Bruton’s Legacy: Restructuring Property Rights and the Landlord-Tenant Divide

Introduction

English law purports to distinguish between a lease and a licence, as established in Street v Mountford [1985]. In this case, the House of Lords (“HOL”) addressed attempts to let premises in a way that would deny occupiers the legal protections associated with tenancies. In brief, Mr. Street let out a premise to Mrs. Mountford, claiming she was not entitled to rent protections as it was a license, but the HOL rejected this notion and distinguished a lease from a license. Three elements were listed to form a lease: exclusive possession, rent or consideration, as well as a determinative period. However, recent developments have deviated from the principle that leases are proprietary in nature - namely in Bruton v London & Quadrant Housing Trust [1999], which introduced “non-proprietary leases”. This has complicated the traditional understanding of the nature of leases, as Martin Dixon purported, it muddies the water further.

Decision of Bruton (1999)

The London Borough of Lambeth granted L&QHT a lease to use flats for charitable housing objects, with no proprietary interest in the land. Mr. Bruton occupied the flat for short-term periods, but the agreement allowed all-time access to the Housing Trust's staff and inspections of cleanliness and repair. He paid £18 per week rent. Mr. Bruton later claimed a breach of an implied covenant to repair under s.11 of the Landlord and Tenant Act 1985. The Housing Trust argued that Mr. Bruton was a licensee, but the HOL concluded that he was indeed a tenant.

Rationale of the Bruton’s decision 

Lord Hoffmann applied the "substance over form" test, viewing the matter in an objective light, rather than by the label attached. He emphasized that the mention of limited access by the grantor indicated a relationship between landlord and tenant, as a license agreement would not have to mention this. His position created a new kind of "exclusive possession" between the grantor and grantee, focusing on the relationship between landlord and tenant rather than the creation of an estate or proprietary interest.

Another justification is that Lord Templeman's formula in Street does not require leases to be derived from superior land interest, but rather a contract satisfying Street's criteria. This was disputed in PW & Co v Milton Gate Investments Ltd [2003], where termination of head-leases led to subleases ending. This shows that leases are more than just contracts as they also create an estate in land. Despite this, Bruton's lease remains a purely contractual lease, as seen in the cases below.

The second justification is estoppel by grant. Although Millett L.J. was of the view that a sub-occupier cannot have a lease when the head occupier has no estate to give them, which is the nemo dat quod non habet rule. It is not estoppel that creates the tenancy, but the tenancy which creates the estoppel, citing Morton v Woods [1868] where there is express intention by the parties using the terms “landlord” and “tenant” in a deed. When a contract grants exclusive possession to another, it is a lease even if the landlord has no title in the land.

Exclusive possession is the most significant criterion to differentiate leases from licenses as it grants tenants the ability to exclude the landlord as well as third parties, whereas a licensee is unable to do that. The HOL in Bruton took a different view where exclusive possession does not have to bind any other person at all. It is sufficient only between the grantor and grantee. 

The courts focus on exclusive possession, where access was considered limited in order to protect vulnerable parties like Mr Bruton. Martin Dixon commented that the case was perhaps decided to invoke section 11- the contract between Mr Bruton and the Housing Trust. 

Criticism of Bruton

Bruton's lease does offer flexibility in granting leases, even without proprietary interest, as exclusive possession still exists. It also provides additional protection to the granted person, especially squatters, as they now have statutory rights of tenancy under the Housing Act 1985, as demonstrated in Bruton.

However, Mark Pawlowski and Sarah Greer have raised criticisms of the creation of a "non-proprietary lease" in Bruton. It creates confusion about the application of Landlord and Tenant legislation. This blurred the line between leases and licenses, as per Martin Dixon's statement, further complicating the understanding of the distinction between leases and licenses.

Furthermore, “contractual leases” and “licenses” both operate in personam and do not create any proprietary interest, nor do they bind third parties, which also creates confusion for courts to decide whether a particular agreement is a Bruton lease or a license. Not to mention that there would be floodgates of litigation where many would try to argue for a lease in order to gain rent protection. 

