Street v Mountford

Important decision of House of Lords rejecting the recently acceptable category of the contractual licensee of residential accommodation who has exclusive possession, makes payments in the nature of rent for a term or period of occupation and is not subject to the Rent Act — Decision of Court of Appeal reversed and a number of previous decisions overruled — Comprehensive review of authorities — The agreement in the present case was expressed to be a licence to occupy a single furnished room for a licence fee of £37 a week and subject to the observance of a number of rules — It was admitted that the occupier, the present appellant, had exclusive possession — The Court of Appeal had held that exclusive possession, although an essential feature of a tenancy, was also compatible with a licence — They considered that in the present case the agreement bore all the hallmarks of a licence; that it was possible to create such a licence to occupy residential accommodation, if that was the parties’ intention, without creating a tenancy; that this had in fact been successfully done; and that, contrary to the view taken in the county court, the appellant had no Rent Act protection — Held by the House of Lords, allowing the appeal, that the appellant was a tenant, not a licensee — An agreement to grant exclusive possession for a term at a rent, whatever it is called, is a tenancy — Unless the three hallmarks of exclusive possession, a payment in the nature of rent, and a term are decisive as to a tenancy, it becomes impossible to distinguish a contractual tenancy from a contractual licence save by reference to a professed intention of the parties or by the judge ‘awarding marks for drafting’ — Some of the earlier decisions can be explained as cases where there was no intention to enter into legal relations, some as master and servant cases, some as lodger cases and some as within the exceptional categories mentioned in Errington v Errington — The cases of Murray Bull & Co Ltd v Murray, Somma v Hazelhurst, Aldrington Garages v Fielder and Sturolson & Co v Weniz were wrongly decided — The Somma v Hazelhurst type of agreement should have been recognised as constituting a joint tenancy with exclusive possession — ‘Henceforth the courts which deal with these problems will, save in exceptional circumstances, only be concerned to inquire whether as a result of an agreement relating to residential accommodation the occupier is a lodger or a tenant’ This was an appeal by Mrs Wendy Mountford from the decision of the Court of Appeal, reported at (1984) 271 EG 1261, [1984] 2 EGLR 119, allowing an appeal from Mr Recorder Rolf at Bournemouth County Court, who had held that the occupancy of Mrs Mountford of accommodation at 5 St Clements Gardens, Boscombe, was a protected tenancy under the Rent Act 1977. J Hicks QC and Miss Claudia Ackner (instructed by Parke Nelson & Doyle Devonshire, agents for D’Angibau & Malim, of Bournemouth) appeared on behalf of the appellant; W Goodhart QC and P Cowell (instructed by Bower Cotton & Bower, agents for Richards & Morgan, of Bournemouth) represented the respondent. In his speech, LORD TEMPLEMAN said: By an agreement dated March 7 1983, the respondent Mr Street granted the appellant Mrs Mountford the right to occupy the furnished rooms nos 5 and 6 at 5 St Clements Gardens, Boscombe, from March 7 1983 for £37 per week, subject to termination by 14 days’ written notice and subject to the conditions set forth in the agreement. The question raised by this appeal is whether the agreement created a tenancy or a licence. A tenancy is a term of years absolute. This expression, by section 205(1)(xxvii) of the Law of Property Act 1925, reproducing the common law, includes a term from week to week in possession at a rent and liable to determination by notice or re-entry. Originally a term of years was not an estate in land, the lessee having merely a personal action against his lessor. But a legal estate in leaseholds was created by the Statute of Gloucester 1278 and the Act of 1529 21 Henry VIII c 15. Now by section 1 of the Law of Property Act 1925 a term of years absolute is an estate in land capable of subsisting as a legal estate. In the present case if the agreement dated March 7 1983 created a tenancy, Mrs Mountford having entered into possession and made weekly payments acquired a legal estate in land. If the agreement is a tenancy, the occupation of Mrs Mountford is protected by the Rent Acts. A licence in connection with land while entitling the licensee to use the land for the purposes authorised by the licence does not create an estate in the land. If the agreement dated March 7 1983 created a licence for Mrs Mountford to occupy the premises, she did not acquire any estate in the land. If the agreement is a licence then Mrs Mountford’s right of occupation is not protected by the Rent Acts. Hence the practical importance of distinguishing between a tenancy and a licence. In the course of argument, nearly every clause of the agreement dated March 7 1983 was relied upon by the appellant as indicating a lease and by the respondent as indicating a licence. The agreement, in full, was in these terms: I Mrs Wendy Mountford agree to take from the owner Roger Street the single furnished room number 5 and 6 at 5 St Clements Gardens, Boscombe, Bournemouth, commencing March 7 1983 at a licence fee of £37 per week. I understand that the right to occupy the above room is conditional on the strict observance of the following rules: 1. No paraffin stoves, or other than the supplied form of heating, is allowed in the room. 2. No one but the above-named person may occupy or sleep in the room without prior permission, and this personal licence is not assignable. 