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Tenancy Agreements 33 days of Tips Day 3 – Tenancy or License?

Tenancy AgreementsDoes your tenant have a tenancy or a license?

Law is never straightforward. Just to make things a little bit more complicated, in law, there is a difference between a License and a Tenancy.

A tenancy:

This is where the person renting the property actually own the land or property for a slice of time.  It is a different type of ownership from owning the freehold of the land, but it is nevertheless ownership.

This is why the Landlord is not entitled to go into the rented property without the tenant’s permission.  He no longer owns it (in a sense).  He has given it away in exchange for the right to receive rent, retaining the right to recover the property once the tenancy has ended.

A license:

This is where the occupier is not a trespasser because he has permission to live in the property.

Creating a license:

Now reading this, you may think (if you are a landlord) “I think a license sounds much better, I will let all my properties on license in future”.  The trouble is, it does not work like that.

It was decided in the House of Lords in 1985, in a case called Street v. Mountford that if the occupier:

  • Has exclusive possession of the property
  • Pays rent (which does not have to be a market rent),
  • For a term (a specified period of time, which can be ‘periodic’ ie from week to week or from month to month)

then the occupier will normally have a tenancy, and the fact that they have signed a piece of paper with ‘license agreement’ written at the top, will be irrelevant.

The most important of these is the right to exclusive occupation.  Not having this generally indicates that you have a license although this is not always the case.  Here are some common situations and signs by which you can recognise that someone does not have a tenancy:

If the parties ‘did not intend to create legal relations’. This will often be implied in family type situations where you allow a member of your family to stay and do not sign any form of legal or tenancy agreement.

If the landlord provides ‘services’  For example, cleaning, and (maybe) meals.  This is one reason why people do not normally acquire a tenancy of a hotel room.  Provision of services also means that the occupier does not have ‘exclusive occupation’ as the landlord has the right to go in, for example, to deliver the clean sheets, or clean the room.  I have written quite a lot about this on my Lodger Landlord web-site.

If the landlord has the right to move the occupier into another room. You need to be careful about this one though.  If the agreement says that the landlord has this right, but in reality, it is clear that it is not something which is going to happen, a Judge in any court claim will probably say that it is a sham and that the occupier really has a tenancy.

Licenses will also be created in the following situations:

  • When an employee is required to live in the property as part of his employment (eg live in nannies and housekeepers)
  • Residential occupation of boats (because you can only have a tenancy of land and a boat cannot be land)
  • Where you rent a room to a lodger in your own home, where you share living accommodation (find out more about this in my Lodger Landlord website)
  • (Sometimes) where the occupier is living in the property as a beneficiary under a charity (such as an almshouse)

Landlords and Rent to Rent

Landlords often think that if they are renting out rooms in a property under a rent to rent agreement, the agreements with the occupiers of the room will automatically be licenses.  Or they give the occupiers ‘license agreements’ thinking that this is the end of the matter.

However as you can see above, this is not the case and is a dangerous assumption.  Also, even if the agreements ARE licenses (and sometimes they will be) this does not give landlords (as many think) the right to evict them, say, on two weeks notice without going through the courts.  You can read more about this here.

Tomorrow I will be looking at the different types of tenancy

Landlord Law Tenancy AgreementsNB Find out more about my Tenancy Agreement Service on Landlord Law


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Tenancy Agreements 33 days of Tips Day 3 – Tenancy or License?


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