40 Years On from Street v Mountford: The Decision and its Impact

Introduction

A lot has changed since the judgment in Street v Mountford [1]was handed down. The most immediate change took place right after the decision, with legal practitioners scrambling to devise new ways to circumvent the Rent Acts. Thus it was that in Antoniades v Villier[2], the House of Lords confronted (and overcame) the express reservation of exclusive possession, that important aspect of a tenancy singled out in Street[3]. The very next year, Thatcher’s Housing Act 1988 came into force,[4] drastically slashing tenancy protections and rent control. This rendered it broadly unnecessary to attempt to ‘contract out’ of the Rent Acts, but important distinctions between tenancies and licenses endure. Importantly, there are implied terms in tenancy contracts imposed by legislation.[5] Furthermore, certain offences relating to the renting of property require the finding that a tenancy was in fact granted.[6] Lastly, a licensee is generally easier to evict than a tenant.[7] Tenancy law will be of increasing relevance as home ownership creeps out of reach of the younger generation[8]. It is therefore helpful to explore some of the ways in which Street impacted and continues to impact judicial decision-making.

1. Case Analysis

1.1. The Facts

On 7 March 1983, Wendy Mountford entered into an agreement with Roger Street to give her the right to occupy two rooms in the latter’s property. There was a provision in the contract indicating that she understood it gave her a licence to occupy the rooms rather than a tenancy. Regardless, she subsequently applied to the rent officer under the Rent Acts for the determination of a fair rent. The issue of whether the Rent Acts applied took the parties all the way to the House of Lords, where Lord Templeman unequivocally settled the ongoing debate about the nature of tenancies by identifying ‘exclusive possession’, ‘for a term’, and ‘at a rent’ as the identifiers of a tenancy[9] - absent this, a legal agreement granting a right to reside in a property was a licence.[10]

1.1. Street and Precedent

Street settled a long-standing debate about how tenancies are to be identified.[11] In Errington v Errington,[12] Lord Denning doubted exclusive possession as an identifier of tenancies. Examining the reasoning in Howard v Shaw,[13] he voiced support for Lord Abinger’s dissent that exclusive possession could not be a conclusive indicator of a tenancy. To substantiate this reasoning, he cited several cases where exclusive possession was found but a tenancy was not. Notable cases include Booker v Palmer,[14] where there was no intention to create legal relations, and Marcroft Wagons Ltd v Smith,[15] where an owner permitting a shop manager to live above a shop granted a license rather than a tenancy. From the common decisive factor between these cases, Lord Denning drew the entirely logical conclusion that the court had to have regard to the circumstances and conduct of the parties to determine whether they intended to grant a tenancy.[16]

 

However, this brought the analysis of tenancy agreements squarely within the constraints of contract law. This, in turn, made it hard for courts to act in the spirit of the Rent Acts. Murray v Murray held that the professed intention of the parties that the defendant be a licensee took priority over the granting in fact of all the elements of the tenancy.[17] Though the House of Lords in Street did not analyse the statute, the provisions of the Rent Act 1977, especially the introduction of rent limits,[18] the protection of tenancies,[19] and the right of tenants to apply for the registration of a fair rent,[20] were all clearly intended to protect residential tenants, who were usually the weaker parties to a transaction. Permitting landlords to circumvent these protections by imposing on tenants labels which fell outside the statute without actually changing anything in substance would have gone against the grain of what Parliament intended. In other words, the ruling in Street could almost be said to have been mandated by statute. s22(1) of the 1977 Act sets out that ‘Where a tenant has the exclusive possession of any accommodation… the separate accommodation shall be deemed to be… let on a protected tenancy…’.[21] This concern was no doubt on Lord Templeman’s mind when he issued his rallying cry for courts to be on guard to detect ‘sham devices’ which were designed to evade the Rent Acts.

 

Lord Templeman drew clear and detailed lines around the precedent cited against the proposition that exclusive possession was not a conclusive indicator of a tenancy. He characterised the cases cited by Lord Denning in Errington as exceptions rather than demonstrations of principle,[22] so the grant of exclusive possession would not create a tenancy where a servant is permitted to stay at a place of work by an employer to perform work (Smith[23]), where there is no intention to create legal relations at all (Palmer[24]), and where the owner had no power to grant a tenancy at all.[25] A tenancy, like a contract, was therefore part of a class of legal objects which come into existence as the sum of an agreement’s parts rather than something which may be granted or not by simply professing the intention to the desired effect. Actual intention to grant a tenancy is neither necessary nor sufficient - what matters is what the agreement grants in fact. Interestingly, both Lord Denning and Lord Templeman agreed that the label of the parties could be disregarded - Lord Templeman’s ‘words alone do not suffice’[26] can be seen to be a firmer stance against the selective labelling of the bargain than Lord Denning’s ‘words alone may not suffice’.[27] The crucial difference between them is that Lord Denning leaves room for the label which the parties place on their bargain to characterise it as part of the circumstances surrounding the agreement, whereas Lord Templeman leaves no such room at all, instead preferring to have regard to what rights are granted by the agreement in fact.[28] This made it much harder for solicitors to prevent the granting of a tenancy, though as the legacy of Street shows, they did not give up.

 

2.The Legacy of Street

2.1. The interpretation of tenancy agreements

The call in Street for courts to be vigilant as to ‘sham devices’ used to disguise the grant of a tenancy has survived the obsolescence of the Rent Acts and the decrease in reasons for landlords to avoid granting tenancies following the Housing Act 1988. Street provided courts with a strong basis for continuing to uphold protections for residents in tenant-like situations (e.g., Villiers[29]). In Villiers, a young unmarried couple entered into separate agreements, expressed as separate licences, to occupy a small flat. The agreement expressly provided that the landlord was not willing to grant exclusive possession and provided that the couple could be made to share the flat if necessary. Even with the authority of Street, constraints on the rules of contractual interpretation[30] could not possibly permit the finding of a grant of exclusive possession when the words unambiguously provided the opposite.[31] Nevertheless, the House of Lords cleverly circumvented this limitation. They pointed to the fact that the parties had assumed responsibility for all repairs and outgoings, and that the flat was manifestly unsuitable for more than 2 people to occupy. They held that there was an ‘air of total unreality’[32] about reading the agreements as separate licenses.[33] The House of Lords in Villiers therefore proceeded by finding parts of the agreement to be a ‘sham’, but extended the principle such as to give the common law the ability to override even the express reservation of an agreement. This, again, proceeded on the premise of an imbalance of power between landlord and tenant. Lord Templeman explicated his concern in Street that allowing parties to ‘contract out’ of the Rent Acts in any way would make them a ‘dead letter’.[34] Villiers therefore placed the written intentions of parties even further in the back seat in preference for what was actually granted by the agreement in reality.

AG Securities was significant as a reminder of the importance of tenancies as proprietary rights and that of exclusive possession to the maintenance of that right. Four people were granted, at separate times under separate agreements, the right to reside in a flat. The agreement provided that no exclusive possession was granted to any party, and it was apparently the practice to rotate between bedrooms as people staying in the flat came and went.[35] At the Court of Appeal, it was held that the agreements were being terminated and re-made each time so as to give the parties exclusive possession of the new bedrooms.[36] This was rightly dismissed as unrealistic at the House of Lords. The argument would have introduced considerable uncertainty through granting courts the ability to effectively circumvent the need for exclusive possession of a room, without an express agreement, under certain circumstances. Thus, Street was qualified by the acknowledgment of certain ways to prevent the grant of a tenancy so long as the agreement reflected some genuine, substantial difference in circumstance between the right-holder in question and a bona fide tenant.

 

2.2. Trouble with Street

While Street can properly be celebrated in some ways as a win for tenant protection at common law, the strictness of the decision presents a double-edged sword. It is true that Lord Templeman expressly acknowledged the possibility of an occupier enjoying exclusive possession being a ‘lodger’, but subsequent case law has not committed to this exception. Organisations offering social housing as part of their statutory welfare obligations or for charitable purposes could unexpectedly find themselves limited in their ability to remove a beneficiary if they had accidentally granted them the characteristics of a tenancy. Bruton v London and Quadrant Housing Trust[37] controversially held that even someone without a proprietary right could, because of Street, grant a tenancy by estoppel. Mrockova lamented the lack of precision in the terminology employed in the decision with regards to the apparent speciation of types of exclusive possession.[38] Wonnacott expressed regret that a contractual formulation of estoppel had been superimposed onto a property law concept in an apparently haphazard fashion.[39]

 

2.3. The future

The distinction Street draws between a tenancy and a licence continues to be informative and is often used as a test for whether a tenancy has been established. In R v Adedeji & Adedeji,[40] a tenant of social housing convicted of unlawfully subletting the premises rented to her argued that no subletting had in fact occurred because exclusive possession had not been granted. The premises had allegedly been sublet to the defendant’s sister. The argument was that the defendant visiting the premises as a family member sometimes precluded a finding of exclusive possession, meaning that she could not have sublet the property. Unsurprisingly, Green LJ rejected this argument, particularly considering the defendant’s unqualified admission that she had in fact sublet the property. The distinction was also considered overly legalistic and fanciful. There was some room for exploring whether a very high frequency of visiting might be enough to be problematic for a finding of exclusive possession, but realistically if the activity must be called a visit, then the concept contains within it the notion that one is imposing on the status quo of exclusive possession. At any rate, this shows how the definitions set out in Street continue to be relevant across a broad range of fields of law. Given how important the distinction is, it seems unlikely that this will change.

However, the common may be turning away from the strictness with which the law around the time of Street would find tenancies. Bright has suggested that the ambit of Street was narrow, and that courts are now more willing to give effect to the bargains of parties.[41] The correctness of this suggestion is bolstered by two recent cases - Stewart[42] and Global 100 Limited v Laleva.[43] In Stewart, Ms Janet Watts was allocated an almshouse by a charity. The agreement provided that she could be requested to vacate the premises if found to be acting in an anti-social manner. Numerous warnings later, the charity served her with notice to quit. Watts appealed the order for possession on the basis, inter alia, that she was a tenant. This involved claiming that Lord Templeman’s dicta in Street that recipients of charity with exclusive possession were not tenants was wrong. Unsurprisingly, this argument was rejected by Sir Terence Etherton MR as being wholly unsupported by authority. He reminded us of the distinction set out in Radaich v Smith,[44] approved in Street,[45] between a legal right of exclusive possession and a personal right of exclusive occupation. The exceptional cases set out by Lord Templeman in Street were said to grant the latter, while a tenancy required the former.

This principle is carried on in Laleva. In that case, a property guardian company sought possession of some residential properties from an appointed guardian. In explaining his dismissal of the defendant’s appeal, Lewison LJ pointed to the ‘distinction between exclusive occupation and legal possession’[46] as an explanation of why Ms Laleva was not a tenant. Laleva also follows the trend set by Camelot Guardian Management v Khoo[47] in rejecting arguments that the agreement to not grant exclusive possession in property guardian situations was a sham to disguise the grant of a tenancy. This seems to be a shift away from Lord Templeman’s insistence that ‘If the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy…’[48]. The decisions in Khoo and Laleva, and possibly Stewart, all seem to more closely resemble Denning LJ’s preference for examining the intention of the contracting parties as to whether a tenancy was to be granted or not.

This all seems to point towards a shift away from Street. Regardless, this all appears to be confined to the commercial, or even specifically property guardian context, which seems like a sensible place for such a rule to operate given that it would be impossible to effectively operate a property guardian business otherwise.[49] Furthermore, Villiers sets out that courts should only look behind the parties’ written agreement to discover the ‘true agreement’ when there is an ‘air of unreality’ about the terms.[50] The agreements in Khoo and Laleva could not fairly have been said to be pretences nor artificial.

 

Conclusion

It remains to be seen whether the collection of cases mentioned above will pave the way for the broadening of the class of ‘exceptional circumstances’ in Street where granting all aspects of a tenancy does not give rise to one - what is clear is that the law has been on the move for some time now. Street can be said to have been the culmination of a century’s worth of debate over how to characterise tenancies, but it can also be said to be one link in a long line of cases which may be appealed to in determining the nature of an agreement granting a right to occupancy.

 

Endnotes:

[1]Street v Mountford [1985] AC 809 (HL)

[2] AG Securities v Vaughan; Antonaides v Villiers [1990] 1 AC 417 (HL)

[3] Street [1985] AC 809 (HL) 823

[4] Housing Act 1988, pt 5

[5] E.g. Landlord and Tenant Act 1985, ss9A(1), 11(1)

[6] E.g. Prevention of Social Housing Fraud Act 2013, s2(2)

[7] Watts v Stewart [2016] EWCA Civ 1247; [2018] Ch 423 (CA)

[8]  Claire Brader, ‘Housing needs of young people’, In Focus (House of Lords Library, 2024)

[9] Street [1985] AC 809 (HL) 825

[10] Ibid

[11] Stuart Bridge, ‘Street v Mountford (1985); AG Securities v Vaughan; Antonaides v Villiers (1988) Tenancies and Licenses: Halting the Revolution’ p181

[12] Errington v Errington [1952] 1 KB 290 (CA) 296-297

[13] (1841) 8 M & W 118.

[14] [1942] 2 All ER 674 (CA)

[15] [1951] 2 KB 496 (CA)

[16] (n 12) 298

[17] [1953] 1 QB 211 (QB)

[18] Rent Act 1977, pt 3

[19] Ibid, pt 7

[20] Ibid, pt 4

[21] Ibid, s22(1)

[22] Ibid, 821

[23] (n 16).

[24] (n 15).

[25] Street (n 1) 818

[26] Ibid, 821

[27] Errington (n 11)

[28] Bridge (n 9) 185

[29] (n 2)

[30] Lord Sumption, ‘A Question of Taste: The Supreme Court and the Interpretation of Contracts’ (Harris Society Annual Lecture 2017)

[31] Villiers (n 2) 468

[32] Ibid, 467

[33] Ibid, 467

[34] Ibid, 458

[35] Ibid, 425

[36] Ibid, 454

[37] [2000] 1 AC 406

[38] Natalie Mrockova ‘‘The Meaning of Exclusive Possession after Bruton’ [2021] Conv 183

[39] Mark Wonnacott ‘Where the law went wrong’ [2021] L & T Review 7

[40] [2019] EWCA Crim 804; [2019] 4 WLR 136 (CA)

[41] (n 8) 36-38

[42] (n 7)

[43] [2021] EWCA Civ 1835 (CA)

[44] (1959) 101 CLR 209 (HCA)

[45] (n 1).

[46] Laleva [2021] EWCA Civ 1835; [2022] 1 W.L.R. 1046 (CA) [40]

[47] [2018] EWHC 2296; [2019] H.L.R. 26 (QB)

[48] Street (n 1)) 819

[49] Khoo (n 50) [34]

[50] (n 2)

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