Licences to occupy residential property are not commonplace but remain relevant in certain circumstances. So, how might the Renters' Rights Bill (RRB) impact licence agreements?
The RRB is of course principally concerned with assured tenancies. Whilst we await the final draft of the Bill as it makes its way through Parliament, we already have a clear picture of its impact on assured shorthold tenancies and existing assured tenancies. Readers can access our previous articles on the general changes here and here, as well as our articles focussing on the Build to Rent and Purpose Built Student Accommodation sectors. Here, we look at how those changes might impact licences to occupy.
Generally speaking, when occupiers are given exclusive possession of a property for a term, a tenancy is created. Under current law, the default is an assured shorthold tenancy. After the RRB is enacted, the default will be an assured periodic tenancy.
However, there are certain circumstances when an occupier may be granted a licence to occupy. For example, in the provision of temporary accommodation or in supported housing, where the housing provider needs to access the service user's room to provide support, meaning there is no exclusive right to possession.
Licences are also sometimes used in certain sectors, such as co-living, where there is a risk that a tenancy may be deemed to exist. Under current law, that can make the possession process more complicated. Once the RRB is enacted it creates further risks of prosecution and potentially Rent Repayment Orders.
Written statement of terms
The RRB includes a requirement for the landlord (or agent) to provide tenants with a written statement of the tenancy terms, including details of any possession grounds requiring prior notice that the landlord may wish to rely on. This consigns oral tenancies to history. A failure to comply enables the local housing authority to impose a financial penalty of up to £7,000.
This requirement does not extend to licence agreements, although it is always good practice to provide a written agreement when granting a licence to occupy, and essential if the housing provider considers there is a risk that the "licence" may be deemed to be a tenancy.
Notice to Quit
The RRB will also extend the default period for a Notice to Quit given by a tenant to two months and, under current drafting, a tenant can give Notice to Quit from commencement of the tenancy. This will not affect the notice period required for termination of a licence to occupy. This is set by common law rules, or in the licence agreement itself, subject to a minimum notice period of 28 days by virtue of section 5 of the Protection from Eviction Act 1977.
Awaab's Law prescribes time periods for remedying hazards occurring in housing accommodation. The RRB will extend Awaab's Law to tenancies in the Private Rented Sector (PRS), but also allows the same provisions to be applied to accommodation occupied under licence. Clause 63 allows the Secretary to State to pass regulations describing which licences will be affected and which require the licensor to take action to address prescribed hazards within defined time limits.
Similarly, the RRB extends the Decent Homes Standard by amending the definition of “residential premises” in section 1 of the Housing Act 2004 to include temporary accommodation for the homeless of a description specified in regulations made by the Secretary of State. Following consultation, the Secretary of State may make regulations that can bring either all privately rented temporary accommodation, or a specified subset of the sector, into scope of the Decent Homes Standard requirements, and applying and disapplying the requirements to residential premises let under particular kinds of tenancy or licence.
Redress Scheme and PRS Database
Part 2 of the RRB introduces the Landlord Redress Scheme and the PRS Database. Whilst these provisions do not currently apply to licences to occupy, it is worth noting that clause 64(4) enables the Secretary of State to pass regulations which change the meaning of "residential tenancy" to include other types of tenancy or licence.
This will be a particular area to watch. Failing to become a member of a Landlord Redress Scheme, or failing to register a property on the PRS database, are offences which may be enforced by financial penalty. In the case of continued or repeated breaches, a Rent Repayment Order may be sought by the occupier.
