The majority of people who rent residential accommodation are tenants, but a few are actually only licensees. The difference is much less important now than it has been previously, when owners of property were keen to grant a licence rather than a tenancy so as to avoid the constrictions of the Rent Acts 1977.

Following the implementation of the Housing Act 1988, the introduction of assured tenancies and assured shorthold tenancies have restored a significant degree of control to landlords, enabling them to charge a market rent and to regain possession according to certain grounds laid out in the Act.

Whether the owner of property has granted a tenancy or a licence is now most important in relation to shared houses.

Distinctions between tenancies and licences

A tenant has a legally binding right to occupy premises, or part of the premises, and to exclude other people (including the landlord) from it; a tenancy implies a right to exclusive possession. Exclusive possession is a necessary condition of a tenancy, but is not solely determinative of a tenancy.

The requirement of exclusive possession does not prevent there being a tenancy where several people share one property either under individual agreements or as joint tenants. The provision of services by the landlord, such as window cleaning or the provision of bedlinen, for which the landlord has unrestricted access to the property may also indicate a licence.

It is settled law that a tenancy cannot exist unless the occupier has:

  • a legal right to occupy the property for a defined term (specified periods or length of tenancy)
  • an obligation to pay rent

Street v Mountford [1985]

By contrast, if the occupier of property does not have a right to exclusive possession, they merely have a licence rather than a tenancy. A licensee is a person who has the permission of the owner to be in the property, but does not have the right to exclude others from the property or the right to exclude or sublet the property.

Whether an arrangement is a tenancy or a licence will also be determined by:

  • whether any written agreement mentions a tenancy or licence
  • the true intentions of the landlord and occupier when they came to their agreement.

The court has the power to look beyond any artificial label in the written agreement, looking at the nature of the occupancy to determine the type of tenancy. Accommodation provided as an act of friendship is more likely to be a licence, whereas self-contained accommodation might indicate a tenancy.

Typical examples of licensees are:

  • Lodgers
  • Persons visiting the household as guests
  • Children living in the parental home
  • Visitors staying in a hotel or hostel

Shared houses/houses in multiple occupation

It is important for the owner of a property in multiple occupation to decide whether to grant the occupants tenancies or licences. The occupants may be granted individual tenancies, with exclusive possession of bedrooms and shared use of communal rooms, or a joint tenancy whereby the occupants hold one tenancy between them and share exclusive possession of the entire property.

Alternatively, the occupants may be granted licences, which will give them permission to occupy certain parts of the property but also reserves the landlord the right to possession, preventing the occupiers having exclusive possession. If the owner decides to grant licences rather than tenancies, there needs to be agreement that the landlord cannot swap the licensees’ rooms.

The provision of services inside the rooms again means that the occupant has only a licence; exclusive possession is not granted because the landlord retains a degree of control over the accommodation.

Types of licence

A licence can take one of two main forms; a bare licence or a contractual licence.

Bare licence

A bare licence is a licence which is granted without the other party providing any valuable consideration (usually money) and where there is no intention to create legal relations. An example is letting a friend sleep on your sofa for a weekend.

A fundamental feature of the bare licence is that the licensor can revoke the licence at any time. After the licence has been revoked, the former licensee becomes a trespasser.

Contractual licence

A contractual licence is a formal arrangement to occupy premises in return for regular payments. This arrangement can give rise to rights and obligations similar to those acquired under a tenancy. The law implies into every licence that term that the licence will not be brought to an end without ‘reasonable notice’.

The law requires a minimum of four weeks as ‘reasonable notice’ in respect of a periodic tenancy, and the notice must contain specified information (as for a notice to quit a tenancy).

A person who is a trespasser but who is subsequently given permission, not amounting to a tenancy, to remain on the premises, becomes a licensee.

Once any licence comes to an end, the licensor is entitled to possession. In most cases, proceedings for eviction are also required.

Relevant Factsheets

Letting Factsheet 44 – Licences