I got asked by someone today whether they could use a license agreement for a short let. So I thought it might be an idea to do a post on licenses and make a few things clear.
1. A license is not a different sort of tenancy
It is a completely different type of let. As I explained here on my Foundations in Law series, a tenancy is a type of ownership of land. A license, on the other hand, is a permission which prevents occupation of property from being trespass. They are TOTALLY different.
In particular you can’t give a tenant a ‘license’ as a sort of probationary tenancy which you can end without going to court if the tenant doesn’t behave himself. Or because the tenant is only renting the property for a short period of time. It doesn’t work like that.
2. Street v Mountford
In 1985 there was a landmark case in the House of Lords called Street v. Mountford. What this told us was that IF you have:
- exclusive possession of land / property
- at a rent
- for a term
it is a tenancy.
3. A fork is not a spade
The case also made the point that you cannot turn a tenancy into a license simply by getting the parties to sign a piece of paper headed ‘license agreement’.
Or as Lord Templeman said,
“The manufacture of a five pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade.”
4. When do you have a license then?
When the three conditions set out in Street v.Mountford don’t apply.
So if there is no rent, ie the occupier is living there rent free, it is not a tenancy.
However the most common way of ensuring the occupation is a license is by creating a situation where the occupier does not get exclusive possession. For example if occupiers share a room as in a hostel dormitory, or if cleaning and meals are provided as in a hotel.
5. Whats the point of pretending?
Street v.Mountford was heard in 1985. At that time rented property was regulated by the Rent Act 1977. Under this act, once a tenancy had been granted it was exceedingly difficult for the landlord to end it. Hence landlords attempts to get around the legislation by creating ‘licneses’.
Now however it is quite different. Under the Housing Act 1988 the default tenancy type is the assured shorthold tenancy, where a landlord can recover possession as of right by serving a s21 notice and then getting an order for possession. There is no point in trying to create a license. Particuarly as you still have to get a court order for possession under most licenses (save for lodger situations).
Finally, I should perhaps make it clear that this blog post has nothing to do with licenses requred from Local Authorities for some HMOs. That is a whole different ball game (and maybe a different spelling, but licence /license has always rather defeated me).