Landlords Still Issuing Licenses to Occupy to Evade Deposit Protection Rules

Deposit Protection

Since the entry into force of the Tenancy Deposit Scheme many landlords and letting agents have devised ways of evading and ignoring deposit protection rules.

One common tactic which renters should be aware of is issuing tenants with a “licence to occupy” in place of an “Assured Shorthold Tenancy”.

A licence gives the right to occupy and is typically used for bed and breakfasts, hotels, holiday lets and some HMOs.  Often tenants only discover that a license has been issued when attempting to recover their deposit at the end of their occupation. However, despite being called a license, you may still have an Assured Shorthold Tenancy (AST) in the eyes of the law. In this event it may be possible to use typical AST measures to recoup moneys owed.

Do I have a License or a Tenancy?

A tenancy is created automatically if someone moves in and starts paying rent. Some landlords incorrectly issue licenses, either through inexperience or design to give tenants less rights than they would usually expect with an AST. A tenancy cannot be turned into a license merely by both parties signing a piece of paper headed ‘license agreement.’  A landmark case which defined the requirements for a tenancy as opposed to a license was Street v. Mountford in 1985. This stated that one has a tenancy if one:

  • pays a rent
  • occupies the property for a term
  • enjoys exclusive possession of land / property

These conditions do not apply if one does not pay rent  or if the occupier does not enjoy exclusive possession such as in a shared room or if cleaning and meals are provided as in a hotel.

The clearest way to identify the difference between the two [license and Assured Shorthold Tenancy] is exclusivity. If a tenant has exclusive use of at least one room in the property, and that room(s) is specified, this will usually be classed as a Tenancy Agreement. If the property is shared with more than one individual, this is more likely to be a Licence.

I believe I have been incorrectly issued with a license and my landlord has not protected my deposit, what should I do?

It may therefore be possible to claim damages from your landlord if they incorrectly issued you with a licence and failed to protect your deposit. According to current deposit protection rules, your landlord must register your deposit in one of the three government-approved deposit protection schemes within 30 days of the start of your tenancy.  The penalty for non-compliance is a fine of between one and three times the deposit amount.






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