3. The owner (or his agent) has the right at all times to enter the room to inspect its condition, read and collect money from meters, carry out maintenance works, install or replace furniture or for any other reasonable purpose. 4. All rooms must be kept in a clean and tidy condition. 5. All damage and breakages must be paid for or replaced at once. An initial deposit equivalent to 2 weeks licence fee will be refunded on termination of the licence subject to deduction for all damage or other breakages or arrears of licence fee, or retention towards the cost of any necessary possession proceedings. 6. No nuisance or annoyance to be caused to the other occupiers. In particular, all music played after midnight to be kept low so as not to disturb occupiers of other rooms. 7. No children or pets allowed under any circumstances whatsoever. 8. Prompt payment of the licence fee must be made every Monday in advance without fail. 9. If the licence fee or any part of it shall be seven days in arrear or if the occupier shall be in breach of any of the other terms of this agreement or if (except by arrangement) the room is left vacant or unoccupied, the owner may re-enter the room and this licence shall then immediately be terminated (without prejudice to all other rights and remedies of the owner). 10. This licence may be terminated by 14 days written notice given to the occupier at any time by the owner or his agent, or by the same notice by the occupier to the owner or his agent. Occupier’s signature Owner/agent’s signature Date 7th March 1983 I understand and accept that a licence in the above form does not and is not intended to give me a tenancy protected under the Rent Acts. Occupier’s signature. On August 12 1983 on Mrs Mountford’s application a fair rent was registered. Mr Street then made application under section 51(a) of the County Courts Act 1959 for a declaration that Mrs Mountford’s occupancy was a licence and not a tenancy. The recorder in the county court held that Mrs Mountford was a tenant entitled to the protection of the Rent Acts and made a declaration accordingly. The Court of Appeal held that Mrs Mountford was a licensee not entitled to the protection of the Rent Acts. Mrs Mountford appeals. On behalf of Mrs Mountford her counsel, Mr Hicks QC, seeks to reaffirm and re-establish the traditional view that an occupier of land for a term at a rent is a tenant provided the occupier is granted exclusive possession. It is conceded on behalf of Mr Street that the agreement dated March 7 1983 granted exclusive possession to Mrs Mountford. The traditional view that the grant of exclusive possession for a term at a rent creates a tenancy is consistent with the elevation of a tenancy into an estate in land. The tenant possessing exclusive possession is able to exercise the rights of an owner of land, which is in the real sense his land albeit temporarily and subject to certain restrictions. A tenant armed with exclusive possession can keep out strangers and keep out the landlord unless the landlord is exercising limited rights reserved to him by the tenancy agreement to enter and view and repair. A licensee lacking exclusive possession can in no sense call the land his own and cannot be said to own any estate in the land. The licence does not create an estate in the land to which it relates but only makes an act lawful which would otherwise be unlawful. On behalf of Mr Street his counsel, Mr Goodhart QC, relies on recent authorities which, he submits, demonstrate that an occupier granted exclusive possession for a term at a rent may nevertheless be a licensee if, in the words of Slade LJ in the present case, ‘there is manifested the clear intentions of both parties that the rights granted are to be merely those of a personal right of occupation and not those of a tenant’. In the present case, it is submitted, the provisions of the agreement dated March 7 1983 and in particular clauses 2, 4, 7 and 9 and the express declaration at the foot of the agreement manifest the clear intention of both parties that the rights granted are to be those of a personal nature and not those of a tenant. My Lords, there is no doubt that the traditional distinction between a tenancy and a licence of land lay in the grant of land for a term at a rent with exclusive possession. In some cases it was not clear at first sight whether exclusive possession was in fact granted. For example, an owner of land could grant a licence to cut and remove standing timber. Alternatively the owner could grant a tenancy of the land with the right to cut and remove standing timber during the term of the tenancy. The grant of rights relating to standing timber therefore required careful consideration in order to decide whether the grant conferred exclusive possession of the land for a term at a rent and was therefore a tenancy or whether it merely conferred a bare licence to remove the timber. In Glenwood Lumber Co Ltd v Phillips [1904] AC 405 the Crown in exercise of statutory powers ‘licensed’ the respondents to hold an area of land for the purpose of cutting and removing timber for the term of 21 years at an annual rent. Delivering the advice of the Judicial Committee of the Privy Council, Lord Davey said at pp 408-409: The appellants contended that this instrument conferred only a licence to cut timber and carry it away, and did not give the respondent any