Legal Know How for Landlords
It is important that landlord insurance policyholders understand the basic legal framework and the various types of lettings that exist. This is because these differences have important ramifications and implications for the rights of landlords and tenants.
Housing and the rights of tenants have always been important political issues and there has been a series of Acts of Parliament on housing matters over the years. This makes the whole subject legally rather complex. A landlord’s or tenant’s rights will, to a large extent, depend upon the Act of Parliament which regulates the tenancy, which in turn depends upon the date when the tenancy originally started. It is important that all landlord insurance customers keep informed of legal developments and changes in the law.
In landlord and tenant law generally, there is a fundamental difference between a licence and a tenancy. A licence is where the owner of the property gives someone permission to occupy it. A tenancy is where the tenant acquires a ‘legal interest’ in the property. This ‘legal interest’, i.e. the tenancy/lease, is more than just permission to live in the property for a while; it is something that is capable of being bought and sold, and can pass to another person after the initial tenant dies.
With a tenancy, one way of looking at it is to consider that the landlord ‘sells’ the property to the tenant for a period of time in exchange for rent and the right for the landlord to get the property back after the tenancy ends (what lawyers call the ‘reversion’). So, in many respects, while the tenancy is in existence it is the tenant who ‘owns’ the property, not the landlord.
Property law being what it is, things are not as simple as that. The various Acts of Parliament which regulate short-term lettings have incorporated a number of rights and obligations into tenancies (and to a much lesser extent, licences) which the landlord is unable to exclude from the letting, however much he may want to (and even if the licensee/tenant agrees to them being excluded).
One of the most important rights that a tenant has is ‘security of tenure’. This means that he can only be evicted from the property if the landlord insurance policyholder follows the procedure laid down in the Act of Parliament which regulates that tenancy. In the 1980s, when the Rent Act 1977 applied to most tenancies, it was very difficult (and sometimes impossible) for landlords to evict tenants. Because of this, a landlord would sometimes try to claim that a letting was a licence so he could repossess his property through the courts. But in an important case in 1985, the courts ruled that whether an agreement is a tenancy or a licence depends upon the facts of the case and not what the agreement is called. For example, if the occupier has ‘exclusive occupation’ of all or part of the property and pays rent, then his occupation is normally deemed to be a tenancy, even if the document is called a ‘licence agreement’. However, if the occupier receives services (such as board and cleaning) as in bed-and-breakfast accommodation, then the occupation will usually be a licence.
There is little incentive nowadays for landlords to try to get round the legislation, as they have much greater rights under the Housing Acts 1988 and 1996, which apply to most new tenancies today (for Scotland, the Housing (Scotland) Act 1988 applies and Housing (Scotland) Act 2006). In particular, landlords can generally recover possession of their property through the courts, provided they follow the correct procedure. The legislation also implies various ‘covenants’ (i.e. legal obligations) into tenancies, the most important of which are the landlords’ repairing covenants.
Under the housing laws, tenancies will run on, after any initial fixed term has expired, until they are ended in a recognised way. The most common ways for a tenancy to end are by what lawyers call ‘surrender’, i.e. if the tenant vacates/gives up possession of the property, or by the court making an order for possession. Some landlords mistakenly think that a tenancy ends when the fixed term ends and that if tenants stay on after this, they are ‘squatters’. This is not the case; they still have a valid tenancy.
It is perhaps also worth mentioning that someone occupying a property under a tenancy, whether it is an assured shorthold tenancy (AST) in England & Wales, a short assured tenancy (SAT) in Scotland or a Rent Act tenancy, cannot acquire ‘squatters rights’ over the property, however long they stay there. The only situation where this could conceivably happen is where the tenant stops paying rent and has no contact whatsoever with the let property insurance policyholder for a period of more than 12 years. This is not going to happen very often!
As mentioned above, when a landlord grants a tenancy of a property to a tenant, he loses many of his rights over the property in exchange for the right to receive rent. This means that he loses the right to deal with or enter the property and can only do so with the permission of the tenant. This is the case even if you want to enter the property for a legitimate purpose, such as the quarterly inspection or the annual gas check. If the tenant forbids you to enter, any attempt to do so will be trespass (even though by forbidding you access the tenant may be in breach of his tenancy agreement). This remains the case even if the tenant is in arrears of rent. Many landlords find this hard to understand or accept and feel that as they own the property they have the right to come and go as they wish. This is not the case; by granting a tenancy you lose control over the property and this passes to the tenant. You will only recover the right to deal directly with the property again once the tenancy has ended.