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Licences for Occupation - Is Your Licence Agreement Actually a Lease?

on Thursday, 27 April 2017.

A ruling in the recent case of Camelot Property Management Limited and another v Roynon is likely to have significant...

...consequences for guardian property companies who use licence agreements to place occupiers into properties and serves as a warning to landlords in general.

What is a Licence Agreement?

A licence agreement gives the licensee permission to do something on the licensor's property. An example of where this type of agreement is commonly used is where a person lets a spare room in their property to a lodger. Licences can usually be terminated relatively easily and on short notice.

In contrast, a tenancy agreement will grant the tenant exclusive possession to the property or an area of the property for a specific period of time. Tenants have more protection and security than licensees and it is more difficult and time consuming for a landlord to terminate a tenancy than a licence.

Facts of the Case

Bristol City Council owned an elderly people's residential home which was unused. They engaged property guardian company, Camelot Property Management Ltd, to place 'guardians' into the property in order to guard against the risks of leaving the property empty.

One guardian, Mr Roynon, entered into an agreement (the Agreement) to occupy two specific rooms, together with access to a communal kitchen and bathroom. Only Mr Roynon had access to the two rooms, which he was able to lock.

The Agreement stated that it was a licence and that exclusive possession was not granted to any part of the property, including the two rooms.

When notice to quit was served, Mr Roynon refused to vacate, claiming that he was an assured shorthold tenant and therefore had statutory rights to remain in the property unless the appropriate procedure was carried out.

Decision

Bristol County Court held that Mr Roynon had exclusive possession of the two rooms and that the agreement was therefore an assured shorthold tenancy, notwithstanding the fact it was labelled as a licence.

The Court found that although a degree of access and control of the rooms was retained by Camelot, the terms of the agreement were not inconsistent with exclusive possession, since landlords often retain the right to enter premises to inspect and carry out repairs.

Best Practice

This decision will be unwelcome news to guardian property companies. It is likely that such companies will need to consider a review of any licences which have been granted to ensure they accurately reflect the arrangements in place.

More generally, this case highlights the need for landlords to ensure they have an appropriate agreement in place which will allow them to regain possession of the property when they expect to be able to. In particular, landlords should exercise caution when granting occupation of a specific area as this is likely to amount to a grant of exclusive possession, resulting in a tenancy. Whilst the case relates to residential tenancies, lessons can also be learned in respect of occupation of commercial premises, tenants of which can also benefit from security of tenure.

In determining what type of agreement exists between the parties, the court will look at the substance of any agreement together with the reality of the arrangements, irrespective of the label that parties seek to place on an agreement. This means that it is key to ensure that the right documentation is used, so that the parties are clear from the outset as to the arrangements which are in place.


For more information please contact Jess Booz in our Commercial Property team on 0117 314 5483.

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