Errington v. Wood — commonly cited as Errington v. Errington (1951)

The old rule was simple: if you let someone into exclusive possession, he is a tenant — at least a tenant at will — and not a mere licensee. Errington is where that rule was put in its place. Exclusive possession is only a prima facie sign of a tenancy; what decides the matter is whether the parties intended to create one. If the circumstances show that all that was intended was a personal privilege with no interest in the land, the occupier is a licensee, however exclusive his possession.

It also decided that a contractual licence could not be revoked in breach of contract, and that the licensor's successor could not disregard it either. Indian courts deciding whether an agreement is a lease or a licence (for example in Associated Hotels of India Ltd. v. R.N. Kapoor, 1959) have relied on Denning LJ's statement of the modern position.

In 1936 a father bought a house, 27 Milvain Avenue, as a home for his newly married son and daughter-in-law. The price was £750: the father paid £250 in cash and borrowed £500 from a building society on mortgage, repayable by instalments of 15s. a week. He took the house in his own name.

He told the daughter-in-law that the £250 was a present for them, but left the couple to pay the building-society instalments. He handed her the building-society book and, in Denning LJ's account, told her: "Don't part with this book". "The house will be your property when this mortgage is paid." He said that when he retired he would transfer it into their names. The couple found they could not also pay the rates, so the father paid those himself.

The father died in 1945, leaving all his property, including the house, to his widow (the plaintiff). The son then left his wife and went to live with his mother. The daughter-in-law stayed in the house (with her sister) and went on paying the instalments.

The widow sued the daughter-in-law for possession. The County Court judge held that the couple were tenants at will, so the claim was barred by the Limitation Act 1939, and that if the instalments were rent the Rent Acts would also protect them. The widow appealed.

1. What was the legal relationship between the father and the couple: tenancy at will, tenancy at a rent, or licence?
2. Is a person let into exclusive possession necessarily a tenant?
3. If the couple were licensees, could the father's successor in title revoke the licence and recover possession?

The appeal was dismissed with costs; no order for possession was made. All three judges reached that result, though on grounds different from the County Court judge's.

Not a tenancy at will

Denning LJ: "it is of the essence of a tenancy at will that it would be determinable by either party on demand, and it is quite clear that the relationship of these parties was not so determinable." The father could not eject the couple while they paid the instalments. He added that if the couple were tenants at will, "the father's title would be defeated after the lapse of 13 years, long before the couple paid off the instalments, which would be quite contrary to the justice of the case."

Somervell LJ likewise found it "impossible to regard them as tenants at will". Hodson LJ said the promise not to determine the arrangement "seems to me to be inconsistent with a tenancy at will".

Not a tenancy at a rent

The instalments could not be rent: "I do not think that 15s. 0d. can possibly be regarded as rent, for the simple reason that the couple were not bound to pay it. If they did not pay it, the father could not sue for it or distrain for it. He could only refuse to transfer the house to them." Somervell LJ added that it seemed "impossible to treat as rent payments made to a third party which differed in kind from rent in that they were instalments of the purchase price with interest payable under a mortgage."

Licensees — and the place of exclusive possession

Denning LJ took the classic definition of a licence from Thomas v. Morrall: it "properly passes no interest or alters or transfers property in anything but only makes an action lawful without which it had been unlawful". Hence: "The difference between a tenancy and a licence is, therefore, that, in a tenancy, an interest passes in the land, whereas, in a licence, it does not."

On exclusive possession: "This test has however often given rise to misgivings because it may not correspond to realities." After reviewing a line of recent cases in which occupiers in exclusive possession were held to be licensees, he stated the principle for which the case is cited:

"The result of all these cases is that, although a person who is let into exclusive possession is prima facie to be considered to be a tenant, nevertheless he will not be held to be so if the circumstances negative any intention to create a tenancy. Words alone may not suffice. Parties cannot turn a tenancy into a licence merely by calling it one. But if the circumstances and the conduct of the parties show that all that was intended was that the occupier should be granted a personal privilege, with no interest in the land, he will be held only to be a licensee."

Applied here: "They were not tenants at will but licensees. They had a mere personal privilege to remain there, with no right to assign or sub-let. They were, however, not bare licensees. They were licensees with a contractual right to remain."

The contractual licence binds the successor

At common law a licence was revocable at will despite a contract to the contrary, the remedy being only damages. But equity had intervened: "This infusion of equity means that contractual licences now have a force and validity of their own and cannot be revoked in breach of the contract. Neither the licensor nor anyone who claims through him can disregard the contract except a purchaser for value without notice."

The father's promise was "a unilateral contract" — the house in return for the couple paying the instalments. It "could not be revoked by him once the couple entered on performance of the act", though it would cease to bind him if they left it incomplete. Since the couple "have acted on the promise", "neither the father nor his widow, his successor in title, can eject them in disregard of it."

The concurring judgments

• Somervell LJ thought the couple did not undertake to pay the instalments, and that their position was "analogous to that of a purchaser who is admitted into possession before completion", but that the contract was different, so they were licensees who could not be dispossessed while they paid.
• Hodson LJ agreed they were licensees, but put it differently: they occupied "under a personal contract" by which they should pay the instalments, and in consideration of that promise the father, and the widow as his successor, "agreed to permit them to occupy the house as long as the instalments were running and being paid by them."

Exclusive possession raises only a prima facie inference of tenancy. An occupier in exclusive possession is not a tenant if the circumstances and conduct of the parties negative any intention to create a tenancy and show that only a personal privilege, with no interest in the land, was intended; labels alone do not decide it. A licensee holding under a contractual licence cannot be ejected in breach of the contract, either by the licensor or by anyone claiming through him (other than a purchaser for value without notice). On the facts, the couple were contractual licensees entitled to remain while they paid the instalments, and the father's widow could not recover possession.

• Direct question: Distinguish between a lease and a licence. Is exclusive possession decisive? Define both (interest in land passes in a lease, not in a licence), then give Denning LJ's statement: exclusive possession is only prima facie evidence; intention, gathered from the circumstances and conduct, decides. Cite Associated Hotels of India v. R.N. Kapoor for the Indian application.
• Problem question: an owner lets a relative occupy a flat exclusively, rent free, while the relative pays the owner's loan instalments, promising to transfer the flat once the loan is cleared. The owner dies and his heir sues for possession. Apply Errington: not a tenancy at will (not determinable at will), no rent (no obligation to pay); a contractual licence the heir cannot revoke while the instalments are paid.
• Point worth marks: why the tenancy-at-will analysis would have been unjust here — it would have let limitation defeat the father's title long before the mortgage was paid off.
• Key phrase to use (paraphrase, don't mis-quote): the court asks whether the circumstances negative any intention to create a tenancy.