02 July 2020
The Coronavirus Act 2020: tenant or licensee?
The Coronavirus Act 2020 came into force on 26 March 2020. One resolution of the Act is the provision of greater protection to residential tenants in England and Wales from eviction. The relevant provisions are found within Schedule 29 of the Act.
One of the ways in which the Act seeks to protect tenants is to extend the notice period which landlords must provide to tenants before commencing possession proceedings at court (usually by serving a section 8 or section 21 notice under the Housing Act 1988) by three months. This extension currently applies until 30 September 2020.
There is however a distinction to be made between (a) tenants who occupy a residential dwelling under a tenancy agreement, and (b) licensees who occupy a residential dwelling under a licence agreement or licence to occupy. This is because Schedule 29 of the Act only applies to the former and therefore licensees are not afforded the same protection as tenants.
The main distinguishing feature between a tenancy agreement and a licence to occupy is the existence of exclusive possession. Exclusive possession means that the occupier can exercise the rights of the landowner and exclude the landowner from entering the property (subject to any rights of entry that the parties agree).
Exclusive possession is a key characteristic of a tenancy agreement. In addition, a tenancy agreement will typically be for a fixed term and will provide that rent is payable.
In turn, a licence is merely permission for a licensee to do something on the landowner’s, or licensor’s, property. A licensee does not benefit from exclusive possession and therefore cannot refuse entry to the licensor.
In practice, the majority of residential landowner and occupier relationships will be that of a landlord and tenant and their relationship will be recorded in a tenancy agreement. However, the courts have held that the label of a document and its terms are not determinative of the relationship and therefore someone who appears to be a licensee may be, in law, a tenant. Just because the agreement states that it is a licence agreement and that licence fee is payable, does not mean that it could be disguising the fact that it is a tenancy agreement and the licence fee is actually a payment of rent.
Given Schedule 29 of the Act only applies to residential tenants who will be occupying a property under tenancy agreement, it is important for the parties to be clear on whether their relationship is that of a landlord and tenant or licensor and licensee. Landowners could be under the false understanding that their ‘licensees’ are not protected by the Act.
A careful examination of the written agreement (or orally agreed terms where there is no written agreement) should be undertaken before deciding whether the protection of Schedule 29 of the Act is afforded to the ‘tenant’.