Tenancies & Licences
Lease Term or Duration
The term of a lease or tenancy agreement is the period for which both the landlord must allow the tenant to stay and the tenant must comply with the obligations in the lease. During the term of the lease, tenancy agreement or letting agreement (the expressions mean much the same thing) the landlord cannot terminate the letting simply because it wants to do so. Of course, if the tenant fails to pay the rent or breaches the terms of its lease, the landlord can terminate the lease.
Tenancies and leases may vary from very short term arrangements with little or no security for the tenant, to longer term leases, under which the tenant has virtually perpetual ownership and security. A tenant may hold under a weekly or monthly tenancy, subject to termination by the landlord on short notice. However, certain tenants may qualify for Landlord and Tenant Act rights, which may dramatically transform and enhance their rights.
Periodic Tenancies
A periodic tenancy is a tenancy from period to period. The periods of notice are provide by common laws. Generally the longer the periodic period the greater the period of notice required.
A lease or tenancy agreement of land or buildings, for a term or period of more than a year, must be in writing. Periodic tenancies are usually verbal. They are almost invariably for successive periods of a year or less a year, and are usually for periods ranging from one week to six months.
In the case of periodic tenancies, the tenancy is rolled over continuously from period to period. Periodic tenancies are generally for a period of a year or less, most commonly, monthly or weekly. They may rollover perpetually with the continuing consent of the landlord and tenant. Alternatively, either the landlord or tenant can terminate the tenancy at the end of any period, by giving notice to the other.
Periodic tenancies commonly arise after the end of a fixed term lease. For example a lease may be granted for a three year period. After the lease ends, the tenant may stay on in possession, paying rent (say monthly) and there will be deemed then to be a monthly tenant, which continues until the landlord or tenant terminates the tenancy..
Creation
A periodic tenancy from period to period may arise by express or implied agreement. When a tenant pays rent and landlord accepts it in the absence of a written agreement, there will generally be deemed to be a periodic tenancy.
The period (e.g. weekly, monthly or yearly) will usually, but not necessarily be determined by the frequency of the rent payment.
Termination
Generally a periodic tenancy can be terminated by either landlord or tenant, by giving notice of termination to the other. In the case of a weekly tenant, the notice to quit period is generally a week. In the case of a monthly tenant, a month. In the case of a yearly tenancy, common law required a six months’ notice.
In the case of agricultural lettings, one years’ notice is required in the absence of an agreement to the contrary.
In each case, the notice must terminate on a so-called gale day. This is the last day of the period and is generally the day on which, or before, the rent is payable.
.The 1992 Housing (Miscellaneous Provisions) Act required one months’ notice for residential tenancies. This has been superseded by the Residential Tenancies Act.A Residential tenancy may not be terminated by any means other than those prescribed by the 2004 legislations
Tenancies at Will & Sufferance
A tenancy at will is the lowest form of occupational interest in land. A tenancy at will does not carry a rent. A tenancy at will is that which is held by a person in exclusive possession of property with the bare consent of another.
Under the Statute of Limitations a tenancy at will terminates after one year and the Statute of Limitations commence to run against the landlord.
A tenancy at sufferance arises where a person originally had consent and continues in occupation or possession without the landlord’s consent. He must pay mesne rates or compensation for the use of the property. A tenancy of sufferance may arise where a person has held over after a periodic tenancy or the end of a lease without the landlord’s consent.
It appears that tenancies at will and tenancies at sufferance have been abolished by the 2009 land law reforms, at least for some purposes. The 2009 Acct defines the estates and interests that may arise at law. A leasehold estate may exist. A rent under tenancy may exit. However, a tenancy as an estate or interest which arises from the relationship of landlord and tenant however it is created but does not include a tenancy at will or at sufferance;
After Expiry
When a lease expires and the tenant remains in possession and pays rent, there may be a periodic tenancy from year to year under the terms and conditions of the expired lease.
A “tenancy at will” may exist after a lease has ended and before a new lease is put in place or before possession proceedings are taken and executed. The tenant at will has the rights to exclude third parties (but does not have a saleable interest). If a person is in possession of property under a tenancy at will without payment of rent for more than a year, then he may commence to qualify for squatters’ rights. After a further 12 years, he may obtain the landlord’s title to the property.
A “tenancy at sufferance” may arise where the tenant continues in possession at the end of a lease without the landlord’s consent or dissent and without rent. He is not a trespasser. He is obliged to pay the landlord compensation equivalent to rent; so-called “mense rates”.
Right to New Lease
Business tenants of buildings usually enjoy perpetual rights to a new lease, after they have occupied the premises concerned for five continuous years. It does not matter how the tenant has come to occupy the premises for five continuous years. There may be one or more short-term leases, followed or preceded by week to week or monthly periodic tenancies, together making five continuous years.
Where the right to a new leases applies, the tenant has complete security of tenure and can generally stay in the premises indefinitely, subject to payment of rent and compliance with the terms of the lease. The right to a new lease can now be waived at any time, after recent 2008 legal changes. Legal advice must be proved to have been taken in relation to the legal effect of the waiver.
