The dispute in London Development Agency v Nidai involved some unusual premises. Each of the defendants had what purported to be a 20-year lease of a lock-up shop, granted in 2002/2003. The shops were built to overhang a river. They were constructed on joists which rested on the retaining walls of the river on each side and were attached to an existing bridge at the front of the shops.

The freehold of the land of which the shops formed part was bought by the London Development Agency (LDA) in 2006. The LDA sought possession of the shops from the defendants on the ground that the "leases" were really licences, which did not bind the LDA.

The "landlord", a company referred to in the case as Bentley, itself had the benefit of three agreements. Under the "Bridge Agreement", the owner of the bridge granted permission to erect the shops and to connect them to the bridge. Under the "Retaining Walls Agreement", the owner of the river walls licensed the erection of the premises to tie into the retaining walls of the river. Under the third agreement, the "River Agreement", the owner of the riverbed consented to the erection of the shops over the river. The River Agreement was the key agreement, since title to the area occupied by the shops could only have been derived out of this agreement.

By the time the case reached court, Bentley had conceded that the River Agreement was a mere licence, and as such not binding on the LDA. A licence does not create an estate in land and cannot bind a successor in title to the licensor. The LDA therefore argued that Bentley had no title to grant leases of the shops to the defendants.

The High Court found in favour of the LDA. It concluded that all three agreements were licences, not leases. They were not granted for a certain period of time and did not grant exclusive possession of a defined area. Their main purpose was to regulate an arrangement which might interfere with the integrity of the structures to which the premises were to be attached. Accordingly, Bentley did not have an interest in the land which entitled it to grant leases. Any rights which the defendants may have had ceased when the LDA purchased the property. As licences, the agreements with the defendants were not binding on the LDA, which was therefore entitled to possession.

Things to consider

The High Court did not consider the case of Bruton v London & Quadrant Housing Trust. In Bruton, the House of Lords ruled that an agreement had created a lease as between the landlord and the tenant, even though the landlord did not have a proprietary interest in the property. In Bruton, as in Nidai, the landlord's interest was in the nature of a licence only. The difference between the two cases is that in Bruton, the tenant was attempting to enforce an implied repairing obligation against its original landlord. In Nidai, the dispute arose between the "tenant" and a third party, who could not be bound by the arrangement.

Nidai also emphasises that it is important to investigate the landlord's title to grant a lease, even where the term being granted is relatively short. The River Agreement was noted against the LDA's title at Land Registry. It is important to appreciate however that simply because something is registered at Land Registry, this will not make it bind successors in title if (like a licence) it is not the kind of interest which is capable of binding successors.