Introduction
This essay critically evaluates the impact of Street v Mountford [1985] A.C. 809 on the distinction between a lease and a licence in property law, focusing on the shift from prioritising contractual language to examining substantive rights. While the decision marked a significant departure from earlier jurisprudence that valued form over substance, the statement under consideration suggests that contractual terms remain relevant, particularly in commercial property contexts. This analysis will explore the implications of Street v Mountford, the evolving judicial approach to distinguishing leases from licences, and the continued importance of contractual terms with reference to academic commentary and case law. The essay aims to provide a balanced perspective on whether the terms of a contract can indeed be overlooked entirely, especially in the commercial sphere.
The Impact of Street v Mountford
Prior to Street v Mountford, the courts often relied on the explicit terminology used by parties to determine whether an agreement constituted a lease or a licence. However, in this landmark case, Lord Templeman rejected such a formalistic approach, stating that the label assigned by the parties is not conclusive. Instead, the court must assess whether the agreement grants exclusive possession for a term at a rent—key hallmarks of a lease (Street v Mountford [1985] A.C. 809). This decision prioritised substance over form, addressing concerns that parties could evade statutory protections, such as those under the Rent Acts, by labelling an arrangement as a licence (Woodfall, 2020). Academic commentators, such as Bright (2006), have praised this shift for ensuring fairness, particularly in residential contexts where tenants require protection from exploitation.
However, the decision was not without critique. Some scholars argue that by sidelining contractual language, the judiciary risks disregarding the intentions of the parties, potentially undermining freedom of contract (Gray and Gray, 2009). This tension becomes particularly evident in subsequent cases, where the application of Street v Mountford’s principles has occasionally led to inconsistent outcomes.
Judicial Developments and the Role of Contractual Terms
While Street v Mountford shifted the focus to substantive rights, later case law demonstrates that contractual terms are not entirely irrelevant. In commercial property cases, such as National Car Parks Ltd v Trinity Development Co Ltd [2001] EWCA Civ 1686, the courts have shown a greater willingness to consider the parties’ expressed intentions alongside the factual matrix. In this case, the court upheld a licence rather than a lease, partly because the commercial context and explicit terms suggested a temporary, non-exclusive arrangement. This indicates that, especially in sophisticated commercial agreements, contractual language can still influence judicial interpretation (McFarlane, 2011).
Arguably, this nuanced approach reflects a recognition that commercial parties often possess greater bargaining power and legal advice, reducing the need for judicial intervention compared to residential contexts. Bright (2006) suggests that courts are more inclined to respect contractual terms in such cases, as both parties are typically well-informed and the risk of exploitation is lower. Nevertheless, this raises questions about consistency in the application of legal principles across different property sectors.
The Commercial Property Context
In the sphere of commercial property, the interplay between form and substance remains particularly complex. Cases like Ashburn Anstalt v Arnold [1989] Ch. 1 illustrate that courts may still scrutinise the reality of the relationship beyond contractual labels, even in commercial settings. Here, the court examined whether exclusive possession was genuinely withheld, despite the agreement being termed a licence. However, academic opinion, such as that of Gray and Gray (2009), highlights that commercial agreements often include detailed clauses designed to avoid creating a lease, and courts are generally cautious about overriding these terms unless clear evidence of a sham exists.
Indeed, disregarding contractual terms entirely could disrupt commercial certainty, a cornerstone of business transactions. As McFarlane (2011) notes, while Street v Mountford prioritises substance, it does not mandate a complete dismissal of form—especially where both parties have negotiated terms in good faith. Therefore, in commercial contexts, the terms of the contract arguably retain significant interpretative weight.
Conclusion
In conclusion, Street v Mountford [1985] A.C. 809 fundamentally reshaped the distinction between leases and licences by prioritising substantive rights over contractual labels, a shift widely regarded as promoting fairness, particularly in residential tenancy disputes. However, as this essay has demonstrated through case law and academic commentary, the terms of the contract cannot be wholly disregarded. This is especially evident in commercial property contexts, where courts often balance the need to honour negotiated agreements with the requirement to assess the reality of the relationship. The ongoing relevance of contractual terms underscores the complexity of achieving consistency in this area of law, suggesting that future judicial clarification may be necessary to harmonise approaches across residential and commercial spheres. Ultimately, while substance now takes precedence, form remains a critical, if secondary, consideration.
References
- Bright, S. (2006) Landlord and Tenant Law: The Nature of Tenancies. Oxford University Press.
- Gray, K. and Gray, S. F. (2009) Elements of Land Law. 5th edn. Oxford University Press.
- McFarlane, B. (2011) The Structure of Property Law. Hart Publishing.
- Woodfall, W. (2020) Woodfall: Landlord and Tenant. Sweet & Maxwell.