Periodic tenancies may qualify for a Landlord and Tenant Act right to a new lease after five continuous years. In this case, he tenant has the assurance that even if the landlord seeks to terminate the lease, it may make a claim for a lease of between five and twenty five years. In contrast, the landlord has very little security in that the tenant may terminate the tenancy by giving short-term notice. The tenant with statutory rights has in effect, the option to claim a new lease. The landlord may take Court proceedings to force the tenant either to leave, or to claim a longer-term lease.
Temporary Convenience
A so-called “temporary convenience” letting may avoid Landlord and Tenant Act rights of renewal. There is an exception to the tenant’s right to a new lease, where there is a temporary convenience letting. It is not enough to label a tenancy as a temporary convenience letting, to successfully avoid tenant’s rights. There must be a genuine temporary convenience which should be identified in the tenancy agreement.
A temporary convenience may arise, where a premises is let for temporary period while the landlord does not need for some identifiable reason. For example, the landlord may not need the premises while awaiting termination of its lease in another building. The temporary convenience must be contemplated from the outset and relevant to the circumstances.
The temporary necessity may be that of the landlord or tenant. For example, the tenant may need the premises while other premises are being provided or during a short-term necessity. Other Landlord and Tenant Act rights are excluded in the case of temporary convenience lettings.
Licences
A tenant has property rights, even its interest is short and can be terminated. The tenant may exclude third parties from the property and has so-called “exclusive possession” of it. It may even exclude the landlord itself, subject to compliance with the terms of the lease.
A licence is a consent to use land. It is a contract to use property, which falls short of creating a tenancy. A licence holder or “licensee” does not have exclusive possession. It does not have any interest in the land which it can sell. It cannot maintain a trespass action against third-parties. It may have rights against a person who granted the licence for interference, but it does not have sufficient so-called possession to take a legal action against the third party trespasser.
A licence arises when a person is allowed to enter land under a contract. Licences can be short of longer-term arrangements, which may in some cases, resemble a lease. The classic example of a licence is the right to use a particular floor area in a department store.
The licence agreement may give extensive rights in relation to the use of the area concerned. However, the licence holder will not have “exclusive possession”. It cannot not exclude third parties as trespassers. If it rights are infringed, its claim is for breach of contract against the licensor.
Types of Licences
The terms of the licence are set by the contract. A key issue is whether the licence is revocable. Generally, the person granting the licence can terminate or revoke it.
The licence holder’s rights would be to compensation only. However in certain circumstances, a contract can be specifically enforced by Court Order. See our article on specific performance. In these circumstances, a licence cannot be terminated. In this case, ,the licence may come very close to a tenancy or lease.
Sometimes a Court will impose a licence, because it is just and reasonable. If a person is given to believe that they will be granted certain rights, and he acts to his detriment, (e.g. by incurring expenditure) in reliance, then the Courts may hold that the owner can no longer exercise the right to terminate the licence.
In these cases, the Courts impose an irrevocable licence as a just solution. The circumstances must be exceptional and the order must be proportionate to the injustice that would otherwise occur.
Lease / Licence Distinction
The difference between a licence and a tenancy may be a question of degree. The issue can be of great significance because licences do not qualify for most of the tenant rights, set out in this guide. Accordingly, attempts are sometimes made by a landlord to provide for an arrangement which resembles a lease in substance or in practice, in a document, which labels itself as a licence.
The Courts will look at the reality and substance of the position. The words in the document or labels used will not be definitive. If the arrangement, in substance and in practice has the characteristics of a tenancy, the Courts will deem the relationship to be a tenancy in substance and accord the tenant Landlord and Tenant Act rights.
A true licence creates personal rights only. Generally, the rights will be personal and may not be assigned or transferred. Exclusive possession is of key importance. If the licensee has exclusive possession and can exclude third parties, this will point towards a tenancy or lease.
If the arrangement is revocable at any time, this will point to a licence. Sometimes, a special relationship between the parties will point to there being a licence. The more formal the arrangement, the more likely it is to be deemed a tenancy.
The degree of control retained by the licensor is important. If the licensor can enter the premises at will and the licensee cannot exclude him, this will point to a licence. The Courts look at the totality of the circumstances to determine whether there is a icence. Obligations on the licensee such as to repair, pay rates, etc point to the existence of a tenancy.
Contest of Disputes
There have been cases, where persons have been let into possession of property under an arrangement labelled a licence, but later claim Landlord and Tenant Act rights after the relevant qualification period (usually five years), has expired. A licence may avoid a restriction on sub-letting in a Lease. However, most modern forms of lease prohibit licence on any sharing of possession including licences.
Several disputes have arisen in relation to petrol station arrangements between oil companies and occupiers. In some cases, the arrangement has been determined by the Courts to be a lease / tenancy with consequent tenant rights for renewal, assignment change of use, etc. The Landlord and Tenant Act rights of the types set out in this note.