A licence to occupy can be a useful agreement for occupiers such as a lodger or live-in nanny. If however a Landlord grants exclusive possession for a term, and in return for a payment of rent, it will be a Tenancy. That matters because Licensees have far fewer rights than Tenants as Landlords are obliged to protect Tenancy Deposits in a recognised scheme but are not obliged to for Licensees. Licensees also have fewer rights than a Tenant who would have security of tenure.
In Islington London Borough Council –v- Green Live Limited T/A Green Live Estate Agents (2017). Green Live pleaded guilty to two offences under the Consumer Protection from Unfair Trading Regulations 2008, SI 2008/1277 relating to the issue of “Licences to occupy” where in fact they should have been granting Tenancies. This is believed to be the first case of its kind in the country.
Landlords and Letting Agents should review their existing Agreements. If it is a sham licence where the Tenant has exclusive possession for a term in return for a payment of rent, then the Landlord should enter into an Assured Shorthold Tenancy Agreement in place of the sham licence. If the Landlord is looking to evict a Licensee, then the Landlord should take great care to commence possession proceedings as if the Licensee was a Tenant.
This case shows that Local Authorities are taking a greater role in the enforcement of standards in the Private Rented Sector. Landlords and Letting Agents can face civil penalties and criminal prosecution should they wrongly issue these agreements in order to avoid the Licensee having security of tenure.