Does anyone else use licence agreements?

Reply to the comment left by "Mary Latham" at "24/12/2013 - 14:27":

The hard bit is that you can have someone is a HMO that is clearly on a valid licence, someone else that is clearly a tenant with full rights then a 3rd person that started on a valid licence then without the landlord knowing become a tenant.

The 1st person has paid for 7 days a week in the HMO, but goes back home to the house they own at the weekend; they are straying in the HMO due to the location of their current customer (or employer).

The 2nd person is living in the HMO as their only home.

The 3rd person was going home every weekend to the house they own, until their wife decided otherwise.

At least if I make a fork, I know it will not transform itself into a spade, if only the law was as simple with HMOs.

I've been intrigued by this issue for a while. Just before Christmas I met with an old tenant who had set up a room letting agency which is doing well. He put his success down to using licence agreements and, when I challenged him on their validity, he said his solicitor had advised that they were legal providing the landlord was supplying at least 2 key utilities - in their case it's a regular cleaner and internet.

I bought my first HMO with licence agreements in place but was told by the council solicitor that the tenant still had a right to an AST. I agree that licences would be far preferable, especially in terms of anti-social behaviour, but don't feel I can risk it until a case has been tried and tested in court,

Reply to the comment left by "HMOLandlady " at "28/12/2013 - 18:33":

Well he should be reporting his solicitor for naff advice.

Internet????? dont make me laugh.

Cleaners? very shaky ground.

Support services can lift a tenancy out of protection and make it a licence but the level of support services must be quite high and genuine. We are talking 24 hour cover with meals provided kind of thing.

Bear in mind that the issue before Judge Templeman in Street v. Mountford was in no small part based the genuineness of the contractual provisions, to separate it from being just a construct aimed at removing an occupier's security of tenure.

In the case of Paddington Churches Housing v. Boateng the accommodation came on condition that Boateng particpate in a support programme. Once in residence he stuck two fingers up so PCHA terminated his licence. The matter went to court who held that Boateng was a tenant, not a licencee because the support plan was a condition binding on the individual not the occupancy. This is how seriously the courts take the matter of supported services. The good will of the landlord organisation is neither here nor there.

Admittedly there is no clear line in the sand between what constitutes a level of service that would eradicate a person's tenancy and those that would not but internet and cleaners would certainly have me rubbing my hands together and saying "My arse".....which is a legal term of course haha

Interesting point, however, I bet there aren't many HMO tenants using the court route so I guess it's down to the individual landlord to decide whether or not to risk it. Word of warning to anyone thinking of this though - the reason I came into contact with a council solicitor was due to my illegal eviction. I found the tenant naked and near dead from a cocktail of drugs and his room had been emptied. Whilst he was in hospital his friend cleared his remaining paltry belongings, I presumed he wasn't coming back as he was in ICU and the next thing I knew I had a phone call from "Ben of the South" threatening to haul my arse through court to make an example of landlords.

Reply to the comment left by "HMOLandlady " at "28/12/2013 - 19:25":

Serena I do more threats than prosecutions. Learn to call the TRO's bluff haha.

You can bet your life the tenant didnt tell the council's solicitor the full story and I for one wouldnt go off half cocked in a case like that. 80% of the stuff tenants tell TROs, when investigated turn into a pile of crap but we still have to investigate them, just like the police do.

Having said that the two cases I dealt with on Xmas Eve and Xmas day arent rubbish and I've got injunctions on both of them.....now if only I can find the bloody landlords to serve them! Still. Monday's another day

Now that you two have put your pants back on!!!

This is actually a VERY important issue. The fashion for converting properties to HMO to increase the return is running wild and I see new landlords entering this market every day. It worries me because they seem to know only about the rental income and have very little idea about the very hard work, regulation, legislation, amenity standards, fire safety etc., they may not intend to be bad landlords but their ignorance will make them break the law. The issue of Licences verses ASTs is a big part of that ignorance and many new landlords set up their business model based on "kicking them out" when the misbehave or don't pay their rent. They become quite petulant when I point out that they cannot do this or at least by doing this they risk HUGE consequences. The top line for an HMO is high but the bottom line is often must less than these landlords imagine because the have made no provision for rent arrears, damages etc. I am not saying that all tenants in an HMO are bad tenants, far from it many are very good tenants but some tenant groups can be challenging and we cannot simply ignore the law to meet those challenges. Anyone entering this, or any rental market, need to understand the realities and to have systems and a war chest to make it work without removing a tenants legal rights.

