Lease or Licence? Why Certainty of Term Matters

(A) INTRODUCTION

1. The decision of Street v Mountford [1985] AC 809 (HL) barely requires citation. In his classic statement of the constituent elements of a lease, Lord Templeman stated: 

To constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of a premium or periodical payments. 

2. Many disputes in relation to whether an agreement is a lease or a licence centre on the issue of exclusive possession. This focus on exclusive possession means that the other elements required for a valid lease (rent and certainty of term) can often be forgotten. However, the recent case of AP Wireless II (UK) Ltd v On Tower UK [2025] EWCA Civ 971 (“AP Wireless”) brings the issue of certainty of term to the fore. In this case, the Court of Appeal found that, although the tenant had exclusive possession and paid rent, the agreement failed as a lease because the term was too uncertain.
3. Whilst the decision in AP Wireless arises in the context of a telecoms agreement, the principles discussed by the Court of Appealare of general application; they will be relevant to any dispute concerning whether an agreement is a lease or license. The decision provides guidance on two important issues:
   
   a. When a term will be sufficiently certain; and
   b. How the courts should treat agreements with an insufficiently certain term. 
4. In discussing these issues, this article will consider:
   
   a. The relevant legal principles in relation to certainty of term;
   b. The key aspects of the decision in AP Wireless;|
   c. The effect of section 149(6) of the Law of Property Act 1925 on agreements granted to individuals; and
   d. The possibility of reform in this area.

(B) CERTAINTY OF TERM: THE RELEVANT LAW

Summary of the Applicable Law

5. It is a longstanding principle that a lease will fail for want of a certain of term. Certainty of the term is assessed by reference to the inception of the agreement. As such, a term is sufficiently certain if:
   
   a. At the inception of the lease, it can be expressed with certainty; or
   b. The term is expressed by reference to something which can be used to determine, at the date of the inception of the lease, what the term is meant to be.[1]

6. The exception to this rule is an agreement which give rise to a periodic arrangement, providing that the periodic arrangement can be determined by either party.[2] A fetter on the right to serve a notice to determine a periodic tenancy for a specified period may be valid. However, a fetter for an uncertain period is ineffective.[3] Conceptually, a periodic tenancy does not fail for lack of certainty because the term continues as if, at the end of each period, the parties had made a new agreement for a new term.[4]

Key Authorities

7. In AP Wireless, the Court of Appeal focused on two particular authorities:
   
   a. Prudential Assurance Co Ltd. v London Residuary Board [1992] 2 AC 386 (HL) (“Prudential”); and
   b. Mexfield Housing Co-Operative Ltd v Berrisford [2011] UKSC 52 (“Mexfield”).    

8. In Prudential, an agreement which provided that the tenancy would continue until the land was required by the council for road widening purposes was considered a term of uncertain duration. However, in that case, the House of Lords found a yearly periodic tenancy could be inferred from the tenant’s exclusive possession and the payment of an annual rent. 
9. In Mexfield, a housing association granted a monthly tenancy at a weekly rent. Pursuant to clause 5, the tenant could end the tenancy on one month’s written notice. Pursuant to clause 6, the housing association could exercise a right of re-entry if the rent was in arrears by 21 days; there were other breaches of the tenancy agreement; or in other specified circumstances. The Supreme Court held that clause 6 meant that the agreement was void for uncertainty. However, the Supreme Court applied section 149(6) Law of Property Act 1925 (“LPA 1925”), which is considered further below.

(C) AP WIRELESS II (UK) LTD V ON TOWER UK

The Factual Background

10. The matter concerned a written agreement made in 1997 between the owner of a farm and telecommunications operators, allowing the operators to install and maintain telecommunications equipment on the owner’s land (“the Agreement”). AP Wireless II (UK) (“the Landowner”) and On Tower (“the Operator”) were both assignees to the Agreement.

11. Clause 2.1 of the Agreement defined the term of the Agreement as follows:

This Agreement shall come into effect on the date shown above and shall continue for no less than the Minimum Term. It may be terminated by either party giving to the other not less than 12 months’ notice in writing to expire at any time on or after the expiry of the Minimum Term.

