Lease or licence

Citation

Waterson, G. and Lee, R. (1999), "Lease or licence", Property Management, Vol. 17 No. 3. https://doi.org/10.1108/pm.1999.11317cab.001

Lease or licence

Mehta v. Royal Bank of Scotland [1999] The Times, 25 January 1999

In many respects the question of whether the occupier of residential property has a lease or a licence has lost much of its practical significance since the coming into effect of the Housing Act 1988 and the possibility of landlords being able to rent out their property by way of an assured shorthold tenancy. Occasionally, however, the distinction may still be of some importance, and this is no doubt one such case.

In this case Mr Mehta occupied a room in the Brompton Hotel as a long-term guest under an oral agreement, paying a monthly sum to the landlords by way of rent. After Mr Mehta had been in occupation of the room for six months or so he was told that he would have to leave as the hotel was being sold and completion was imminent, and following his refusal either to leave or to sign a new contract with the owners, he was unlawfully evicted the following day, apparently by the receivers appointed by the landlords' mortgagees.

When the matter came to trial, Mr Mehta claimed that the oral agreement gave rise to an assured tenancy of the room, satisfying as it did the three criteria for a lease or tenancy set out by Lord Templeman in the case of Street v. Mountford, that is to say "exclusive possession, at a rent, for a term ...". At first instance the argument was accepted and Mr Mehta was awarded £100,000 damages for wrongful eviction.

The Court of Appeal took a rather different view: the circumstances of this case were such that it was not easy to apply the test laid down by the House of Lords in Street v. Mountford. In the words of the judge, Mr Richard Southwell QC, "What each court, faced with a need to make a distinction, had to do was weight all the relevant and significant factors and to decide in the light of them on which side of the line the particular case fell. This case fell on the contractual licence side of the line ..."

In the circumstances, held the court, a notice period of four months would have been appropriate to determine the licence. Mr Mehta was therefore still entitled to damages for unlawful eviction, but in the somewhat reduced sum of £45,000.