Street v Mountford [1985] AC 809

Facts

• Mr. Street granted Ms. Mountford exclusive occupation of two rooms in his property under an agreement labeled a "license," with payments described as "license fees."
• Despite the wording, Ms. Mountford had the right to exclude others, including Mr. Street, subject to limited reserved rights such as entry for repairs.
• The agreement ran for a specific term and regulated Ms. Mountford’s occupation.
• The case arose due to a dispute over whether the arrangement was legally a lease or a mere license, affecting the level of protection afforded to Ms. Mountford.

Issues

1. Whether an agreement that confers exclusive possession for a term, but is labeled a license, creates a lease or a license in law.
2. Whether the parties’ use of labels like "license" and "license fee" can override the substance of the agreement.
3. What distinguishes a lease from a license, particularly regarding the significance of exclusive possession, payment of rent, and the parties' intentions.
4. How to determine the true nature of an agreement when wording and practical circumstances conflict.

Decision

• The House of Lords held that an agreement granting exclusive possession for a term, even if described as a license, constitutes a lease if the legal requirements are satisfied.
• The court found the substance of the arrangement took precedence over its label or form.
• Exclusive possession was considered the fundamental right distinguishing a tenant from a licensee.
• The House of Lords emphasized courts should detect and frustrate sham devices intended to disguise leases as licenses to avoid statutory protections.
• The payment of rent was not a necessary requirement for the existence of a lease, as clarified in subsequent cases.

Legal Principles

• Exclusive possession is the core distinguishing feature of a lease compared to a license.
• The labels or express wording of an agreement do not determine its legal nature; the substance and practical realities are decisive.
• Courts are empowered to look past sham clauses or pretenses that conceal the true rights and obligations intended by the parties.
• Rent is not a necessary hallmark for the existence of a lease.
• Multiple occupiers can only have a joint tenancy if they share a single interest, as clarified in later case law.
• Proprietary status of the grantor is not always determinative for the existence of a lease, as illustrated by subsequent developments.

Conclusion

Street v Mountford remains a foundational decision establishing that exclusive possession for a term creates a lease regardless of labels, ensuring substantive rights for tenants and curbing attempts to circumvent legal protections through formality or wording alone.