I have received the following email from one of our readers:

My boyfriend and I moved into a 7 person flat share beginning of Nov 2008 where we were advised by the tenant moving out that there had not been a lease agreement with the Landlord via the letting agents for a while.  It had expired and the agents hadn’t renewed despite the tenant asking. Anyway they said it worked for them to not bother with a new lease as the turn over of tenants was fairly regular so they started a system that a new tenant coming in just paid the tenant leaving the bond.

I have been told by the agency who we rent the property through that due to a government law bought out in April 2007  regarding deposits they would be unable to transfer the names from tenants that were on the lease at the time to my name therefore leaving me in a position where I will not be able to get the deposit back should there be a situation where we need to leave and are not replacing out selves with another tenant.  Is there anything i can do about this?

This is not the first time I have been consulted in a case where ‘tenants’ move in and move out of a property without signing any form of tenancy agreement, often where the original tenants who signed the tenancy agreement have long gone.

Are they tenants or lodgers?

It raises a number of legal problems.  If the original tenants are still living in the property, the incoming occupiers probably have the status of lodgers.  However what is the situation when all the original tenants have left?  You can’t really have a house full of lodgers under a tenancy where the tenants are no longer there.

Here are two suggestions -

• the occupiers have an oral tenancy, or
• there has been some sort of implied assignment

I would favour the oral tenancy argument, perhaps on the basis that they have a tenancy of their own room and shared use of the common parts.  What do you think?

What about the deposit?

And what is the situation regarding the deposit?  If this was protected (and it may not have been) it would have been protected with one of the three tenancy deposit companies, under the names of the original tenants.  Is there any procedure whereby it can be paid out to the current occupiers?  The original tenants won’t be interested as they will have been repaid by the incoming occupiers.

My advice to both landlords and tenants, is never allow this sort of situation to develop. It is a lazy approach to letting which benefits neither party, and which can be very prejudicial to either.

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

Day 15 – Should you use a lodger agreement?
This may seen unnecessary for an informal lodger situation but it is best to have one, just in case problems arise

Day 16 – Should you take deposits and use an inventory?
Deposits are useful protection if your lodger breaks something, and an inventory is essential for working out if any damage has been done, particularly over a long period

Day 17 – How much paperwork and record keeping is involved?
This post gives a useful list of all the paperwork involved in having a lodger

Day 18 – How should you behave towards your lodger?
Making friends with your lodger, privacy issues, and increasing the rent?

Day 19 – How should you deal with problem lodgers?
Sets out an action plan

Day 20 – How do you evict a lodger who won’t go?
Most people will never need this post

Day 21 – What should you do when your lodger leaves?
Dealing with the last day procedures

If you take in a lodger, I hope the series was helpful for you. If you have any questions or comments, please make these on the Lodger Landlord site.

Like

Unlike

Day 8 – What about tax and council tax?
This tip looks at the government’s rent a room scheme, and SpareRoom.com’s Raise the Roof campaign.

Day 9 – How do you find lodgers?
Discusses various methods such as student accommodation offices, shop windows and the internet.

Day 10 – How do you draft adverts and deal with enquiries?
This tip stresses the importance of safety, as criminals have been known to target lodger adverts.

Day 11 – How do you interview lodgers?
Looks at preparation for the interview, suggests questions to ask and discuss, and looks briefly at deposits

Day 12 – What checking and referencing is needed?
Discusses things to take into account when coming to a decision and describes the referencing process

Day 13 – What about rent and housing benefit?
Discusses the thorny problem of how much rent to charge, and looks at the Local Housing Allowance and the problems associated with taking in lodgers on benefit

Day 14 – Should you have house rules?
These are in addition to a formal lodger agreement and set out more domestic arrangements

The final week of tips starts on Monday 15 February with a post on lodger agreements, leading up to tips on dealing with problem lodgers and the day your lodger leaves. Please visit (www.lodgerlandlord.co.uk), to read them. Please feel free to add any comments to the tips, we would love to hear from you …

Like

Unlike

Day 1 – What is a lodger?
This looks at whether there is a legal definition of a lodger and gives advice on avoiding creating a tenancy.  There are some interesting comments on this tip.

Day 2 – Have you got permission to take in a Lodger?
This looks at the various permissions necessary before you can rent out a room in your home.

Day 3 – Have you got proper insurance?
People don’t always realise that taking in a lodger can invalidate your insurance.  This tip looks at how to avoid this.

Day 4 – Is your property in a proper condition?
Altough lodger landlords are not bound by the landlords repairing covenants as set out in the Landlord and Tenant Act 1985, this does not mean that they have no obligations at all …

Day 5 – Have your gas appliances been tested for safety?
Lodger landlords are bound by the gas regulations, and this tip sets out what needs doing and also has some safety advice

Day 6 – Do you have the right furniture and furnishings?
This tip looks at getting the room ready for your lodger, and discusses your legal obligations

Day 7 – Will taking in a lodger turn your property into an HMO?
Something very much to be avoided if at all possible,  this tip explains how

The daily tips continue on Monday 8 February with a post on tax and council tax.  Please do visit (www.lodgerlandlord.co.uk), and if you want to leave any comments on any of the posts, we would love to hear from you …

Like

Unlike