Lease or Licence?

The difference between a lease and a licence is that a lease is an interest in land granting the right to exclusive possession of land for a determinable period of time whereas a licence is simply a personal right granting permission for the licensee to do something on the licensor’s property.  A licence offers no security and it does not create an interest in land.  The key distinction therefore between a lease and licence is exclusive possession.

There have been two recent cases further highlighting the difference between a lease and a licence which demonstrates the importance of ensuring the documentation accurately reflects the reality of the day to day occupation of Methodist property.  In the two recent cases the Court was asked to consider whether an agreement between the parties constituted a lease or a licence.

In the recent case of Camelot Property Management Limited (1) Camelot Guardian Management Limited (2) v Greg Roynon,  Mr Roynon was allowed into occupation of two rooms in a vacant care home under a licence to provide a measure of security against squatters and vandalism under a guardianship scheme.  The Licence did not grant exclusive possession and provided flexibility over which rooms were to be occupied.  However, Mr Roynon was the only person with a key to his rooms and Mr Roynon was able to exclude all other occupants from the rooms.  The Court held that the agreement did not reflect the reality of the situation as Mr Roynon had exclusive possession and was therefore a tenant with statutory protection and not a Licensee.

A guardianship scheme is an arrangement by which people are granted accommodation within a vacant property in exchange for keeping the property under observation and in good condition.  The continued occupation provides a disincentive for the property to be occupied by squatters.

This case is particularly important because we are aware Managing Trustees have on occasion considered using guardianship schemes as a way to keep redundant Methodist property safe from vandalism.  The case highlights the dangers of allowing a third party to occupy property where the reality of the occupation does not reflect the document.  If the Managing Trustees are considering guardianship of empty Methodist property, then please contact TMCP in the first instance in order that we can provide further guidance.

Conversely, in the case of Watts v Stewart and others, Mrs Watts was allocated almshouse accommodation and occupied the property pursuant to a letter of appointment.  The letter of appointment stated a monthly rent was payable and made various references to the tenancy.  However, it also stated that neither the resident nor any relation to the resident would be a tenant.  It was held that the occupiers of an almshouse who had been granted a “lease” were in fact licensees and not tenants as they did not have exclusive possession.  The court explained that there is a difference between exclusive possession and exclusive occupation.  Although the terms in this case were similar to the terms of the lease in the Camelot case, the determining factor was an express provision that the occupier has no legal interest in the property.

The recent cases act as a reminder that it is not simply enough to label a document a licence/lease if the reality of the occupation doesn’t reflect the document.  The label given to a document does not determine its status and a Court will look beyond the label the parties have put on the document.

On the TMCP website there is a useful guidance note Licence Guidance 1 - When to use the Standard Licence which will assist the Managing Trustees in determining when to use the Standard Licence.  The Managing Trustees can also find further guidance notes on the website to assist them in completing the Standard Licence.

If the Managing Trustees are considering entering into an agreement of church premises with a third party and they are unsure whether a lease or licence is appropriate for the intended use then TMCP would strongly recommend the Managing Trustees obtain independent legal advice.

If you have any queries on the legal requirements and/or steps that Managing Trustees must adhere to when granting a Lease or a Licence of Methodist property then you can contact TMCP Legal and a member of our legal team will be happy to assist you.



Please note that this document is to provide guidance and assistance to Managing Trustees and their professional advisers. This guidance note is general in nature, may not reflect all recent legal developments and may not apply to the specific facts and circumstances of any particular matter. Also note that nothing within the documents and guidance notes provided by TMCP nor any receipt or use of such information, should be construed or relied on as advertising or soliciting to provide any legal services. Nor does it create any solicitor-client relationship or provide any legal representation, advice or opinion whatsoever on behalf of TMCP or its employees. Accordingly, neither TMCP nor its employees accept any responsibility for use of this document or action taken as a result of information provided in it. Please remember that Managing Trustees need to take advice that is specific to the situation at hand. This document is not legal advice and is no substitute for such advice from Managing Trustees' own legal advisers.