Vesely v Levy & Ors

Whether residential occupation creates a tenancy depends objectively on the purpose, terms and surrounding circumstances. Exclusive possession is necessary but does not by itself establish a tenancy. The description of a payment is not decisive, and rent need not be reserved or paid in money. However, a rent-free or contribution-based arrangement will not create a tenancy where the objective inference is that the parties intended only to share household expenses and did not intend a landlord-and-tenant relationship. On costs, a trial judge must take account of the parties’ success on the real issues. An order may be disturbed where it is plainly wrong or reflects an error of principle.

The appellant occupied rooms in Flat 4, owned by trustees for the benefit of Marian Miller. The trial judge found that a December 1996 arrangement involved shared household expenses, not rent, and created no tenancy. The appellant later moved to Flat 1 and was granted a fixed-term tenancy in 2001. The central issue was whether the earlier arrangement was an assured tenancy which, under the agreed effect of the Housing Act 1996 and the Housing Act 1988, caused the later tenancy to be an assured tenancy rather than an assured shorthold tenancy. The trustees also challenged the trial judge’s costs order.

1. The appeal on tenancy status was dismissed. The question whether the December 1996 arrangement created a tenancy had to be determined objectively by considering its purpose, terms and surrounding circumstances, applying Street v Mountford [1985] 1 AC 809.

2. Exclusive possession is necessary for a tenancy but is not sufficient. A lodger may have exclusive possession of rooms without becoming a tenant. The court must also identify the true basis of any payment. Calling a payment rent, or using another description, is not conclusive; the relevant question is whether it was made for exclusive use and occupation. Rent may be provided in kind, and the reservation of rent is not essential to a tenancy: Ashburn Anstalt v Arnold [1989] Ch 1.

3. The objective inference from the evidence was that the parties intended Miss Vesely and Marian to continue sharing a household and that Miss Vesely would contribute £65 weekly to their joint expenditure. The payment was not intended as rent and was not payable to the trustees. The trust’s purpose, Marian’s occupation as beneficiary, the friendship between the women, the circumstances of Miss Vesely’s occupation and the continuing uncertainty about future arrangements all supported the conclusion that no tenancy had been granted. The judge had ample evidence and gave adequate reasons.

4. The trial judge’s costs discretion had been exercised on a wrong basis. The trustees’ failure to obtain possession did not justify making them bear 95% of the costs when they had succeeded on the principal tenancy-status issue and on the appellant’s counterclaim. The court may intervene where a costs order is plainly wrong or reflects an error of principle. Permission to appeal on costs was granted and that appeal was allowed. A proportionate order was substituted, in substance leaving no order as to costs. Arden LJ and Jacob LJ agreed.

• Court of Appeal (Civil Division): On 27 April 2007, dismissed the appeal against the declaration that the appellant was a statutory periodic tenant holding over after an assured shorthold tenancy. Permission to appeal on costs was granted and the costs appeal was allowed.
• Central London Civil Justice Centre: On 8 September 2006, HHJ Faber found that no assured tenancy had been created before 28 February 1997, refused possession, and ordered the trustees to pay 95% of the costs.