Wednesday 9 February 2005

Lease or Licence - what is in a name?

With Watson Burton LLP Law Firm

When an agreement purports to grant a licence one would assume that it is indeed a licence which has been granted. However, it is not always safe to make such an assumption, and property owners and tenants should be alert to this.

It is firmly established that when determining if a lease or licence is in existence, it should be considered whether the agreement grants exclusive possession of the property at a rent for a term. If this is established, and the rights to exclusive possession cannot be linked to another established legal relationship, then a tenancy is created - ie a lease exists, affording the tenant greater protection. Giving a lease another name does not prevent a tenancy from being created.

The recent High Court decision in Clear Channel UK Limited -v- Manchester City Council (14 December 2004 ChD) considered whether the use of advertising hoardings was a lease or a licence.

In that case, the Court considered two separate arrangements :

  1. relating to hoardings on 13 different sites around Manchester; and
  2. relating to a prominent site in the middle of a traffic island.

In both arrangements, evidence of agreement was produced, although no formal agreements were ever completed. Also, in both arrangements, Clear Channel, as the advertiser, paid rent and began advertising from the sites.

The Council, as the landowner, sought to terminate the arrangements claiming that Clear Channel did not have formal tenancies, but merely had licences. Clear Channel, to the contrary, claimed that it had protected business tenancies.

In the first arrangement, for the 13 sites, the Court held that Clear Channel only had a licence. As no plans were agreed defining the areas over which Clear Channel were claiming a tenancy, and the 13 sites were only identified by way of addresses, together with the fact that there was no right of way granted to and from the hoardings at each site, there was no intention that the Council were to grant exclusive possession to Clear Channel. It was also considered by the Court that a single lease of 13 such demises would be a very unusual way to create a tenancy.

However, on the second arrangement, the traffic island site, Clear Channel did have success. The Court held that Clear Channel did occupy the site for the purpose of their business and, accordingly, the arrangement constituted a protected periodic tenancy. The reason for this was because there was nothing contained in the correspondence between the parties agreeing the terms which suggested that something less than exclusive possession was being granted.

Although it is common that arrangements entered into in respect of advertising hoardings and other aspects of property use are referred to as licences, this is not always true and one should bear in mind that when dealing with such matters, things are not always as they appear.

If you have any queries relating to this article, or any other property related matters, please contact Michael Shuker (michael.shuker).

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