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BLOG: Tenant or Lodger/Licensee? An Important Distinction

Mike Gossage

I have acted on several cases where there has been confusion about the rights of a person occupying a residential property.

Confusion has been on both sides. Owners of properties often seek advice on the rights of occupiers; usually in hope that such rights are limited. Conversely, occupiers often assume they have more rights than they perhaps do.

The first question that owners and occupiers must ask is whether there is a tenancy or a licence in place. The position is not always immediately clear but the distinction is very important.

Who has more rights – a tenant or licensee?

A tenancy creates an interest in the land and it provides for a landlord and tenant relationship with the landlord needing to comply with many legal obligations.

A licence does not create an interest in the land and provides for a licensor and licensee relationship which is more informal.

In brief, a tenant typically has more rights and protection than a licensee or lodger.

Tenancy or Licence? How to tell the difference

The difference between a tenancy and a licence all depends on what has been agreed and the circumstances of occupation.

A tenancy requires exclusive possession. If an occupier is entitled to exclude others from entering the building or a defined area (except for access) then they will likely have a tenancy.

A licence typically provides permission to use land on terms agreed; an example being an owner allowing somebody permission to live at the property with them. This is not exclusive possession because the owner still exerts control.

How this difference may affect you

Whether you are an owner or an occupier of a property the distinction is important. Perhaps the most important aspect relates to the owner’s ability to evict the occupier if they do not leave of their own accord.

If a tenancy is in place and the occupier is unwilling to surrender possession then the landlord must serve notice. This provides the tenant with some security in knowing that in order to be evicted certain criteria must apply. Either:-

  1. The tenant must be in sufficient arrears (two months); or
  2. The fixed term must have expired and the landlord must have complied with a range of obligations (valid protection of the deposit, having a landlord licence/gas safety certificate/EPC in place where necessary and having provided the tenant with a copy of the government’s ‘How To Rent’ checklist at the outset of the tenancy). This only applies to assured shorthold tenancies (ASTs).

If neither of the above applies then the landlord will find it difficult to seek possession. There are other grounds, for example applying to court as a result of a tenant’s antisocial behaviour, but these scenarios are less common and are more difficult.

The situation for lodgers/licensees is much different. Owners simply need to serve notice withdrawing permission to remain at the property and providing reasonable time (typically 14 days) to leave the property.

Common Misconceptions

We have seen parties on both sides of the argument come unstuck when not understanding the rights of an occupier.

Property owners have understood an arrangement with a ‘lodger’ to have been informal when in fact we have advised them a tenancy is likely in place. With there being no rent arrears and with the owner having not complied with their obligations as a landlord this presented difficulties in seeking possession. Such scenarios can prove very costly for owners as they often find they must simply negotiate a voluntary surrender with the tenant.

There is also a misconception among owners that not having a written agreement in place, simply labelling a document as being a licence agreement or calling an occupier a “lodger”, will be enough to prove that only a licence is in place. This is not necessarily the case and courts will consider all relevant factors when determining the type of agreement.

I have also seen examples where occupiers have considered themselves as tenants despite not having exclusive possession. Even when occupiers accept they are not a tenant they can also wrongly assume that if they have some sort of beneficial interest in the property (i.e. they are owed money from any sale of the property) then this will stop the landlord from being able to seek possession. Again this is not necessarily the case and it is the legal interest in the property, as opposed to the beneficial interest, which is the important factor.

The importance of knowing your rights

It is important to know your rights no matter which side of an arrangement you are on. This is particularly important if the owner/occupier relationship turns sour, which so often happens.

If you are an occupier you should make sure you are certain of your rights to ensure you avoid a scenario whereby 14 days notice can be served on you to vacate the property.

If you are an owner you should make sure you are certain of your rights to be able to seek possession of your property. Should you ever wish to sell your property (with vacant possession) or move into your property then you may be barred from doing so.

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