Landlords like the idea of letting on a licence rather than a tenancy agreement – but in nearly every case the decision can work out a mistake.
The attraction of a licence is a four-week notice period for the landlord, compared with double that for an assured shorthold tenancy agreement.
The problem is only certain lettings are allowed on a licence – and in most cases they do not apply to buy to lets or shared houses in multiple occupation (HMOs)
What property is rented on a licence?
Only certain lettings can be done on a licence, including:
- Accommodation on a boat
- Service accommodation for live-in staff, such as caretakers, security guards and cleaners
- Lodgers with a room in the landlord’s home
- Hotel or hostel rooms shared by tenants with individual agreements, or when access is required for regular cleaning
- People living as a charity beneficiary instead of a tenant
What are the rules of rental licences?
Street v Mountford, a case heard before the House of Lords in 1985 set a precedent for rental licences.
The judges decided if the room or property is let under terms generally found in a tenancy agreement, like regular rent and exclusive occupation, then there’s no licence but a tenancy.
A landlord cannot bypass the rules by asking the tenant to sign away their rights with a licence.
What if landlords create a rental licence that is not valid?
Setting up a licence that is not valid could result in the landlord following the wrong eviction procedures. A judge is likely to throw the case out and may order compensation or costs to the tenant.
Writing clauses in to an agreement won’t help. A common one is a right for the landlord to move the renter in to a different room.
If the disputed licence clauses never come into effect, then courts will probably view the agreement as a tenancy.
Are there any benefits of renting on a licence?
Not really. Despite the reduced notice terms of a licence, the Protection from Eviction Act 1977 still applies, giving almost all residential occupiers the right to stay in the property until a court order is issued.