right of occupation or interest in the land itself. Having regard to the provisions of the Act under the powers of which it was executed and to the language of the document itself, their Lordships cannot adopt this view of the construction or effect of it. In the so-called licence itself it is called indifferently a licence and a demise, but in the Act it is spoken of as a lease, and the holder of it is described as the lessee. It is not, however, a question of words but of substance. If the effect of the instrument is to give the holder an exclusive right of occupation of the land, though subject to certain reservations or to a restriction of the purposes for which it may be used, it is in law a demise of the land itself. By [the Act] it is enacted that the lease shall vest in the lessee the right to take and keep exclusive possession of the lands described therein subject to the conditions in the Act provided or referred to, and the lessee is empowered (amongst other things) to bring any actions or suits against any party unlawfully in possession of any land so leased, and to prosecute all trespassers thereon. The operative part and habendum in the licence is framed in apt language to carry out the intention so expressed in the Act. And their Lordships have no doubt that the effect of the so-called licence was to confer a title to the land itself on the respondent. This was a case in which the court after careful consideration of the purposes of the grant, the terms of the grant and the surrounding circumstances, came to the conclusion that the grant conferred exclusive possession and was therefore a tenancy. A contrary conclusion was reached in Taylor v Caldwell (1863) 3 B & S 826 in which the defendant agreed to let the plaintiff have the use of the Surrey Gardens and Music Hall on four specified days giving a series of four concerts and day and night fetes at the gardens and hall on those days, and the plaintiff agreed to take the gardens and the hall and to pay £100 for each day. Blackburn J said at p 832: The parties inaccurately call this a ‘letting,’ and the money to be paid a ‘rent,’ but the whole agreement is such as to show that the defendants were to retain the possession of the hall and gardens so that there was to be no demise of them, and that the contract was merely to give the plaintiffs the use of them on those days. That was a case where the court after considering the purpose of the grant, the terms of the grant and the surrounding circumstances came to the conclusion that the grantee was not entitled to exclusive possession but only to use the land for limited purposes and was therefore a licensee. In the case of residential accommodation there is no difficulty in deciding whether the grant confers exclusive possession. An occupier of residential accommodation at a rent for a term is either a lodger or a tenant. The occupier is a lodger if the landlord provides attendance or services which require the landlord or his servants to exercise unrestricted access to and use of the premises. A lodger is entitled to live in the premises but cannot call the place his own. In Allan v Liverpool Overseers (1874) LR 9 QB 180, 191-192 Blackburn J said: A lodger in a house, although he has the exclusive use of rooms in the house, in the sense that nobody else is to be there, and though his goods are stowed there, yet he is not in exclusive occupation in that sense, because the landlord is there for the purpose of being able, as landlords commonly do in the case of lodgings, to have his own servants to look after the house and the furniture, and has retained to himself the occupation, though he has agreed to give the exclusive enjoyment of the occupation to the lodger. If on the other hand residential accommodation is granted for a term at a rent with exclusive possession, the landlord providing neither attendance nor services, the grant is a tenancy; any express reservation to the landlord of limited rights to enter and view the state of the premises and to repair and maintain the premises only serves to emphasise the fact that the grantee is entitled to exclusive possession and is a tenant. In the present case it is conceded that Mrs Mountford is entitled to exclusive possession and is not a lodger. Mr Street provided neither attendance nor services and only reserved the limited rights of inspection and maintenance and the like set forth in clause 3 of the agreement. On the traditional view of the matter, Mrs Mountford not being a lodger must be a tenant. There can be no tenancy unless the occupier enjoys exclusive possession; but an occupier who enjoys exclusive possession is not necessarily a tenant. He may be owner in fee simple, a trespasser, a mortgagee in possession, an object of charity or a service occupier. To constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of a premium or periodical payments. The grant may be express, or may be inferred where the owner accepts weekly or other periodical payments from the occupier. Occupation by service occupier may be eliminated. A service occupier is a servant who occupies his master’s premises in order to perform his duties as a servant. In those circumstances the possession and occupation of the servant is treated as the possession and occupation of the master and the relationship of landlord and tenant is not created; see Mayhew v Suttle (1854) 4 EI & BI 347. The test is whether the servant requires the premises he occupies in order the better to perform his duties as a servant. ‘Where the occupation is necessary for the performance