Street v Mountford is a leading decision of the House of Lords on English land law, dealing with the distinction between a lease and a licence. The case is significant because it clarified the legal principles used to determine whether an occupier of property holds a tenancy or merely a licence.
This distinction was crucial due to the statutory protections available only to tenants under rent control legislation. The judgement focused on the substance of the rights granted rather than the labels used by the parties, reaffirming that exclusive possession is the defining feature of a lease.
Background and Importance of Street v Mountford Case
The Street v Mountford case arose at a time when landlords commonly used licence agreements to avoid the application of rent control statutes. The Rent Act 1977 applied only to leases and granted tenants the right to a regulated or fair rent, as well as greater security of tenure.
A licence, by contrast, did not attract such statutory protection. The dispute in Street v Mountford therefore raised an important question: whether a court should accept the parties’ expressed intention to create a licence, or instead examine the true legal effect of the rights granted under the agreement.
Beyond rent control, the case also had wider importance because a lease has proprietary status. This means that a lease can bind third parties, whereas a licence is merely a personal right between the parties. The outcome therefore had implications not only for landlord and tenant relationships, but also for the broader understanding of estates and interests in land.
Facts of Street v Mountford Case
On 7 March 1983, Mr Roger Street, a solicitor based in Bournemouth, permitted Mrs Wendy Mountford to occupy rooms 5 and 6 at No 5 St Clement’s Gardens, Boscombe. The occupation was granted in return for a weekly payment of £37, described as a ‘licence fee’. The agreement stated that the arrangement was terminable on fourteen days’ notice.
Mrs Mountford signed a written document described as a ‘licence agreement’. This document included a declaration that the arrangement did not create a tenancy and that the Rent Act 1977 would not apply.
At the time, the Rent Act 1977 required landlords of residential property to accept a fair rent determined by an independent officer or tribunal and imposed stricter notice requirements for termination, but only if the occupier held a lease rather than a licence.
Despite the wording of the agreement, Mrs Mountford argued that she had been granted a lease. At first instance, the judge accepted this argument and held that Mrs Mountford did have a lease. Mr Street appealed this decision.
Issue
The central legal issue in Street v Mountford was whether the agreement created a tenancy (lease) or merely a licence. If the agreement was only a licence, Mrs Mountford could not rely on the Rent Act 1977.
Mr Street argued that both parties had intended to create a licence, as clearly stated in the written agreement. He maintained that the court should respect this expressed intention, particularly where the agreement was unambiguous in its terms.
Mrs Mountford, on the other hand, argued that the true nature of the rights granted should determine the legal classification of the agreement. According to this view, the substance of the arrangement was more important than the label attached to it.
Decision of the Court of Appeal
The Court of Appeal allowed Mr Street’s appeal. It held that the written agreement clearly demonstrated that both parties intended to create only a personal right of occupation rather than a tenancy. Slade LJ stated that the agreement manifested “the clear intention of both parties that the rights granted are to be merely those of a personal right of occupation and not those of a tenant”.
The Court of Appeal therefore concluded that no lease had been created and that the arrangement was a licence. Mrs Mountford then appealed to the House of Lords.
Street v Mountford Judgement
The House of Lords unanimously allowed the appeal and restored the decision that Mrs Mountford had a lease. The leading judgement was delivered by Lord Templeman. The House of Lords rejected the reasoning of the Court of Appeal, holding that the legal effect of the agreement could not be altered by the labels or declarations used by the parties.
Lord Templeman began by explaining that a tenancy is a term of years absolute under the common law and the Law of Property Act 1925, section 205(1)(xxvii). He traced the historical development of leasehold interests, noting that leaseholds became legal estates through statutory developments such as the Statute of Gloucester 1278 and the Recoveries Act 1529.
It was conceded in the case that Mrs Mountford had been granted exclusive possession of the rooms. Lord Templeman explained that where exclusive possession is granted, the landlord’s right of entry is limited to viewing, repairing, and similar purposes. These limited rights do not negate exclusive possession.
Exclusive Possession and Residential Accommodation
Lord Templeman stated that, in the context of residential accommodation, determining whether exclusive possession has been granted is usually straightforward. An occupier of residential accommodation at a rent for a term must be either a tenant or a lodger. The occupier is a lodger where the landlord provides attendance or services that require unrestricted access to the premises.
In explaining this distinction, Lord Templeman referred to the decision in Allan v Liverpool Overseers, where it was said that a lodger cannot call the premises his own because the landlord retains occupation through the presence of services and control. In contrast, where no such services or attendance are provided, the occupier enjoys exclusive possession and is therefore a tenant.
In the present case, Mr Street did not provide attendance or services requiring unrestricted access to the rooms. As a result, the arrangement could not properly be described as a lodging arrangement.
Intention and Freedom of Contract
One of the key arguments raised on behalf of Mr Street was that recognising a tenancy would interfere with the parties’ freedom of contract. Lord Templeman rejected this submission. He accepted that both parties were free to negotiate and agree upon the terms of occupation, and that they were free to decide whether or not to contract at all.
However, he explained that the legal consequences of an agreement must be determined by its effect rather than by the parties’ description of it. If an agreement satisfies all the requirements of a tenancy, it produces a tenancy as a matter of law. The parties cannot change this outcome by asserting that they intended to create only a licence.
Lord Templeman illustrated this point by stating that a five-pronged implement for digging remains a fork, even if the person who made it insists that it is a spade. This analogy emphasised that substance prevails over form.
Relevance of the Rent Acts
Lord Templeman also stated that the Rent Acts were irrelevant to determining whether an agreement created a tenancy or a licence. Just as the parties’ professed intention could not alter the effect of the agreement, neither could statutory consequences influence the legal classification of the rights granted. The question was simply whether the agreement demonstrated an intention to grant exclusive possession for a term at a rent.
Conclusion
The decision in Street v Mountford firmly established that the presence of exclusive possession for a term at a rent creates a tenancy as a matter of law. Labels such as ‘licence’ are not decisive. The case reaffirmed that courts must look at the substance of the rights granted rather than the form of the agreement.
By doing so, Street v Mountford provided clarity and certainty in the law of landlord and tenant, ensuring that statutory protections cannot be avoided through artificial drafting.