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Case law: Ruling clarifies when license is in fact a tenancy

Property owners and managers intending to grant a licence should ensure that agreements entered into with the occupiers are consistent with being a licence, and the way the agreement is implemented is consistent with a licence – or risk a tenancy being created in law.

Legal Alert

This update was published in Legal Alert - June 2017

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

A management company contracted to look after an empty former care home for the owner. The company entered into an agreement with two guardians whereby they would live in the property to help keep it secure against vandalism and trespassers.

Under the agreement with one guardian, he could occupy two rooms and share a living room, kitchen and bathroom. The agreement stated it was a licence and not a tenancy. An individual occupying a property under a tenancy has far more legal rights than under a licence. This includes the right to require the landlord to maintain the property, and protection from arbitrary eviction.

However, the name or label the parties give to their arrangement is not conclusive. It also depends on matters such as the intention of the parties, and whether the occupier has exclusive possession of the property or part of it. The way this agreement was drafted was consistent with a licence.

Two years later, the company served notice to quit on the guardian. He claimed he was a tenant and could not be evicted.

The court found that what had happened in fact did not tally with what the agreement said. For example, under the agreement the guardians would agree how they would share their space. However, in reality the guardian discussed the room allocation and any changes, with the company, without involving the other guardians.

Similarly, the agreement did not give a guardian the right to occupy any particular room. The guardians chose their own rooms, had a sign with their name on it on the door, were given the keys to their respective rooms, and were able to exclude other guardians from going into their rooms. The guardian therefore had exclusive occupation of his rooms.

He also had exclusive occupation as against the company. Relevant factors included:

  • The company's rights to enter the property (to inspect it and make repairs) were limited, just as in a tenancy situation
  • The company had no power to move guardians from one set of rooms to another
  • If the guardian did have exclusive possession, that would not prevent the company from exercising any statutory duty
  • The company did not have any permanent staff at the property, or provide any services to the guardians

In addition, whilst the company regulated certain matters, there was a no-smoking rule and overnight guests were not allowed. These were also matters commonly regulated by tenancy agreements.

The court ruled that the guardian had exclusive possession of his two rooms against both other guardians and the company, therefore, he was a tenant of them (although not the shared rooms).

Operative date

  • Now

Recommendation

  • Owners and managers of property intending to grant a licence should ensure that agreements entered into with the occupiers are consistent with being a licence, and that the way the agreement is implemented is also consistent with a licence, or risk the court finding that there is a tenancy

Case ref: Camelot Property Management Limited and Camelot Guardian Management Limited v Greg Roynon, Bristol County Court C01BS354

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.