of services, and the occupier is required to reside in the house in order to perform those services, the occupation being strictly ancillary to the performance of the duties which the occupier has to perform, the occupation is that of a servant’; per Mellor J in Smith v Seghill Overseers (1875) LR 10 QB 422, 428. The cases on which Mr Goodhart relies begin with Booker v Palmer [1942] 2 All ER 674. The owner of a cottage agreed to allow a friend to install an evacuee in the cottage rent free for the duration of the war. The Court of Appeal held that there was no intention on the part of the owner to enter into legal relationships with the evacuee. Lord Greene MR said at p 677: To suggest there is an intention there to create a relationship of landlord and tenant appears to me to be quite impossible. There is one golden rule which is of very general application, namely, that the law does not impute intention to enter into legal relationships where the circumstances and the conduct of the parties negative any intention of the kind. It seems to me that this is a clear example of the application of that rule. The observations of Lord Greene MR were not directed to the distinction between a contractual tenancy and a contractual licence. The conduct of the parties (not their professed intentions) indicated that they did not intend to contract at all. In the present case, the agreement dated March 7 1983 professed an intention by both parties to create a licence and their belief that they had in fact created a licence. It was submitted on behalf of Mr Street that the court cannot in these circumstances decide that the agreement created a tenancy without interfering with the freedom of contract enjoyed by both parties. My Lords, Mr Street enjoyed freedom to offer Mrs Mountford the right to occupy the rooms comprised in the agreement on such lawful terms as Mr Street pleased. Mrs Mountford enjoyed freedom to negotiate with Mr Street to obtain different terms. Both parties enjoyed freedom to contract or not to contract and both parties exercised that freedom by contracting on the terms set forth in the written agreement and on no other terms. But the consequences in law of the agreement, once concluded, can only be determined by consideration of the effect of the agreement. If the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties cannot alter the effect of the agreement by insisting that they only created a licence. The manufacture of a five-pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade. It was also submitted that in deciding whether the agreement created a tenancy or a licence, the court should ignore the Rent Acts. If Mr Street has succeeded, where owners have failed these past 70 years, in driving a coach and horses through the Rent Acts, he must be left to enjoy the benefit of his ingenuity unless and until Parliament intervenes. I accept that the Rent Acts are irrelevant to the problem of determining the legal effect of the rights granted by the agreement. Like the professed intention of the parties, the Rent Acts cannot alter the effect of the agreement. In Marcroft Wagons Ltd v Smith [1951] 2 KB 496 the daughter of a deceased tenant who lived with her mother claimed to be a statutory tenant by succession and the landlords asserted that the daughter had no rights under the Rent Acts and was a trespasser. The landlords expressly refused to accept the daughter’s claims but accepted rent from her while they were considering the position. If the landlords had decided not to apply to the court for possession but to accept the daughter as a tenant, the moneys paid by the daughter would have been treated as rent. If the landlords decided, as they did decide, to apply for possession and to prove, as they did prove, that the daughter was not a statutory tenant, the moneys paid by the daughter were treated as mesne profits. The Court of Appeal held with some hesitation that the landlords never accepted the daughter as tenant and never intended to contract with her although the landlords delayed for some six months before applying to the court for possession. Roxburgh J said at p 507: Generally speaking, when a person, having a sufficient estate in land, lets another into exclusive possession, a tenancy results, and there is no question of a licence. But the inference of a tenancy is not necessarily to be drawn where a person succeeds on a death to occupation of rent-controlled premises and a landlord accepts some rent while he or the occupant, or both of them, is or are considering his or their position. If this is all that happened in this case, then no tenancy would result. In that case, as in Booker v Palmer, the court deduced from the conduct of the parties that they did not intend to contract at all. Errington v Errington and Woods [1952] 1 KB 290 concerned a contract by a father to allow his son to buy the father’s house on payment of the instalments of the father’s building society loan. Denning LJ referred at p 297 to the judgment of Lord Greene MR in Booker v Palmer [1942] 2 All ER 674; 677 where, however, the circumstances and the conduct of the parties negatived any intention to enter into legal relationships. Denning LJ continued at pp 297-298: We have had many instances lately of occupiers in exclusive possession who have been held to be not tenants, but only licensees. When a requisitioning authority allowed people into possession at a weekly rent: . . . when a landlord told a tenant on his retirement that he could live in a cottage rent free for the rest of his days; . . . when