Stewart v Watts [2018] Ch 423

Facts

• Mr. Stewart managed and occupied a property under terms labeled as a license.
• He carried out extensive repairs to the property, controlled access, and paid all related expenses.
• The court considered both the contract terms and Stewart’s conduct, such as his management of the property.
• The owner did not retain rights like providing services or holding keys, indicating Stewart held primary control.

Issues

1. Whether Mr. Stewart's arrangement constituted a lease or license, particularly given the agreement's label as a "license."
2. Whether practical circumstances, including control over the property and exclusive use, override the contractual label in determining the nature of the arrangement.
3. How the parties’ intent interacts with actual conduct when classifying property use arrangements.

Decision

• The Court of Appeal found that Stewart had exclusive use and actual control over the property, indicative of a lease, regardless of the agreement’s label.
• The court determined that practical circumstances are decisive, thus upholding that real-world use, not contractual terminology, establishes the nature of property arrangements.
• The judgment confirmed the importance of examining conduct, control, and exclusion of others in such assessments.

Legal Principles

• Exclusive use, defined as the right to exclude others (including the owner), is the key indicator of a lease.
• The legal status of an arrangement depends on practical operation, not mere wording.
• Courts must evaluate actual control, management responsibilities, expenses paid, and ability to exclude others when distinguishing leases from licenses.
• While the parties' intent is relevant, it does not determine classification if contradicted by the facts.
• Leases create property rights; licenses confer only personal rights.

Conclusion

The Court of Appeal clarified that in distinguishing between leases and licenses, the principal consideration is actual control and exclusive use exercised over the property. Labels and stated intentions are subordinate to the practical realities of occupation and management, with exclusive use signifying a lease regardless of the agreement's wording.