AG SECURITIES v VAUGHAN

As discussed in Aslan v Murphy, the protection of exclusive possession under the Rent Act 1977 is under scrutiny when another two cases are subject to judicial wisdom.

In the first instance, the collective arguments of four individuals rally against the wishes of a landlord looking to remove them in favour of longer-term arrangements; while in the second case, the needs of two cohabiting parties are contested before a landlord seeking their departures for similar reasons.

AG Securities v Vaughan

Situated near the very popular West End of London, the building in question was a four-bedroom flat that had been apportioned to accommodate four individual residents at any one time.

The nature of the arrangements were unique to each party, so subsequently there were four separate contracts precluding the right to exclusive possession on grounds that each licence was for a six-month period, before commencing as a rolling one-month contract, prior to predetermined notices to quit from either landlord or licensee.

Over a period of around three years, the appellants had by grant of the respondent, enjoyed intrusion free use of the flat, and were eventually left to determine (through interviews and group discussion) who would replace those vacating their rooms during the passage of time.

Each party also paid differing amounts of rent, and had acquiesced to the terms of their agreements when becoming part of the group in occupation.

When the time came for the landlord to reassess how he wished to lease the flat, it was decided that long-term sub-leases were preferred; at which point, notice to quit was served upon the four remaining occupiers.

This prompted the local authority to establish through the rent officer, whether the appellants were in fact considered tenants under section 68 of the Rent Act 1977, and not licensees (as suggested by the respondent and indicated in the terms of their individual contracts), and thus how best to determine a fair market rent.

The landlord contested the application, and sought to apply an injunction against the local authority, while seeking payment of rent arrears by the appellants, while on this occasion, the judge found in favour of the respondent, and declared the appellants licensees.

Upon appeal, three of the appellants were successful in reversing the previous decision by the court, thereby granting the appellants powers of joint tenancy, whereupon the respondent appealed. 

With a verdict of two to one for the now appellants, the principles of exclusive possession and joint tenancy were examined, within which the rights determined in Street v Mountford require exclusive possession in lieu of payable rents for a determinable period.

On this occasion, although the contract contradicted the nature of the living arrangements, the four appellants had enjoyed uninterrupted possession of the flat, and were subject to finite durations of contract prior to the respondent’s remuneration for  privilege of occupancy.

With regard to joint tenancy and the principles of unity of possession, interest, title and time, it was held that at one point the four appellants were equal in their period of residency, and while each resident held separate contracts, their duration was of the same length; therefore, unity of term applied, despite disparate cessation of each agreement.

While title must be held under the same Act, there was by implication, a single agreement that bound each resident to the same conditions; and although the contractual periods overlapped, each was determinable in duration, and therefore valid in terms of ascertainment.

This somewhat overreaching of the principles of tenancy, amounted to judgment in favour of the appellants and award of costs.

Appealed again in the House of Lords, it was quickly concluded that to allow a joint tenancy to exist would be an affront to the four unities, when no one person was granted exclusive interest in the property; but instead, were merely sharing a right to occupancy under licence; and that when compelled to enforce their legal rights, the technicalities of the contracts denied them tenancy powers, regardless of how hard they tried to collaborate. 

Antoniades v Villiers

In this matter, an experienced property manager took the steps to observe the legal principles held in Somma v Hazelhurst; where it was held that two parties sharing the same room while under separate contracts can enjoy the rights of exclusive possession, and thus those of the Rent Act 1977, despite signing licence agreements.

It was after openly discussing the respondent’s preference to licence agreements, that the appellants willingly co-signed separate, yet identical agreements on the same day, before commencing their occupancy as contracted.

Part of the agreement stipulated that at the luxury of the respondent, there was a possibility that additional residents may be added to the house; and that until such time, the appellants were to cohabit as husband and wife (even though they were just boyfriend and girlfriend).

Little over a year later, the respondent issued them with a month’s notice to vacate the property, following disputes over non-payment of rent.

It was then that the appellants asserted themselves as tenants and not licensees; after which, the rent officer upheld their claim and registered a lower rent than had been previously agreed.

Having taken them to court, it was found by the judge that while the terms of the agreement were reflective of the outcome of Somma, the recent decision taken by the House of Lords in Street had in essence, reversed that position back in favour of the appellants, when Templeman LJ said:

“Although the Rent Acts must not be allowed to alter or influence the construction of an agreement, the court should, in my opinion, be astute to detect and frustrate sham devices and artificial transactions whose only object is to disguise the grant of a tenancy and to evade the Rent Acts.”

Street v Mountford

This translated that those once considered licensees under similar circumstances to the one created by the respondent’s draft, were now deemed tenants under protection of the Rent Act 1977; and so, by following verbatim the minds of the judges, the court found in favour of the appellants, and dismissed the possession order.

In the Court of Appeal, the two judges agreed that great lengths had been taken by the respondent to act inside the legalities of occupancy rights, and that the transparent nature of the relationship both before and after the signing of the agreements, dictated how no efforts were made to conceal the limitation of rights ascribed the two parties.

For this reason, the appeal was upheld and possession procedures left to recommence.

Further appealed and evaluated in the House of Lords, the meaning of the agreements (while appearing legitimate) were now held to be nothing short of manipulative and misleading.

It was also agreed that by the two appellants signing mirroring contracts and paying the same amounts each calendar month, they had by extension, been afforded the same rights and freedoms provided for tenants under the very Act the respondent had looked to avoid.

It was also agreed that aside from clause 16, which allowed the respondent to reside himself, or introduce another occupier, there was nothing to suggest that a joint tenancy based upon interdependence did not exist; hence, the House allowed the appeal while reminding the parties that:

“Since parties to an agreement cannot contract out of the Rent Acts, a document which expresses the intention, genuine or bogus, of both parties or of one party to create a licence will nevertheless create a tenancy if the rights and obligations enjoyed and imposed satisfy the legal requirements of a tenancy.”