a landlord, on the death of the widow of a statutory tenant, allowed her daughter to remain in possession, paying rent for six months: Marcroft Wagons Ltd v Smith; when the owner of a shop allowed the manager to live in a flat above the shop, but did not require him to do so, and the value of the flat was taken into account at £1 a week in fixing his wages: . . . in each of those cases the occupier was held to be a licensee and not a tenant. . . . The result of all these cases is that, although a person who is let into exclusive possession is prima facie to be considered a tenant, nevertheless he will not be held to be so if the circumstances negative any intention to create a tenancy. Words alone may not suffice. Parties cannot turn a tenancy into a licence merely by calling it one. But if the circumstances and the conduct of the parties show that all that was intended was that the occupier should be granted a personal privilege, with no interest in the land, he will be held to be a licensee only. In Errington v Errington and Woods [1952] 1 KB 290 and in the cases cited by Denning LJ at p 297 there were exceptional circumstances which negatived the prima facie intention to create a tenancy, notwithstanding that the occupier enjoyed exclusive occupation. The intention to create a tenancy was negatived if the parties did not intend to enter into legal relationships at all, or where the relationship between the parties was that of vendor and purchaser, master and service occupier, or where the owner, a requisitioning authority, had no power to grant a tenancy. These exceptional circumstances are not to be found in the present case where there has been the lawful independent and voluntary grant of exclusive possession for a term at a rent. If the observations of Denning LJ are applied to the facts of the present case it may fairly be said that the circumstances negative any intention to create a mere licence. Words alone do not suffice. Parties cannot turn a tenancy into a licence merely by calling it one. The circumstances and the conduct of the parties show that what was intended was that the occupier should be granted exclusive possession at a rent for a term with a corresponding interest in the land which created a tenancy. In Cobb v Lane [1952] 1 TLR 1037 an owner allowed her brother to occupy a house rent free. The county court judge, who was upheld by the Court of Appeal, held that there was no intention to create any legal relationship and that a tenancy at will was not to be implied. This is another example of conduct which negatives any intention of entering into a contract, and does not assist in distinguishing a contractual tenancy from a contractual licence. In Facchini v Bryson [1952] 1 TLR 1386 an employer and his assistant entered into an agreement which, inter alia, allowed the assistant to occupy a house for a weekly payment on terms which conferred exclusive possession. The assistant did not occupy the house for the better performance of his duty and was not therefore a service occupier. The agreement stipulated that ‘nothing in this agreement shall be construed to create a tenancy between the employer and the assistant’. Somervell LJ said at p 1389: If, looking at the operative clauses in the agreement, one comes to the conclusion that the rights of the occupier, to use a neutral word, are those of a lessee, the parties cannot turn it into a licence by saying at the end ‘this is deemed to be a licence’; nor can they, if the operative paragraphs show that it is merely a licence, say that it should be deemed to be a lease. Denning LJ referred to several cases including Errington v Errington and Woods and Cobb v Lane and said at pp 1389-1390: In all the cases where an occupier has been held to be a licensee there has been something in the circumstances, such as a family arrangement, an act of friendship or generosity, or such like, to negative any intention to create a tenancy. . . . In the present case, however, there are no special circumstances. It is a simple case where the employer let a man into occupation of a house in consequence of his employment at a weekly sum payable by him. The occupation has all the features of a service tenancy, and the parties cannot by the mere words of their contract turn it into something else. Their relationship is determined by the law and not by the label which they choose to put on it. The decision, which was thereafter binding on the Court of Appeal and on all lower courts, referred to the special circumstances which are capable of negativing an intention to create a tenancy and reaffirmed the principle that the professed intentions of the parties are irrelevant. The decision also indicated that in a simple case a grant of exclusive possession of residential accommodation for a weekly sum creates a tenancy. In Murray Bull & Co Ltd v Murray [1953] 1 QB 211 a contractual tenant held over, paying rent quarterly. McNair J found at p 217 that ‘both parties intended that the relationship should be that of licensee and no more . . . The primary consideration on both sides was that the defendant, as occupant of the flat, should not be a controlled tenant’. In my opinion this case was wrongly decided. McNair J, citing the observations of Denning LJ in Errington v Errington and Woods [1952] 1 KB 290; 297 and Marcroft Wagons Ltd v Smith [1951] 2 KB 496, failed to distinguish between, first, conduct which negatives an intention to create legal relationships, secondly, special circumstances which prevent exclusive occupation from creating a tenancy