A Lease By Another Name
At some point in your adult life, someone will likely quote (or commonly misquote) the Duck Test to you. For the benefit of clarity, the generally accepted expression is, “if it looks like a duck, swims like a duck, and quacks like a duck, then it is probably a duck”.
The origin of the expression is somewhat disputed. The first written example is attributed to the 19th century Indiana poet James Whitcomb Riley. However, it has been reported that the phrase may have been used as early as the 1730s. Potentially referring to a complex duck automaton created by Jacques de Vaucanson. The automaton is said to have moved, quacked and even eaten like a real duck; much to the wonder of audiences of its day.
Whatever origin story you prefer, the Duck Test is at its heart a form of abductive reasoning which implies that one can identify any given subject by observing that subject’s habitual characteristics.
The concept of defining something by what function it performs is something upon which the courts have relied for countless occasions. A recent decision of 24 February 2017 demonstrates the concept of the Duck Test was applied by Bristol County Court in everything but name. The case of Camelot Property Management Limited and Camelot Guardian Management Limited v Greg Roynon makes for difficult reading for any landlord where there is a dichotomy between intention and practice.
This case concerned the site of a former care home owned by Bristol City Council. The council engaged Camelot Property Management Limited to manage the building, the remit of which included the installation of “guardians” at the property. Camelot Guardian Management Limited entered into what was clearly stated as a licence with Greg Roynon, this allowed him to occupy two rooms at the property and have use of the communal kitchen, living room and bathroom.
Two years later, Mr Roynon was served with a notice to quit. He subsequently refused to leave and Camelot were forced to issue possession proceedings.
The issue before the court was whether Mr Roynon had a tenancy or was simply an occupier under a licence at the property. In order to determine this, the court needed to look beyond the superficial name of ‘licence’ given to the arrangement and instead examine the practical implications of Mr Roynon’s time at the property.
While the agreement stipulated throughout that it was a licence, the court scrutinised a number of inconsistencies between what the agreement stated and what occurred in practice. One such inconsistency was that no guardian was to have a right to use any specific room. However, in reality, each guardian picked their own room which they were able to lock and upon which was a sticker denoting it as their room. This demonstrated that Mr Roynon had exclusive possession of his rooms against his fellow guardians.
Mr Roynon was also shown to have exclusive possession against Camelot. Although there were restrictions on the use of the premises and Camelot retained rights of re-entry for the purposes of inspection and repair; these were consistent with common features of a tenancy and therefore not incompatible with exclusive possession.
The court did consider further facts beyond those discussed above in deciding this matter. However, the concept of exclusive possession is a vital consideration when determining whether any occupation should be deemed a tenancy. On the facts, the court decided that Mr Roynon was a tenant of the two rooms he was granted exclusive possession of, but not of the shared communal areas.
What are the implications of being a tenant over a licensee at a property? A tenant at any property will enjoy considerably more rights than an equivalent licensee. Nowhere is this more true than in relation to commercial premises. The Business Tenancies (Northern Ireland) Order 1996 offers significant protections to qualifying tenants, including security of tenure. It is also not possible to contract out of the business tenancies provisions in Northern Ireland, unlike the position in England.
Landlords and tenants should be aware that it will not matter if you choose to call an agreement a licence; if it looks like a lease, swims like a lease and quacks like a lease, then it’s probably a lease.
Should you require any more information, please contact a member of our Real Estate team.
While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.