Quick Guide - Occupation Types
There are many occupation types. This affects the landlords’ and occupiers’ rights in respect of the property. However, it is often difficult for non-lawyers (which includes most landlords!) to know what they are and the difference between them.
You will find a brief summary of the different occupation types below together with links to further information.
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It is important to understand that the occupation type is determined largely by
- The date the occupation starts and
- The circumstances of the letting
The date is important as it determines the legislation which applies.
The importance of the circumstances of the letting is illustrated by the 1985 case of Street v. Mountford. In this case, the Court of Appeal held that it is the nature of the rights which the occupier enjoys which determine in many cases the type of occupation they have, rather than what is stated in the written agreement signed by the parties.
So in that case Mrs Street signed a 'license agreement' which specifically stated that it was not intended to grant her a tenancy. However, as she had 'exclusive possession' of the property let to her, what she in fact had was a tenancy.
A residential license is where an occupier has permission to legally occupy a property rather than a tenancy (which is a legal interest in land and a form of ownership).
A licensee does not have the rights that a tenant has and their rights are mostly limited to what is set out in the contract. Although there are some statutory rights, for example under the tenant fees legislation.
Read our article on Residential Licenses
Assured Tenancies were introduced by the Housing Act 1988 which came into force on 15 January 1989.
Assured tenants have long security of tenure (as opposed to assured shorthold tenancies) as section 21 cannot be used to recover possession.
Possession has to be obtained using the procedure section out in section 8 of the act, based on one of the grounds set out in schedule s (which includes in ground 8, serious rent arrears of two months or more as a mandatory ground).
Read our article on assured and assured shorthold tenancies.
An Assured Shorthold Tenancy is indistinguishable from an Assured Tenancy apart from two major factors.
- Firstly, section 21 allows the landlord the right, after the fixed term has ended, to apply to the court for a possession order, without giving a reason to the tenant or to the court, provided the landlord has complied with the conditions set out in section 21.
- Secondly and less significantly a tenant during the first six months, can refer a rent to the first tribunal for review if they do not believe it is a market rent.
Read our article on assured and assured shorthold tenancies.
Common law tenancies are tenancies that fall outside the scope of statute law (such as the Housing Act 1988). The rules that dictate the terms of the tenancy are found in both the contract between the tenant and the landlord and under the 'common law' ie the law built up over the years from judgement from the courts.
Company Lets are a type of common law tenancy but as the tenant is a company (an 'artificial person') as opposed to a living tenant, the rules are slightly different. For example, the consumer legislation will not apply to protect the tenant - as being a company the tenant is not a 'consumer'.
A company can be a residential tenant however if the people occupying the property are the company directors or employees of the company. However, if the property is rented for the purpose of subletting to people unconnected with the company, then this will be a commercial tenancy and will in fact be a 'rent to rent' situation (we have a video on this here).
Protected tenancies are governed by the Rent Act 1977. Under this act, tenants have much stronger rights than they have now. The Rent Act 1977 only applies to tenancies which started before 15th January 1989. Note that protected tenants cannot have their tenancy changed to an assured shorthold tenancy simply by giving them a new tenancy agreement. Protected tenancies give a tenant both security of tenure as well the right to a 'fair rent'.
Strictly speaking, an HMO is not a tenancy type in itself and any one of the tenancy types set out above can be an HMO. Whether a property is an HMO or not will depend on the number of occupiers living in the property and whether or not they form one 'household' (which basically equates to 'family').
So a property will be an HMO if the occupiers consist of at least three people who are not from ‘one household’ and who share facilities within the house such as the kitchen and bathroom. HMOs are subject to stricter safety conditions and sometimes requires a license which can be obtained from the local council. If a license is required, it is important to obtain it before renting out an HMO, as, without one, penalties apply and tenants may be able to claim a rent repayment order. The rules regarding licensing are slightly different in Wales.
We have a lot of content on HMOs on Landlord Law including:
