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Licences

This page deals with the distinction between leases and licences in the commercial context; and the termination of licences.

The two principal commercial situations in which the distinction between a lease and a licence has been discussed is that of advertising hoardings and car parking spaces. See also the Chattels and fixtures page in relation to beach huts.


Advertising hoardings

Clear Channel UK Ltd v Manchester City Council
[2005] EWCA Civ 1304.

Facts

Agreement to allow a company to erect and maintain 13 large advertising displays at various prominent sites in Manchester owned by the Council.

Each advertising display consisted of a substantial superstructure in the shape of a large 'M'. The superstructure was fixed to a rectangular concrete base which was embedded in the ground. The position where the base of each hoarding should go was marked out by agreement on the ground. The company argued that on its true construction the agreement created a tenancy of those areas: that is to say, a tenancy of the land occupied by the concrete bases.

The issue: Whether the effect of the contract was to grant the company a tenancy or merely a licence?

Held:

Licence.

As was conceded by counsel for the company:
    "..it is of the essence of a right of exclusive possession, and hence of a tenancy, that the area or areas of land over which the right is said to exist should be capable of precise identification at the date when the right is said to be created. Accordingly if the Agreement, on its true construction, does not sufficiently identify the land in respect of which a tenancy is said to have been created, the case for a tenancy must fail."
In upholding the decision of the first instance judge the CA agreed that "the Sites" mentioned in the agreement were not the areas of the concrete bases of the Ms, but larger undefined areas of land owned by the council. This prevented the agreements from being a tenancy. That was enough to dispose of the appeal.

However, the agreement also contained a term that stated:
    "This Agreement shall constitute a licence in respect of each Site and confers no tenancy on [the company] and possession of each Site is retained by [the Council] subject however to the rights and obligations created by this Agreement".
In relation to that clause Parker, LJ, at the end of his judgment said this:
    "28. I venture to make one additional comment, however. I find it surprising and (if I may say so) unedifying that a substantial and reputable commercial organisation like Clear Channel, having (no doubt with full legal assistance) negotiated a contract with the intention expressed in the contract.. that the contract should not create a tenancy, should then invite the Court to conclude that it did.

    29. In making that comment I intend no criticism whatever of Mr McGhee, who sought valiantly to make bricks without straw. Nor, of course, do I intend to cast any doubt whatever on the principles established in Street v. Mountford. On the other hand the fact remains that this was a contract negotiated between two substantial parties of equal bargaining power and with the benefit of full legal advice. Where the contract so negotiated contains not merely a label but a clause which sets out in unequivocal terms the parties' intention as to its legal effect, I would in any event have taken some persuading that its true effect was directly contrary to that expressed intention. In the event, however, as the judge so clearly demonstrated, the case admits of only one result."
Comment: It is important not to read too much into these final comments. They do not mean that inserting a clause stating that the agreement constitutes a licence will be conclusive. That was not the basis of the decision and as Parker LJ makes clear the CA was not seeking to undermine the principles set out in Street v Mountford


Car parks

In National Car Parks Ltd v Trinity Development Co. (Banbury) Ltd [2001] EWCA Civ 1686; [2001] L&TR 33 (CA) it was held that the principles of Street v Mountford [1985] UKHL 4 apply to business premises. The essential consideration is whether or not the occupier has been granted exclusive possession. However, the fact that the parties have called the document a licence is a factor that can be taken into account when deciding whether or not exclusive possession has been granted. See above in relation to "advertising hoardings".

Pankhania v Hackney LBC [2002] EWHC 2441 (Ch) was another car park case in which the court held that there was a tenancy notwithstanding that it was called a licence. The Street v Mountford principles were discussed.

For a discussion as to whether or not a car parking space can amount to an easement click here.



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