Leases, Licencees, and Discrimination in the Court of Appeal
9 May 2017

Leases, Licencees, and Discrimination in the Court of Appeal

Robert Dunn examines the case of Watts v Stewart & Others [2016] EWCA Civ 1247 in which the Court of Appeal explored the distinction between a lease and a licence in the context of the occupation of almshouses, and whether an occupant could rely upon Articles 8 and 14 of the ECHR to protect their position.


Mrs Watts was a resident in an almshouse. She was allocated her accommodation by the Ashtead United Charity pursuant to the terms of an Appointment Letter dated 29th September 2004, which Mrs Watts signed. Unfortunately however, Mrs Watts was not the textbook neighbour. Following accusations of spitting, throwing rubbish out of windows, singly loudly, running the taps all night, and of smearing her bins with ‘various substances’, the charity issued possession proceedings [17].

The District Judge hearing the matter ordered a trial of a preliminary issue as to the legal basis upon which Mrs Watts occupied the property; was it under a lease, or a mere licence? The District Judge concluded that ‘Mrs Watts occupies the Property as an appointee made by the Trustees and has a licence to occupy as a beneficiary of the Charity and has not been granted a lease’ [14]. Mrs Watts appealed on 3 grounds, namely, that:


  1. Mrs Watts was a lessee of the property under a periodic tenancy, and that this was not inconsistent with being a beneficiary under a charitable trust;
  2. The Court was wrong to hear the preliminary issue, as these were ‘charity proceedings’ within the meaning of Section 115(8) of the Charities Act 2011, requiring the authorisation of the Charity Commission to be heard;
  3.  Mrs Watts was discriminated against, as compared with social housing tenants, and so her rights under Articles 8 and 14 of the ECHR has been breached;


The leading judgment on the distinction between a lease and a licence is Lord Templeman’s in Street v Mountford [1985] AC 809. His Lordship held that a lease required ‘the grant of land for a term, at a rent, with exclusive possession’. These, his Lordship said, were the determinative criteria, irrespective of the labels the parties placed on the occupancy. The other key case relied upon was Gray v Taylor [1998] 1 WLR 1093, in which the Court of Appeal suggested that an almsperson would be a licensee, not a tenant, as it would contrary to the purpose of the trust for them to continue to occupy the property after ceasing to be a beneficiary.


The Court of Appeal unanimously dismissed the appeal on all three grounds.

Crucially, held Sir Etherton MR, there was a distinction between exclusive possession or the right to exclusive possession, and a personal right of exclusive occupation [31]. A Court should objectively analyse the substance of any exclusive occupation, to determine whether it amounted to exclusive possession. In the instant matter, upon reviewing Mrs Watts’ Letter of Appointment, she could not prove more than a right to exclusive occupation. Although references to the ‘payment of rent’ and the ‘Conditions of Tenancy’ suggested a lease had been created, such labels were not determinative, and could be explained by the Trustees being lay volunteers, not lawyers. On the contrary, the Letter provided for Mrs Watts to have ‘no legal interest in the almshouse’, to move to another almshouse if the Trustees requested, to be unable to have visitors without the Trustees’ consent, to inform the Trustees’ if she would be away for more than one week, and for the occupancy to be ended by the Trustees’ for ‘good cause’ alone.

These terms were not indicative of exclusive possession, and consequently, not of a tenancy either. Therefore, the Court declined to find a periodic tenancy, or even to infer a tenancy at will, and held that Mrs Watts was a licensee. Whilst the Court’s decision was based upon the ratio of Street v Mountford, Sir Etherton opined that Gray v Taylor was correct on its facts.

Secondly, the Court gave short shrift to the Appellant’s arguments on the Charities Act 2011. Section 115 concerned the internal administration of charities, not an issue such as this.

Finally, the Court considered Mrs Watts’ human rights submissions. Applying McDonald v McDonald [2016] UKSC 28, Sir Etherton held that an occupants’ Article 8 rights under the ECHR could be ‘engaged’ when a Court is asked by a private landlord to make a possession order, although a Court was not required to consider the proportionality of an order in such circumstances.

However, pursuant to Article 14, Mrs Watts was required to show a ground, or ‘personal characteristic’, on which she had been discrimination. Whilst ECHR jurisprudence interpreted this rather liberally, particularly the concept of ‘other status’, it was doubtful whether Mrs Watts could show one. Mrs Watts’ ‘ground’ could only really be that she was an almshouse resident, and that she therefore received lesser protection that a person in social housing. However, this was not a characteristic that was central to her person such as race or gender, she had simply chosen to live there, and there was a risk of defining the ground by the very alleged discriminatory conduct complained of. Finally, even if this was a ground, there was a justification for any difference in treatment: charities provide for the most deserving persons and were not bound to provide security of tenure to those who became less deserving over time.


Although newly created tenancies now attract significantly less protection under the Housing Act 1988 than they did under the Rent Act 1977, there is still benefit to an occupant in being a lessee, rather than a licencee. A tenant’s rights under a lease are proprietary (subject to Bruton v London & Quadrant), and so offer the benefits of succession, and of protection against third parties (if a property’s freehold were to be sold for example). Moreover, assured tenancies, and to a lesser extent assured shorthold tenancies, continue to offer a degree of rent regulation and security of tenure, that may well not be present in a licence.

Sir Etherton’s judgment provides a helpful reinstatement of the principles from Street, and provides a useful guide to the terms that will lean a Judge towards, or away from, a finding that a tenancy exists [at 31]. Also welcome is the affirmation of Gray v Taylor, on the basis that there was no exclusive possession. The Court seemingly avoided the strand of reasoning that a Trustee could not grant a proprietary right which allowed a person to remain in occupation after they no longer qualified as a beneficiary: the grant of exclusive possession in line with Street creates a tenancy, even if the Trustee acts in breach of trust. The Court’s ruling on Articles 8 and 14 are hardly ground-breaking, but appear correct on the facts, and provide a clear structure as to how to analyse such issues.



Pupil Barrister