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).
David says
October 12, 2011 at 9:23 AMGood post. Last week I met a lady at a conference who said her brother was letting bedsit type houses under licences. As you do, I questions this as the facts do not match the paperwork. Section 3 Housing Act 1988 clearly says they only need exclusive possession of any part of the dwelling to have the AST. (slightly confusing as outside the Housing Act the rules can be different and focus on “essential living accommodation”). I had been talking about section 21 notices and deposit protection and what was evident was here was a landlord with a significant number of ASTs, with deposits and none of them protected because they were called licences.
Regarding License and Licence, CLG put out a very helpful comment on the press release in 2006 explaining that they felt Licence was the noun (I have a Licence) and License was the verb (you need to License your property).
mary latham says
October 12, 2011 at 10:09 AMTessa I am so pleased that you posted this. Many times landlords tell me that they use a Licence Agreement so that they can get tenants out “without trouble”. I am forever explaining that it is the reality of the letting not the name on the document that defines the type of contract and that the law will decide whether the occpier is a licensee of a tenant. What really surprises me is that it is not just landlords who get this wrong, many local authorities use licence agreements and in particular where they have a private sector leasing scheme the contracts often state that the property will be let under a licence agreement to tenants who are homeless.
I always tell landlords and local authorties that they can call the contract whatever they wish, since there is no legal requirement for them to use a written contract, but that if they ask a tenant to leave without going through the possession procedure they are breaking the law. I also tell them that if a deposit is taken it must be protected otherwise they are unlikely to be able to get legal possession. In fact landlords and local authorities who use inappropriate licence agreements are making their position weaker not stronger and I hope that they read this blog and realise this.I was at the NEC at a Landlords Show a few years ago when a speaker told a room full of people to use a licence agreement, as she does, to avoid all the legal requirments of an AST. I will be pointing people towards this blog in future because they look at me as though I was mad when I tell them
Tessa Shepperson says
October 12, 2011 at 10:26 AMI think that there is a lot of wishful thinking here. People don’t want to go to court for a possession order or protect their deposits, so they think that if they make something up it will get them off the hook.
Lord Templeman’s ‘a spade is not a fork’ quote is a really good one. I also often give the example of babies. You can’t turn a baby boy into a baby girl just by calling it a girl and dressing it in pink.
Likewise you can’t turn a tenancy into a license just by calling it a license and signing a differently headed form.
Ben Reeve-Lewis says
October 12, 2011 at 11:14 AMYes this is indeed a very common problem that comes my way. Many amateur landlrods find it very hard to understand Judge Templeman’s spade analogy.
@Mary It is often legally correct for homelesness cases to be on a licence. (and thanks for clearing that linguistic thing up David, I had problems with that too) Where people are placed under section 188 (still having their claim investigated) the case of Mohammed v. Manek and Kensington & Chelsea kick in where the judge held that it wouldnt be appropriate for a tenancy to be in force where a person’s homelessness claim was under investigation.
The argument being that if you stick soeone in TA (industry parlance for temporary accommodation) and 2 weeks l;ater decide they arent actualy homeless or arent in priority need it would be ridiculous if you then had to go through the full tenant eviction process.
mary latham says
October 12, 2011 at 3:00 PMI can see that Ben but I am talking about those councils who are using the accesss schemes to reduce their legal obligations to those who they can place for a year in the PRS. If the tenancy goes beyond the investigation stage I am fairly certain that the courts would call it a Tenancy and therefore the occupiers should be made aware that their legal position has changed and that they now have the full legal rights of a tenant. Local Authorities are not immune to the law and should, in my opinion be setting a good example – I know that you will agree with that.
One officer told me that they know that it is actually an AST but that telling the tenants that it is a Licence Agreement keeps them on their toes – very naughty
Ben Reeve-Lewis says
October 12, 2011 at 9:13 PMYes Mary, once the decision has been made the applicant becomes subject to what is known as the 192 Duty (full housing duty), they may continue to stay in the temporary accommodation provided for them whilst they were under investigation or they may be placed elsewhere but it will be a kind of tenancy at that point.
If it is council owned it is often termed a ‘Non Secure tenancy’, which is a weird misnomer but there you go, or it may be an AST.
The officer telling the occupier they are under a licence is out of order but I have to admit, I do have a smile of recognition. It’s a tough world in the frontline