and, thirdly, the professed intention of the parties. In Murray Bull & Co Ltd v Murray the conduct of the parties showed an intention to contract and there were no relevant special circumstances. The tenant holding over continued by agreement to enjoy exclusive possession and to pay a rent for a term certain. In those circumstances he continued to be a tenant notwithstanding the professed intention of the parties to create a licence and their desire to avoid a controlled tenancy. In Addiscombe Garden Estates Ltd v Crabbe [1958] 1 QB 513 the Court of Appeal considered an agreement relating to a tennis club carried on in the grounds of a hotel. The agreement was ‘described by the parties as a licence . . . the draftsman has studiously and successfully avoided the use either of the word ‘landlord’ or the word|page:129| ‘tenant’ throughout the document’ per Jenkins LJ at p 522. On analysis of the whole of the agreement the Court of Appeal came to the conclusion that the agreement conferred exclusive possession and thus created a tenancy. Jenkins LJ said at p 522: The whole of the document must be looked at; and if, after it has been examined, the right conclusion appears to be that, whatever label may have been attached to it, it in fact conferred and imposed on the grantee in substance the rights and obligations of a tenant, and on the grantor in substance the rights and obligations of a landlord, then it must be given the appropriate effect, that is to say, it must be treated as a tenancy agreement as distinct from a mere licence. In the agreement in the Addiscombe case it was by no means clear until the whole of the document had been narrowly examined that exclusive possession was granted by the agreement. In the present case it is clear that exclusive possession was granted and so much is conceded. In these circumstances it is unnecessary to analyse minutely the detailed rights and obligations contained in the agreement. In the Addiscombe case Jenkins LJ referred at p 528 to the observations of Denning LJ in Errington v Errington and Woods to the effect that ‘the test of exclusive possession is by no means decisive’. Jenkins LJ continued: I think that wide statement must be treated as qualified by his observations in Facchini v Bryson [1952] 1 TLR 1386, 1389; and it seems to me that, save in exceptional cases of the kind mentioned by Denning LJ in that case, the law remains that the fact of exclusive possession, if not decisive against the view that there is a mere licence, as distinct from a tenancy, is at all events a consideration of the first importance. Exclusive possession is of first importance in considering whether an occupier is a tenant; exclusive possession is not decisive because an occupier who enjoys exclusive possession is not necessarily a tenant. The occupier may be a lodger or service occupier or fall within the other exceptional categories mentioned by Denning LJ in Errington v Errington and Woods [1952] 1 KB 290. In Isaac v Hotel de Paris Ltd [1960] 1 WLR 239 an employee who managed a night bar in a hotel for his employer company which held a lease of the hotel negotiated ‘subject to contract’ to complete the purchase of shares in the company and to be allowed to run the nightclub for his own benefit if he paid the head rent payable by the company for the hotel. In the expectation that the negotiations ‘subject to contract’ would ripen into a binding agreement, the employee was allowed to run the nightclub and he paid the company’s rent. When negotiations broke down the employee claimed unsuccessfully to be a tenant of the hotel company. The circumstances in which the employee was allowed to occupy the premises showed that the hotel company never intended to accept him as a tenant and that he was fully aware of that fact. This was a case, consistent with the authorities cited by Lord Denning in giving the advice of the Judicial Committee of the Privy Council, in which the parties did not intend to enter into contractual relationships unless and until the negotiations ‘subject to contract’ were replaced by a binding contract. In Abbeyfield (Harpenden) Society Ltd v Woods [1968] 1 WLR 374 the occupier of a room in an old people’s home was held to be a licensee and not a tenant. Lord Denning MR at p 376 said: the modern cases show that a man may be a licensee even though he has exclusive possession, even though the word ‘rent’ is used, and even though the word ‘tenancy’ is used. The court must look at the agreement as a whole and see whether a tenancy really was intended. In this case there is, besides the one room, the provision of services, meals, a resident housekeeper, and such like. The whole arrangement was so personal in nature that the proper inference is that he was a licensee. As I understand the decision in the Abbeyfield case the court came to the conclusion that the occupier was a lodger and was therefore a licensee not a tenant. In Shell-Mex & BP Ltd v Manchester Garages Ltd [1971] 1 WLR 612 the Court of Appeal, after carefully examining an agreement whereby the defendant was allowed to use a petrol company’s filling station for the purposes of selling petrol, came to the conclusion that the agreement did not grant exclusive possession to the defendant, who was therefore a licensee. At p 615 Lord Denning MR in considering whether the transaction was a licence or a tenancy said that: Broadly speaking, we have to see whether it is a personal privilege given to a person (in which case it is a licence), or whether it grants an interest in land (in which case it is a