June 25 1999. HOUSE OF LORDS

Housing trust agreement created a lease

Bruton v. London and Quadrant Housing Trust

Before Lord Slynn of Hadley, Lord Jauncey of Tullichettle, Lord Hoffmann, Lord Hope of Craighead and Lord Hobhouse of Woodborough

[Speeches June 24]

When a housing trust which had a licence from the local authority to use a council property as short-term accommodation for homeless people, made an agreement granting the right to exclusive possession of a self-contained flat on the property at a weekly rent, that amounted to the creation of a lease even though the agreement expressly stated that it was creating a licence.

 The House of Lords so held, allowing an appeal by the plaintiff, Gary Francis Bruton, from a decision of the Court of Appeal (Lord Justice Kennedy and Lord Justice Millett, Sir Brian Neill dissenting) (The Times August 14, 1997; [1998] QB 834) upholding a decision of Judge James sitting at Lambeth County Court on June 28 1996 who held on a preliminary issue that the plaintiff occupied a flat at 2 Oval House, Rushcroft Road, Brixton, London as a licensee of the defendant, the London and Quadrant Housing Trust, pursuant to an agreement dated January 31, 1989.

Mr Kim Lewison, QC and Mr David Watkinson for Mr Bruton; Mr Roger Henderson, QC and Mr Terence Gallivan for the defendant housing trust.

 LORD HOFFMANN said that the defendant was a charitable housing trust which, among other things, provided short-term accommodation for the homeless and others in need of housing.

The question arose because Mr Bruton claimed that the trust was in breach of the implied repairing obligations contained in section 11 of the Landlord and Tenant Act 1985.

The trust denied that it granted a tenancy and said that the agreement created only a licence to use the flat.

When Mr Bruton brought proceedings in the county court to enforce the implied covenants the housing trust served a notice to quit and claimed a declaration that Mr Bruton had no security of tenure because he was only a licensee.

The flat was in a block belonging to the London Borough of Lambeth. The council acquired the block in 1975 for housing purposes by the use of compulsory powers, intending to demolish it and build new houses or flats on the site. But the scheme was delayed.

On March 27, 1986 council entered into an agreement with the trust permitting the trust to use the premises in furtherance of its charitable housing objects.

The agreement was called a licence and it was agreed that it was not the grant of an estate or other proprietary interest in the premises.

By section 32(3) of the Housing Act 1985 the local authority could let the land under a secure tenancy to a residential occupier but could not otherwise dispose of any interest without the consent of the secretary of state.

It would therefore have been beyond the powers of the council to grant the trust any estate or other proprietary interest in the premises.

The agreement between the trust and Mr Bruton was for "occupation of short-life accommodation ... on a temporary basis". The agreement stated:

"As has been explained to you, the above property is being offered to you by [the trust] on a weekly licence ... The trust has the property on licence from [the council] who acquired the property for development ... and pending this development, it is being used to provide temporary accommodation. It is offered to you on the condition that you will vacate upon receiving reasonable notice from the trust."

It was a condition of the agreement that the trust or its agents, surveyors or consultants be permitted to enter the property for the purpose of inspecting it, and Mr Bruton agreed to pay £18 a week for the right to occupy.

The question was whether the agreement created a "lease" or "tenancy" within the meaning of the Landlord and Tenant Act 1985 or any other legislation which referred to a lease or tenancy.

The decision of the House of Lords in Street v Mountford ([1985] AC 809) was authority for the proposition that a lease or tenancy was a contractually binding agreement, not referable to any other relationship, which gave another the right to exclusive occupation of land for a fixed or renewable period or periods of time, usually in return for a periodic payment in money.

An agreement having those characteristics created a relationship of landlord and tenant to which the common law or statute might then attach various incidents.

The fact that the parties used language more appropriate to a different kind of agreement, such as a licence, was irrelevant if upon its true construction it had the identifying characteristics of a lease.

The meaning of the agreement, for example as to the extent of the possession which it granted, depended upon the intention of the parties, objectively ascertained by reference to the language and relevant background. The agreement in this case, construed against the relevant background, plainly gave Mr Bruton a right to exclusive possession.

There was nothing to suggest that he was to share possession with the trust, the council or anyone else. The trust did not retain such control as was inconsistent with Mr Bruton having exclusive possession.

The only rights which the trust reserved were for itself and the council to enter at certain times and for limited purposes.

As Lord Templeman had said in Street v Mountford (at p818), such an express reservation only served to emphasise the fact that the grantee was entitled to exclusive possession and was a tenant.

There was no other relationship between the parties to which Mr Bruton's exclusive possession could be referable.

It was submitted on behalf of the trust that there were special circumstances which enabled one to construe the agreement as a licence despite the presence of all the characteristice identified in Street v Mountford.

Those were that the trust was a responsible landlord performing socially valuable functions, that Mr Bruton had agreed that he was not to have a tenancy and the trust had no estate out of which it could grant one.

In his Lordship's opinion, none of those cirmustances could make an agreement to grant exclusive possession something other than a tenancy. The character of the landlord was irrelevant because although the Rent Acts and other Landlord and Tenant Acts did make distinctions between different kinds of landlords, it was not saying that what would be a tenancy if granted by one landlord would be something else if granted by another.

The alleged breach of the trust's licence was irrelevant because there was no suggestion that the grant of a tenancy would have been beyond the powers of either the trust or the council.

If it was a breach of a term of the licence from the council, that would have been because it was a tenancy. The licence could not have turned it into something else.

Mr Bruton's agreement was irrelevant because one could not contract out of the statute. The trust's lack of title was also irrelevant. The agreement was a lease within the meaning of section 11 of the Landlord and Tenant Act 1985.

Lord Slynn, Lord Jauncey and Lord Hobhouse delivered concurring judgments and Lord Hope agreed with Lord Hoffmann.

Solicitors: G. L. Hockfield & Co, Kennington; Devonshires.

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