Bruton v. London and Quadrant Housing Trust

The House of Lords held that an agreement which grants exclusive possession for a term in return for payment is a tenancy notwithstanding that it is labelled a licence and notwithstanding that the grantor lacks a proprietary estate out of which a legal leasehold could traditionally be carved. The court applied the principle in Street v. Mountford that exclusive possession is the key characteristic of a lease and rejected arguments that the charitable status of the landlord, the existence of an underlying licence from the council, or the parties' expressed intention could convert an agreement conferring exclusive possession into a mere licence. The majority also rejected the Court of Appeal's requirement that a tenancy must create a legal estate binding the world or depend upon an estoppel to create a tenancy where the grantor lacked title. Section 11 of the Landlord and Tenant Act 1985 (implied repairing obligations) therefore applied.

The appellant, Mr Bruton, occupied a flat owned by Lambeth Borough Council but occupied by the London and Quadrant Housing Trust under a licence from the council. The Trust granted Mr Bruton an agreement described as a weekly licence. He paid a weekly sum and was given exclusive possession subject only to limited rights of entry. Mr Bruton sued in the county court seeking to enforce statutory implied repairing covenants said to arise under section 11 of the Landlord and Tenant Act 1985. The county court judge directed and determined a preliminary issue that the agreement was a licence. The Court of Appeal ([1998] Q.B. 834) affirmed that decision by a majority (Millett and Kennedy L.JJ; Sir Brian Neill dissenting). The matter came to the House of Lords on appeal.

The central legal issue was whether the agreement created a tenancy or merely a licence, and in particular whether the absence of any proprietary estate in the Trust or an agreement with the council that no tenancy would be granted could prevent the agreement being a tenancy. The House considered the effect of Street v. Mountford and related authorities, the relevance of "surrounding circumstances", and the argument that a tenancy required the creation of a legal estate or, alternatively, an estoppel where the grantor lacked title.

The House held that the agreement gave a right to exclusive possession and therefore prima facie created a tenancy; there were no special circumstances to displace that characterisation. It rejected the Court of Appeal's additional requirement that a tenancy must create a proprietary estate binding the world and explained that the legal character of the contract determines the relationship between the parties; the absence of a legal estate in the grantor may affect rights against third parties but does not change the nature of the relationship between the parties. The House therefore allowed the appeal and held that the implied repairing obligations under section 11 applied. The Lords noted concerns about the practical consequences for bodies housing the homeless but found these did not alter the legal characterisation.

Appeal allowed. The agreement conferred exclusive possession and therefore created a tenancy for the purposes of the Landlord and Tenant Act 1985; the absence of a proprietary estate in the grantor does not prevent the agreement from being a tenancy and the Court of Appeal's additional requirement that a tenancy must create a legal estate binding the world was rejected.

County Court (Lambeth) – preliminary issue tried and judge declared agreement a licence; Court of Appeal affirmed the county court decision ([1998] Q.B. 834) by a majority (Kennedy and Millett L.JJ; Sir Brian Neill dissenting); House of Lords allowed the appeal ([1999] UKHL 26).