tenancy). At one time it used to be thought that exclusive possession was a decisive factor. But that is not so. It depends on broader considerations altogether. Primarily on whether it is personal in its nature or not: see Errington v Errington and Woods. In my opinion the agreement was only ‘personal in its nature’ and created ‘a personal privilege’ if the agreement did not confer the right to exclusive possession of the filling station. No other test for distinguishing between a contractual tenancy and a contractual licence appears to be understandable or workable. Heslop v Burns [1974] 1 WLR 1241 was another case in which the owner of a cottage allowed a family to live in the cottage rent free and it was held that no tenancy at will had been created on the grounds that the parties did not intend any legal relationship. My noble and learned friend Lord Scarman, then Scarman LJ, cited with approval at p 1252 the statement by Denning LJ in Facchini v Bryson [1952] 1 TLR 1386, 1389 that: In all the cases where an occupier has been held to be a licensee there has been something in the circumstances, such as a family arrangement, an act of friendship or generosity, or such like, to negative any intention to create a tenancy. In Marchant v Charters [1977] 1 WLR 1181 a bed-sitting room was occupied on terms that the landlord cleaned the room daily and provided clean linen each week. It was held by the Court of Appeal that the occupier was a licensee and not a tenant. The decision in the case is sustainable on the grounds that the occupier was a lodger and did not enjoy exclusive possession. But at p 1185 Lord Denning MR said: What is the test to see whether the occupier of one room in a house is a tenant or a licensee? It does not depend on whether he or she has exclusive possession or not. It does not depend on whether the room is furnished or not. It does not depend on whether the occupation is permanent or temporary. It does not depend on the label which the parties put on it. All these are factors which may influence the decision but none of them is conclusive. All the circumstances have to be worked out. Eventually the answer depends on the nature and quality of the occupancy. Was it intended that the occupier should have a stake in the room or did he have only permission for himself personally to occupy the room, whether under a contract or not? In which case he is a licensee. But in my opinion, in order to ascertain the nature and quality of the occupancy and to see whether the occupier has or has not a stake in the room or only permission for himself personally to occupy, the court must decide whether upon its true construction the agreement confers on the occupier exclusive possession. If exclusive possession at a rent for a term does not constitute a tenancy then the distinction between a contractual tenancy and a contractual licence of land becomes wholly unidentifiable. In Somma v Hazelhurst [1978] 1 WLR 1014, a young unmarried couple H and S occupied a double-bed sitting-room for which they paid a weekly rent. The landlord did not provide services or attendance and the couple were not lodgers but tenants enjoying exclusive possession. But the Court of Appeal did not ask themselves whether H and S were lodgers or tenants and did not draw the correct conclusion from the fact that H and S enjoyed exclusive possession. The Court of Appeal were diverted from the correct inquiries by the fact that the landlord obliged H and S to enter into separate agreements and reserved power to determine each agreement separately. The landlord also insisted that the room should not in form be let to either H or S or to both H and S but that each should sign an agreement to share the room in common with such other persons as the landlord might from time to time nominate. The sham nature of this obligation would have been only slightly more obvious if H and S had been married or if the room had been furnished with a double bed instead of two single beds. If the landlord had served notice on H to leave and had required S to share the room with a strange man, the notice would only have been a disguised notice to quit on both H and S. The room was let and taken as residential accommodation with exclusive possession in order that H and S might live together in undisturbed quasi-connubial bliss making weekly payments. The agreements signed by H and S constituted the grant to H and S jointly of exclusive possession at a rent for a term for the purposes for which the room was taken and the agreement therefore created a tenancy. Although the Rent Acts must not be allowed to alter or influence the construction of an agreement, the court should, in my opinion, be astute to detect and frustrate sham devices and artificial transactions whose only object is to disguise the grant of a tenancy and to evade the Rent Acts. I would disapprove of the decision in this case that H and S were only licensees and for the same reason would disapprove of the decision in Aldrington Garages|page:130| Ltd v Fielder (1978) 37 P & CR 461 and Sturolson & Co v Weniz (1984) 272 EG 326, [1984] 2 EGLR 121. In the present case the Court of Appeal held that the agreement dated March 7 1983 only created a licence. Slade LJ accepted that the agreement and in particular clause 3 of the agreement ‘shows that the right to occupy the premises conferred on the defendant was intended as an exclusive right of occupation, in that it was thought necessary to give a special and express power to the plaintiff to enter’. Before your Lordships it was conceded