The Court of Appeal has recently given its decision in the case of Watts v Stewart  EWCA Civ 1247, and in so doing has provided a useful reminder of the distinction to be drawn between a lease and a licence. The case is also a restatement of the Street v Mountford principle that the language used in an agreement does not override the parties’ intentions.
The case arose from Mrs Watts’ occupation of an almshouse provided to her by the Ashtead United Charity. Almshouses have been in existence since the 10th century and provide charitable accommodation for financially vulnerable and usually elderly people. The around 30,000 almshouses in the UK are managed by charities or the trustees of individual bequests. As the purpose of almshouse accommodation is usually to house only the poor, vulnerable and sometimes those from a particular form of employment (as was the case in Watts) the Court of Appeal’s decision on whether Mrs Watts occupied as a tenant or licensee had potentially huge implications for almshouse charities and their ability to fulfil their charitable obligations.
In September 2014 Mrs Watts was allocated one of 14 almshouses owned by the Ashtead United Charity. The charity’s scheme stated that residents of the almshouses would be “poor single women of not less than 50 years of age who are inhabitants of the area of the ancient parish of Ashtead with a preference for such women who have been employed in domestic service”.
Mrs Watts occupied the almshouse under a “Letter of Appointment” from the trustees which described her as a “beneficiary” and explicitly stated that she was not a tenant of the charity nor had any legal interest in the property. However, the letter also referred to the “Conditions of Tenancy” and the payment of “rent”. In the same letter were clauses allowing the charity to move her to other almshouse accommodation, a prohibition on visitors without prior permission and the ability to cease her appointment “for good cause.”
Unfortunately, Mrs Watts’ behaviour during her occupation of the almshouse was less than ideal with other almshouse residents reporting her for spitting, swearing and generally anti-social behaviour. In May 2015 the charity sought possession of her accommodation on the grounds that she had breached the terms of her Letter of Appointment.
Mrs Watts argued that she occupied the almshouse as a periodic tenant as she had exclusive possession and the Letter of Appointment had referred to a weekly “rent” and conditions of a “tenancy”. The charity argued that her occupation was based on the terms of the Letter of Appointment and that she was therefore an appointee with only a licence to occupy. The County Court agreed with the charity and found that Mrs Watts was a licensee and not a tenant. Mrs Watts appealed and the significance of the case to almshouse charities was such that permission was given for both the National Association of Almshouses (NAA) and the Charity Commission to intervene in the appeal.
The Court of Appeal upheld the County Court’s decision and found that whilst Mrs Watts had a personal exclusive right of possession she did not have a legal right of exclusive possession and so held a licence rather than a tenancy. In his judgment Sir Terence Etherton MR stated that “…there is a distinction between legal exclusive possession…and a personal right of exclusive possession…Legal exclusive possession entitles the occupier to exclude all others, including the legal owner, from the property. Exclusive occupation may, or may not, amount to legal possession. If it does, the occupier is a tenant. If it does not, the occupier is not a tenant and occupies in some different capacity.”
With regards to the references to “rent” and “tenancy” in the Letter of Appointment, the Court of Appeal found that these had been used because the charity’s volunteers had not understood the potential significance of these terms. However what was more important than the precise wording used were the express provisions of the Letter of Appointment which, the Court of Appeal found, gave a clear indication that Mrs Watts was not a tenant of the almshouse.
In giving its judgment the Court referred to the leading case of Street v Mountford  1 AC 809 which confirms that the language used in an agreement does not override the actual intentions of the parties. In Street v Mountford it was stated that “The manufacture of a five-pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intends to make and has made a spade.”
In this case, the Court found that there was no intention on the part of the charity to create a tenancy. The Court’s finding was a huge relief to the NAA: a different decision could have given rise to a situation where almshouse charities could no longer fulfil their objectives of housing the poor and needy if in reality they could not evict tenants who no longer met the criteria (for instance if they had won money on the National Lottery).
The decision in Watts is a reminder of the need to look at the intention of the parties rather than just the wording of an agreement. It could also be seen as a reminder that engaging a lawyer when drafting documents relating to residential occupation will be money well spent if it avoids the lengthy and costly litigation faced by the Ashtead United Charity.