6 Street v Mountford and agricultural tenure
5.51 The House of Lords ruling in Street v Mountford126 on the distinction between licences and tencancies had potentially major implications for agricultural tenure, and for the interpretation and application of s 2 of the 1986 Act in particuar.
It reinforced the importance of exclusive possession as the hallmark of a protected tenancy, and the necessity to avoid any implication that a short-term letting is ‘sham’. If an agreement by which land is occupied manifests an intention to grant exclusive possession to the occupier for a term at a rent, then a tenancy arises and not a licence, whatever the parties choose to call their relationship.127 It is clear that the payment of a monetary rent is not necessary for a tenancy to arise, exclusive possession for a term under an enforceable agreement alone being sufficient.1285.52 In one sense, Street v Mountford merely reaffirmed a requirement already existing in agricultural law, viz. that s 2(2)(b) of the 1986 Act only operates on licences which confer exclusive occupation of agricultural land.129 In this sense, it might be said that an interest taking effect as a tenancy by virtue of Street v Mountford would, in any event, have taken effect as a tenancy by statutory conversion, ie under s 2(2) of the 1986 Act. The application of the Street v Mountford principles to lettings of agricultural land was confirmed in Colchester BC v Smith130 and Ashdale Land and Property Co v Manners,131 in which their implications for the operation of s 2 of the 1986 Act were considered. The application of the Street principles to the statutory scheme of the 1986 Act has a number of consequences:
(i)A ‘licence’ to use agricultural land limited to a period of between one and two years may in law create a tenancy if exclusive possession is conferred.
Such an interest would not, however, have conferred security of tenure, as lettings for between one and two years were outside the security provisions of the 1986 Act.132 Viewed as a licence, however, such an interest would be caught by s 2, and an annual tenancy with protection would have arisen.(ii)A licence for a fixed period of two years or more would, by virtue of s 2, have taken effect as a periodic yearly tenancy. Under the rule in Street v Mountford, however, if exclusive possession was granted to the ‘licensee’ it would take effect as a tenancy for a term of years: and if the period were for 2 years or more it would continue on expiry as an annual tenancy under s 3 of the 1986 Act. This could have consequences for the application of other statutory rights, eg the availability, and timing, of rent reviews under s 12.
(iii)The dicta in Street v Mountford go to the common law distinction between leasehold and lesser interests, such as licences, and as such should in principle override earlier case law from the lower courts under the agricultural holdings legislation.133 The decision could, therefore, render the principles in s 2(2)(b) of the 1986 Act for the statutory conversion of licenses into protected tenancies largely redundant. If licenses conferring exclusive possession are to be interpreted as granting a tenancy in law, then to what residual categories of license will statutory conversion under section 2(2)(b) apply? The impact of Street v Mountford on the operation of s 2 was judicially considered in McCarthy v Bence134 where it was tentatively suggested that the residual scope of s 2(2)(b) may be that it is intended to catch licences to use land for grazing or mowing (or both) which are not, by being limited to some specified period of the year, excluded from s 2 by s 2(3).135 Alternatively, it was posited that the wording of s 2 goes back to the Agriculture Holdings Act 1948 and has simply not been updated in the light of Street v Mountford.136
(iv)Where Ministry consent was obtained for the creation of a licence outside the protection of the 1986 Act, it was important to avoid conferring exclusive possession on the licensee. In Ashdale Land and Property Co v Manners137 Ministry consent was granted for the creation of a licence for a period of ‘not more than three years commencing on 29th September 1984’. The licence agreement, however, gave the licensee the right to use the land without interruption from the licensor or any person claiming through it. This was conclusive, as it manifested an intention to confer exclusive possession on the licensee. On the facts, therefore, and applying the Street principles, the agreement created a tenancy and not a licence. It was therefore outside the terms of the Ministry consent, with the result that a fully protected tenancy had been created.