammond v Mitchell [1991] 1 WLR 1127

Ivan v Blake [1995] 1 FLR 70

Lloyds Bank Plc v Rosset [1991] 1 Ac 107

Lynes v Snaith [1899] 1 QB 486

Marchant v Charters [1977] 1 WLR 1181

O’Brien v Robinson [1973] AC 912

Passley v Wandsworth LBC (1996) 30 HLR 165

Pettitt v Pettitt [1970] AC 777

Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055

Quick v Taff Ely BC [1986] QB 809.

Savill v Goodall [1993] 1 FLR 755

Smith v Bradford Metropolitan Council (1982) 44 p & CR 171

Somma v Hazelhurst and Savelli [1978] 1 WLR 1014

Springette v Defoe [1992] 2 FLR 388

Street v Mountfield [1985] AC 809

Telecommunications Plc v Sun life Assurance Society Plc [1996] Ch69

Thomas v Sorrell (1673) Vaughan 330

Verral v Great Yarmouth BC [1981] QB 202

Wood v Leadbitter (1845) 13 M & W 838

Table of Statutes

Defective Premises Act 1972

Housing Act 1988

Land Registration Act 1925

Rent Act 1977

1


Footnotes

[1] Land Registration Act 1925 s5

[2] Grant v Edwards [1986] Ch 638

[3] Eves v Eves [1975]1 WLR 1338

[4] Lloyds Bank Plc v Rosset [1991] 1 Ac 107

[5] Pettitt v Pettitt [1970] AC 777

[6] Hammond v Mitchell [1991] 1 WLR 1127

[7] Goodman v Gallant [1986 Fam 106

[8] Grant v Edwards [1986] Ch 638

[9] Eves v Eves [1975]1 WLR 1338

[10] Savill v Goodall [1993] 1 FLR 755

[11] Ivan v Blake [1995] 1 FLR 70

[12] Grant v Edwards [1986] Ch 638

[13] Grant v Edwards [1986] Ch 638

[14] Gissing v Gissing [1971] AC 886

[15] Savill v Goodall [1993] 1 FLR 755

[16] Grant v Edwards [1986] Ch 638

[17] Ivan v Blake [1995] 1 FLR 70

[18] Lloyds Bank Plc v Rosset [1991] 1 Ac 107

[19] Springette v Defoe [1992] 2 FLR 388

[20] Grant v Edwards [1986] Ch 638

[21] Lynes v Snaith [1899] 1 QB 486

[22] Marchant v Charters [1977] 1 WLR 1181

[23] Street v Mountfield [1985] AC 809

[24] Somma v Hazelhurst and Savelli [1978] 1 WLR 1014

[25] Facchini v Bryson [1952] 1 TLR 1386

[26] Thomas v Sorrell (1673) Vaughan 330

[27] Ashburn Anstalt v Arnold [1989] Ch 1

[28] Housing Act 1988 s21

[29] Wood v Leadbitter (1845) 13 M & W 838

[30] Verral v Great Yarmouth BC [1981] QB 202

[31] Rent Act 1977 replaced by the Housing Act 1988


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