12. The Minimum Term was elsewhere defined as 10 years from 11 March 1997.

The Issues

13. The Landowner argued that the Agreement was a lease, whereas the Operator argued that the Agreement was a license. It would be commercially advantageous for the Operator for the Agreement to take effect as a license because, under the relevant scheme, a license would attract a lower rent than if the Agreement were classified as a lease.
14. The matter commenced in the First Tier Tribunal (‘the FTT”). In the FTT, the Judge held that the term of the Agreement was sufficiently certain, but that the Agreement was a license based on lack of exclusive possession.
15. On appeal to the Upper Tribunal (Lands Chamber) (“the UT”), Edwin Johnson J also determined that the Agreement was a license but did so for converse reasons. The Operator was found to have exclusive possession of the Site, but that the Agreement would not take effect as a lease because Clause 2.1 did not provide for a certain term.
16. The finding that the Operator had exclusive possession was not challenged. However, the Landowner appealed the Judge’s decision that the term was too uncertain. On appeal, the Landowner argued that the term was sufficiently certain based on three arguments:
    1. The Invalidating Features Argument – in Mexfield,Baroness Hale had identified only two ‘invalidity features’ that would render a term uncertain. These features were not present on the facts of the case.
    2. The Interpretation Argument – on a proper interpretation of the agreement the term was certain.
    3. The Inferred Periodic Tenancy Argument – alternatively, a periodic tenancy ought to be implied.

(i) The Invalidating Features Argument

17. In Mexfield, Baroness Hale said at [93]:

There is a rule against uncertainty which applies both to single terms of uncertain duration and to periodic tenancies with a curb on the power of either party to serve a notice to quit unless and until uncertain events occur.

18. Based on this paragraph, the Owner argued that there were only two circumstances in which a term would be considered to be too uncertain:
    
    a. A single term of which was of uncertain duration; or
    b. There was a fetter on the right to serve notice that was of an uncertain duration.

19. The Court of Appeal held that paragraph [93] of Mexfield did not provide a general rule. Rather, in order to determine whether the term was sufficiently certain, the Court must consider what the proper intention of the parties was.[5]

(ii) The Interpretation Argument

20. The Owner alleged that there were three possible interpretations whereby the Agreement provided for a certain term:
    
    a. A yearly tenancy determinable on any date after 12 months’ notice, with a minimum duration of 10 years;
    b. A 10-year fixed term, followed by a yearly tenancy which was terminable on any date after 12 months’ notice; or
    c. A 10-year fixed term followed by a daily periodic tenancy terminable on 12 months’ notice.

21. The Court of Appeal held that the Agreement could not be interpreted in any of these ways. The wording of the Clause 2.1 of the Agreement was contrary to each of these suggested interpretations.

(iii) The Inferred Periodic Tenancy Argument

22. The final argument advanced was that the Court ought to imply a periodic tenancy from the commencement of the Agreement.
23. The Court of Appeal considered the approaches taken in Prudential and Mexfield. In Prudential the House of Lords had inferred a periodic tenancy, whereas in Mexfield the Supreme Court did not do so. A contractual tenancy applied, subject to section 149(6) LPA 1925 (which is discussed further below).
24. The Court of Appeal in AP Wireless held that once a tenancy is void for want of a certain term, “the Court is faced with a choice of inferring a tenancy or giving effect to the parties’ intentions contractually”. This choice is to be determined by reference to what a “reasonable observer” would consider the parties had intended and the Court look for the “best fit”.[6]
25. On the facts of AP Wireless, the Court of Appeal held that a periodic tenancy was inconsistent with the other contractual terms. For instance, the payment dates and dates for calculation of the rent were inconsistent with the date on which the Agreement commenced. For instance, the Agreement provided for payment of a Tariff to be calculated from 14 August 1996 and payable quarterly in advance of the payment days (31 March, 30 June, 30 September and 31 December, whereas the term of the Agreement commenced on 11 March 1997.

(D) SECTION 149(6) LAW OF PROPERTY ACT 1925

26. The decision in AP Wireless also provides a reminder of the provisions of section 149(6) LPA 1925. The effect of section 149(6) LPA 1925 mean that a term being uncertain could have significant consequences where the occupier is an individual. 
27. In Mexfield the Supreme Court found that an agreement of an uncertain of term should be treated as a tenancy for life. In turn, this should be converted to a 90-year lease by virtue of section 149(6) LPA 1925. Section 149(6) LPA 1925 provides:

Any lease . . . at a rent . . . for life . . . or any contract therefor, made before or after the commencement of this Act . . . shall take effect as a lease . . . or contract therefor, for a term of 90 years determinable after . . . the death . . . of . . . the original lessee . . . by at least one month’s notice in writing given to determine the same on one of the quarter days applicable to the tenancy . . .

