This is day 3 of my 31 days of tips on tenancy agreements series. To see the rest of the series click here.
Is your agreement 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 you 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.
There are a number of 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 agreement.
If the landlord provides ‘services’. For example, cleaning, and 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 do the cleaning. 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.
(For more information see here for five tips on how to avoid a tenancy when renting out a granny annex.)
Licenses will also be created in the following situations:
- When an employee is required to live in the property as part of his employment
- Residential occupation of boats
- (Sometimes) where the occupier is living in property as a beneficiary under a charity (such as an almshouse)
Note that if you are letting a room to a lodger, you can purchase a lodger agreement from the documents shop on my Lodger Landlord site.
Do you have any comments on this section? Have I left anything out? Have you had any interesting cases which hinge on the difference between a license and a tenancy? Do you think this distinction should be abolished?
Note that on my Landlord Law site, I have a >> Which Tenancy agreement ‘trail’ which will guide you by question and answer to find out which is the most appropriate type of agreement for your situation.
Tomorrow I will be looking at the different types of tenancy
NB Read about my tenancy agreements service here.
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Great – nice and simple! Could you confirm that all live aboard boats have to be let on a license basis? Can you point me in the direction of any case law on this?
I let my boat out on AST (1 yr), I will be issueing a S21 (1) (b). However, I am now stopped in my tracks by reading your article!
any help?
So far as I am aware it is not possible for there to be a tenancy of a boat as you can only have a tenancy of ‘land’. As it is floating on the water, a boat cannot be land.
I think there was a government consultation about this a few years ago but I have no idea what happened with it.
The leading case, if you want it, is Chelsea Yacht and Boat Club Ltd -v- Pope [2000]: http://www.bailii.org/ew/cases/EWCA/Civ/2000/425.html
You ‘AST’ will probably take effect as a license agreement so most of the terms and conditions will probably still apply.
Can you clarify the point about providing services? For example, where the landlord is not resident, but the landlord provides a weekly cleaner included in the rent. Does the fact that a third party enters to clean mean that the occupier is not granted exclusive possession therefore it can’t be a tenancy (since provision of services isn’t mentioned in Schedule 1 HA1988)?
If so, does this mean that there is no covenant of quiet enjoyment?
It would be an easily exploitable loophole if it were the case that a landlord could undermine an occupier’s status merely by including a cleaning service, with the occupier unaware of its effect on his security of tenure; so, isn’t it the case that the tenancy would still be a tenancy on the principle established in Street v Mountford?
@westminster Interesting point. I think it would depend on the circumstances and the intention of the parties.
For example if it was a genuine serviced appartment then this is a license. However I don’t think a landlord can prevent a tenancy just by arranging for a cleaner to go round once a month.
But it is always possible that he might I suppose. I don’t think there is case law on that point – but I will have a look.
Thank you, Tessa. So, is it the case that the occupier of a serviced apartment (or hotel) is a licencee because he is not granted exclusive possession (because of services provided) and/or the fact that the property might not be the occupier’s only or principal home? (Or perhaps because there may be no term certain?)
What I am trying to pin down is why the provision of services may in itself prevent a tenancy arising, and the legal basis for this.
I think probably each case would be decided on its own facts and would be a combination of:
- whether or not the occupier had exclusive occupation
- whether the landlord had the right to move him to another room
- whether services were provided
- the intentions of the parties, and
- the principle home and fixed term points you make
etc
If you don’t mind, I would prefer not to be ‘pinned down’ as I am a mere seeker after truth such as yourself …
Mind you, that said, I have just dug up the case of Huwyler v. Ruddy http://pntodd.users.netlink.co.uk/cases/cases_h/huwyler.htm
Sorry, didn’t mean to pin *you* down but rather I was trying to get a handle on it all. As you say, it does seem to be a case of judging each case on the facts.