Bruton on future decisions

In Kay v Lambeth London Borough Council [2006], the council granted possession of council homes to Quadrant Housing Trust under a license, which was later replaced by a lease. The Housing Trust occupied the council homes under the licences, which according to Bruton, was a lease. The council sought possession and terminated the lease, stating that the lease was granted before the Trust had an estate in the property, thus not binding superior titles. It was also ruled that a Bruton sub-tenancy does not survive the head tenancy between the landlord and freeholder. This is because the personal sub-tenancy is not a derivative interest created by the immediate landlord out of the estate created by the freeholder. Any surrender of head tenancy would not subject a Bruton lease to the freeholder, who they have no rights against. Thus, Bruton leases have an effect between the licensee and the granted person, not any third party.

Another case to examine is London Borough of Islington v Green and O’Shea [2005]. Islington granted a license to Patchwork Community Housing Association to use the property for temporary housing accommodation. Islington sought to repossess the property. Patchwork did not obtain an estate in the property - the relationship between a landlord and a tenant does not depend on whether the lease created a proprietary interest.

Both of these cases established that a personal tenancy granted by someone who only holds a license is only binding towards the person as licensee, and not to the licensor (who is the freeholder), since the freeholder was not a contractual party to the personal tenancy. 

Academicians view 

Academicians like Martin Dixon emphasize the organic origins and nature of modern land law in Bruton. He argues that land law has deep roots in practicality, focusing on the impact on land use and economic value. In Lynn Shellfish Ltd v Loose [2016], the Supreme Court affirmed that the extent of rights obtained via prescription depends on the actual use of rights. The orthodox view is that licenses are used to regularize land use without affecting future use, despite the nature of licenses and leases.

Linking back to Bruton, Martin Dixon opined that ‘non-proprietary leases’ are impractical because it is impossible to compel the Housing Trust to do repair work as they had no right to touch the land, which in a sense would be requiring Quadrant to pay money they may not have, in respect of an obligation they did not in reality undertake and which they cannot actually fulfill. He highlights the danger in how land law is reformed based on theory alone, without understanding how land is used practically. 

Kevin Gray (1991) in his article mentioned that the legal system in land law seems to use criteria of excludability, i.e. physical, legal and moral, to decide whether a relationship is proprietary in nature- such as protecting vulnerable homeless persons.  

Michael Harwood commented that more speculations in Bruton could be explored such as challenges towards a fixed hierarchy of interests in land as well as whether one can carve a greater interest out of a lesser one. Nevertheless, Bruton viewed leases as merely contractual arrangements and no more. 

Possible reforms

Lorren Eldridge (2023) commented that in Bruton, the focus on contractual terms such as covenants or implied terms had made it difficult for the law to recognise that leases even without covenants can exist as a legal estate in land. However, he mentioned that sometimes leases are best treated as contracts, as Sir Leslie Scott purported in a 1922 HOL debate.  

Scott opined that the length of time is key in determining whether the agreement is a mere contract or whether it becomes a tenure. It could be suggested to view short-term leases as contracts because they are not created by deed and are made under hand, whereas longer leases are proprietary in nature. There should be a fair balance of the lease as both property and contract. 

Another reform was proposed by the Law Commission. In their Report Renting Homes (2006), an “occupation contract” could be given to residential tenants to offer statutory protection. There would no longer be a need for covenants and Bruton leases would not be required, thereby maintaining the traditional notion of leases and licenses. 

Conclusion

It is no surprise that Bruton leases have created confusion of the traditional understanding of leases. It is far from perfect as it opens up many criticisms, especially opening floodgates against Housing Trusts in the UK which purport only to temporarily provide shelter for the homeless. That being said, perhaps Bruton was taking into account the welfare of squatters by allowing a fair share of bargaining power between them and Housing Trusts.