28. Therefore, applying the reasoning in both Mexfield and AP Wireless, rather than deciding between inferring a periodic tenancy or a contractual license,in the case of an individual an uncertain agreement is converted to a 90-year lease by virtue of section 149(6) LPA 1925.
29. As such, the operation of section 149(6) LPA 1925 could have significant ramifications. Where a potential issue arises as to whether an agreement is a lease or a license, parties should carefully consider their stance. Whilst in some cases there may be advantages in arguing that an agreement is not a lease, if the lease fails for lack of certainty, the result may instead be a lease for 90 years.
30. However, it should be noted that there are limitations on the application of section 149(6) LPA 1925:
    
    a. The section is only applicable to individuals. As such, the same did not take effect in the case of AP Wireless and will not take effect in any other case concerning a company.
    b. In Southward Housing Co-operative Ltd v Walker [2015] EWHC 1615 (Ch), the High Court distinguished Mexfield. The High Court found that aspects of the agreement were incompatible with the parties having an intention to create a lease for life. Therefore, there may still be scope for a court to avoid the application of section 149(6) LPA 1925 and the finding that a lease exists.

(E) SCOPE FOR CHANGE?

31. The authorities in respect of certainty of term are marked by much consternation as to the practical effect of the rule.In many of the relevant authorities, but for the issue of certainty of term, the agreement conveys an intention of the parties to create a lease. The Courts have therefore strained to give effect to a lease by implying a periodic tenancy or utilising section 149(6) LPA 1925.
32. In the UT in AP Wireless, as a postscript to his judgment, Edwin Johnson J expressed disquiet with the practical effect of his decision, considering it to be an “unsatisfactory one”. Similarly, in Prudential, Lord Browne-Wilkinson, with Lords Mustill and Griffiths concurring, stated that, “it is difficult to think of a more unsatisfactory outcome” and went on to state:

This bizarre outcome results from the application of an ancient and technical rule of law which requires the maximum duration of a term of years to be ascertainable from the outset. No one has produced any satisfactory rationale for the genesis of this rule. No one has been able to point to any useful purpose that it serves at the present day.

33. In Mexfield, Lord Neuberger stated at [34]:

[t]he law is not in a satisfactory state. There is no apparent practical justification for holding that an agreement for
a term of uncertain duration cannot give rise to a tenancy, or that a fetter of uncertain duration on the right to serve a notice to quit is invalid. [34]

34. Notwithstanding this criticism, in both Prudential and Mexfield the Court was reluctant to depart from the longstanding rule of certainty of term.[7] This position was maintained in the Court of Appeal’s decision in AP Wireless. Whilst Sir Geoffrey Vos, Master of the Rolls, noted the comments in the UT that the outcome of was unsatisfactory, he stated: “I am not sure that there is anything at this level that we can do about that”.
35. It therefore appears that, at least for now, the Court’s maintain their unwillingness to depart from the requirement for certainty of term in the absence of statutory reform.

(F) CONCLUSIONS

36. Despite much criticism of the practical effect of the rule, the requirement for a lease to be of a certain term is here to stay. Practitioners should not simply assume that a dispute over whether an agreement is a lease or a license will ultimately turn on the issue of exclusive possession. For those seeking to argue that an agreement is a license, the certainty of the term remains a point to be attacked.
37. AP Wireless makes clear that there is no general rule that a lease will only be considered to be uncertain if it either provides for a single term which was of uncertain duration or involves a fetter on the right to serve a notice that was of an uncertain duration. The issue of certainty should be determined primarily by reference to the intention of the parties, as ascertained from the agreement.
38. Where an agreement on the face of it is uncertain, the Court has a choice between inferring a periodic tenancy agreement or upholding the agreement as a contractual license. A periodic tenancy should only be inferred where it is consistent with the intention of the parties, as set out within the agreement. In the case of an agreement in favour of an individual, section 149(6) can operate to convert the agreement to a lease for 90 years. Landlords arguing that an agreement is uncertain should therefore be cautious of the application of this section.

Eloise Marriott
September 2025

[1] Lace v Chantler [1944] KB 368 (CA), 370 – 371.

[2] Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386 (HL), 394G.

[3] Mexfield Housing Co-Operative Ltd v Berrisford [2011] UKSC 52, 33.

[4] Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386 (HL), 394F – G.

[5] AP Wireless II (UK) Ltd v On Tower UK [2025] EWCA Civ 971, 36, 38

[6] AP Wireless, 50

[7] Prudential, 397A; Mexfield,115

Whilst every effort has been taken to ensure that the law in this article is correct, it is intended to give a general overview of the law for educational and/or informational purposes. It is not intended to be a substitute for specific legal advice and should not be relied upon for this purpose.

This article represents the opinion of the author and does not necessarily reflect the view of any other member of St Philips Chambers.