Renting property on a license

I had a gentleman ring me up yesterday. He had lots of overseas tenants (he told me) but they caused a lot of problems and  he was getting fed up with it.

He would prefer to rent to them on licenses in future.  How could he do this?

It made me think that I have not done a license post for a while. so here goes.

Street v. Mountford

The main reason why licenses for residential occupiers are, in most cases, not an option, is the House of Lords case of Street v. Mountford in 1985.

Street v. Mountford made it clear that if the circumstances of a letting are that of a tenancy (ie payment of rent and exclusive occupation) then it will be a tenancy.  The fact that the tenant may have signed a piece of paper saying something else will not change anything.

All that will happen is that the landlord will probably use the wrong eviction procedure (thinking it is a license) and have his case  rejected by the Judge and thrown out.  And perhaps be ordered to pay the tenants legal costs.

‘Proper’ licenses

There are some situations where a license agreement will be created anyway.  A non exhaustive list is:

• lettings of accommodation on boats (eg houseboats)
• service accommodation (ie for staff members required to live there for their job – such as a caretaker)
• lodgers renting a room in their landlords home
• hotel or hostel accommodation where, either the room is shared by several people on individual agreements  and/or where the owner has regular access for cleaning
• (sometimes) where the occupier is living at the property as the beneficiary of a charity rather than as a teannt

Artificial licenses

Sometimes landlords attempt to create a license by putting clauses in the agreement saying, for example, that the landlord has the right to move the occupier to another room, can require him to share with another person, needs access for regular cleaining, etc.

Whether these ‘work’ or not  will depend on what the situation actually is on the ground.

If in fact (as in the Street v. Mountford case) the occupier lives in the property without interference from landlord, or (for example) no cleaning is ever done, then the ‘license’ clauses will be of no effect, and the occupion will be a tenancy.

The benefits of a license – perceived and real

I suspect that landlords often want to have a license because they think it means that they can then just evict the occupiers themselves without having to go to court first.

However this is not so.  Under the Protection from Eviction Act 1977 virtually all residential occupiers have the right to stay in a property until a court order is made.  Whether they have a tenancy or not.

So if they just turf the occupier out, he will be able to claim compensation.

The only situation (or the only common situation) where a possession order from the courts is not needed, is where the occupier is a lodger living in the landlord’s own home.  I discuss this in my Lodger Landlord site.

The main advantage of a license agreement for a landlord is that the notice period is a bit shorter – not less than  four weeks rather than not less than two months/8 weeks.

However set against that is the disadvantage that you could lose your case if you have not set up the license properly.  In my view it is probably better just to accept that you have an AST and put up with it.

At least then you know where you stand and will be guaranteed possession should you need it, under the section 21 process.