If a property is only occupied by people paying rent and it is their only UK residence 99.9% of the time they are tenants not licencees and they have the rights of an AST regardless of the contract they have signed.

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Mary Latham - follow me on Twitter @landlordtweets

Also see http://www.amazon.co.uk/dp/1484855337 for the perfect present for landlords for under a fiver

Thank you for all the comments so far, and for Mary's emphasis on how very important this can be for HMO landlords.

I do understand why most people are advising that the HMO room lettings would be tenancies regardless of whether they are called licences or not. However, apart from Ben referring to support services, nobody seems to have mentioned other conditions that can change a tenancy into a licence (with non-resident landlords).

Having experience of working in several local authority housing departments, I know that some councils grant licence agreements to asylum seekers, for example, and these are the person's only accommodation and the accommodation is self-contained, so going by the standard rules in Street v Mountford these would be tenancies, not licences. I'm also aware of the licence agreements used by the companies that provide accommodation (self-contained, and shared accommodation) to asylum seekers on behalf of UKBA, and again these are licence agreements, but under the normal rules of Street v Mountford they would be tenancies. These types of lettings do not fall within the temporary homelessness accommodation criteria, so this does not appear to be the reason for them being valid licences.

Therefore, there are factors that can make a letting into a valid licence agreement rather than a tenancy, and having looked at the small print in Street v Mountford the case does actually allow for this in some circumstances. In order for my HMO room lettings to be valid Licences rather than tenancies, then I have to meet those criteria, e.g. provision of multiple services, reservation of right of entry, clear intention of the letting being a licence not a tenancy, etc, etc. Of course the services provided do have to be real and genuine, and could include cleaning, but this would not be enough on its own.

I did initially specify a 7 day notice period, but having subsequently had discussions with the Tenancy Relations Officer it was pointed out that although the agreements could be accepted as Licence Agreements, I was still bound by the Protection from Eviction Act and therefore had to give 28 days notice, so my agreements have been changed accordingly. This is not a problem as the notice is now served as a precaution at the start of the occupancy, like most letting agents do with tenants on ASTs. Thus, this is one example of an issue/problem I've come across, but have now dealt with.

Is there a wording for a S21 when you use a license, but wish to protect yourself if it is deemed to be an AST? (Without tipping the tenant off that the license may not be enforceable.)

I use a Notice to Quit, not a s21 Notice Seeking Possession. If it is deemed to be an AST, then a s21 or s8 Notice would be required. As far as I know there is no reason why all three notices couldn't be served, (if relevant), such that if one fails then one or more of the others could still be accepted as valid, but it does create extra paperwork, and if your licence agreement does not encompass the serving of s21/s8 notices as an "in the event of ......., then a s8 and/or s21 can be served in the alternative", then the serving of these could be used as evidence of it being an AST instead of a licence.

As already mentioned, simply calling an occupancy agreement a "licence", does not make it a licence, the legal presumption is that it is a tenancy, so if you want to create a licence you have to overcome that legal presumption by structuring the agreements and services provided in such a way as the only conclusion can be that it is a licence. But, if you are willing to do this, then it offers many potential benefits for you as a landlord, and it can also benefit the occupant as well.

OMG! I've been reading about licences vs tenancies until my eyes water and am still not sure which route to take. I have just begun to let rooms to tenants recommended by my local council and they're telling me to have each tenant on a licence for the specific reason of being able to get rid of a problematic tenant if/when it becomes necessary.

I'm certainly intersted in what Robert M says about "meeting certain criteria" in order for a licence to be valid. If someone could explain what that criteria might be, I would be most grateful.