that the agreement conferred the right of exclusive possession on Mrs Mountford. Even without clause 3 the result would have been the same. By the agreement Mrs Mountford was granted the right to occupy residential accommodation. The landlord did not provide any services or attendance. It was plain that Mrs Mountford was not a lodger. Slade LJ proceeded to analyse all the provisions of the agreement, not for the purpose of deciding whether his finding of exclusive possession was correct, but for the purpose of assigning some of the provisions of the agreement to the category of terms which he thought are usually to be found in a tenancy agreement and of assigning other provisions to the category of terms which he thought are usually to be found in a licence. The lord justice may or may not have been right that in a letting of a furnished room it was ‘most unusual to find a provision in a tenancy agreement obliging the tenant to keep his rooms in a ‘tidy condition”. If the lord justice was right about this and other provisions there is still no logical method of evaluating the results of his survey. Slade LJ reached the conclusion that ‘the agreement bears all the hallmarks of a licence, rather than a tenancy, save for the one important feature of exclusive occupation’. But in addition to the hallmark of exclusive occupation of residential accommodation there were the hallmarks of weekly payments for a periodical term. Unless these three hallmarks are decisive, it really becomes impossible to distinguish a contractual tenancy from a contractual licence save by reference to the professed intention of the parties or by the judge awarding marks for drafting. Slade LJ was finally impressed by the statement at the foot of the agreement by Mrs Mountford: ‘I understand and accept that a licence in the above form does not and is not intended to give me a tenancy protected under the Rent Act.’ The lord justice said that ‘it seems to me that if the defendant is to displace the express statement of intention embodied in the declaration, she must show that the declaration was either a deliberate sham or at least an inaccurate statement of what was the true substance of the real transaction agreed between the parties’. My Lords the only intention which is relevant is the intention demonstrated by the agreement to grant exclusive possession for a term at a rent. Sometimes it may be difficult to discover whether on the true construction of an agreement, exclusive possession is conferred. Sometimes it may appear from the surrounding circumstances that there was no intention to create legal relationships. Sometimes it may appear from the surrounding circumstances that the right to exclusive possession is referable to a legal relationship other than a tenancy. Legal relationships to which the grant of exclusive possession might be referable and which would or might negative the grant of an estate or interest in the land include occupancy under a contract for the sale of the land, occupancy pursuant to a contract of employment or occupancy referable to the holding of an office. But where as in the present case the only circumstances are that residential accommodation is offered and accepted with exclusive possession for a term at a rent, the result is a tenancy. The position was well summarised by Windeyer J sitting in the High Court of Australia in Radaich v Smith [1959] 101 CLR 209 at p 222 where he said: What then is the fundamental right which a tenant has that distinguishes his position from that of a licensee? It is an interest in land as distinct from a personal permission to enter the land and use it for some stipulated purpose or purposes. And how is it to be ascertained whether such an interest in land has been given? By seeing whether the grantee was given a legal right of exclusive possession of the land for a term or from year to year or for a life or lives. If he was, he is a tenant. And he cannot be other than a tenant, because a legal right of exclusive possession is a tenancy and the creation of such a right is a demise. To say that a man who has, by agreement with a landlord, a right of exclusive possession of land for a term is not a tenant is simply to contradict the first proposition by the second. A right of exclusive possession is secured by the right of a lessee to maintain ejectment and, after his entry, trespass. A reservation to the landlord, either by contract or statute, of a limited right of entry, as for example to view or repair, is, of course, not inconsistent with the grant of exclusive possession. Subject to such reservations, a tenant for a term or from year to year or for a life or lives can exclude his landlord as well as strangers from the demised premises. All this is long established law: see Cole on Ejectment (1857) pp 72, 73, 287, 458. My Lords I gratefully adopt the logic and the language of Windeyer J. Henceforth, the courts which deal with these problems will, save in exceptional circumstances, only be concerned to inquire whether as a result of an agreement relating to residential accommodation the occupier is a lodger or a tenant. In the present case I am satisfied that Mrs Mountford is a tenant, that the appeal should be allowed, that the order of the Court of Appeal should be set aside and that the respondent should be ordered to pay the costs of the appellant here and below. LORDS SCARMAN, KEITH OF KINKEL, BRIDGE OF HARWICH and BRIGHTMAN agreed that the appeal should be allowed for the reasons given in the speech by Lord Templeman and did not add anything further.