A lease is a grant of exclusive possession of land or property. A licence is a permission to do something on the licensors’ land or property.
The distinction is important because different legal rights and protections attached to leases and licences. A document is not simply comprised of the label that is put upon it. The courts look into the terms of the agreement. Therefore, they look at the substance and intentions of the parties in order to analyse the arrangements between them.
In the recent matter of Watts v Stewart and others  EWCA Civ 1247 the Court of Appeal was asked to consider whether, Mrs Watts a resident of an almhouse, was a tenant or licencee.
Mrs Watts had signed a letter of appointment with the charity when she took up residence. The terms of the agreement referred to the conditions of tenancy. Mrs Watts was served a notice to quit the property This was because of her antisocial behavior. Legal proceedings were also issued for possession.
The Court of Appeal held that Mrs Watts did not have exclusive possession of the property. This was because she was a beneficiary under a charitable trust. She was therefore not a tenant.
Mrs Watts also argued that an earlier decision in the case of Gray v Taylor (1998), which held that an occupier of an almhouse was not a tenant for legal purposes, was in breach of the European Convention on Human Rights. The Court of Appeal disagreed concluding that denial of security of tenure to almhouse persons was a proportionate means of achieving a legitimate aim.
The final argument that the proceedings were charity proceedings and had to be authorised by the Charity Commission were also dismissed. The Court of Appeal held that the proceedings concerned internal administrative matters of the charity and were not charitable proceedings.
The outcome of this matter is of particular importance as the decision made shows that courts will give consideration towards the substance of a document as opposed to any labels it refers to. Therefore, regardless of whether document is labelled as a lease, it will not be treated as such if its contents show it to be a licence and vice versa.
Please note that the above does not constitute legal advice, for further information please contact Nath Solicitors.