The recent case of Camelot Property Management Limited and another v Roynon is a reminder that when it comes to determining the basis of someone’s occupation of property, what happens on the ground is as important as what the agreement between the parties actually says.

The facts

Bristol City Council owned a former care home which stood empty. In order to reduce the risk of the property being occupied by squatters the Council did what many landowners would do in such circumstances and engaged the services of a management company who invited in a number of individuals (known as guardians) to occupy the building at a low rent. One of the individuals, Mr Roynon occupied two specific rooms to which only he had access. He also had use of a communal kitchen, washing facilities and a living area for £247 a month. Mr Roynon entered into a written agreement in January 2014m which stated, in clear terms, that it created a licence and not a tenancy. However, when the management company served a notice to quit upon Mr Roynon he refused to leave and claimed that he was, in fact, an assured shorthold tenant.

The law

When determining whether the agreement is a tenancy or a licence the Court will not simply look at the terms of the agreement and accept whatever label the parties have placed on the agreement. The Court will look at the reality of the occupation. The distinguishing feature of a tenancy, as opposed to a licence, is that of "exclusive possession". A licence is simply a permission to do something on someone else’s property, whereas a tenancy is the grant of the right to the exclusive possession of property for a specified period of time. Furthermore, a residential tenancy will always be an assured shorthold tenancy unless specific exceptions apply.

The court's decision

The County Court had to decide as a preliminary issue whether Mr Roynon was an assured shorthold tenant or a licensee. If the court found that he was an assured shorthold tenant then the tenancy could only be brought to an end by the service of prescribed notices and there would also be greater requirements upon the landlord before it could obtain possession.

Although the agreement was labelled a “licence” the Court found that that was not an end to the matter. What was provided for in the agreement did not actually reflect the reality of Mr Roynon’s occupation “on the ground”. For example, the agreement provided for the guardians to decide where each guardian slept and not to be given designated rooms. In reality Mr Roynon had exclusive use of two rooms; the other guardians were not involved in that decision and did not have keys to the rooms. The agreement restricted Mr Roynon’s right to have guests to stay but this was not inconsistent with the terms of a tenancy. Monthly inspections of the rooms were also not incompatible with a tenancy. The management company did not enter the rooms regularly and no services (such as cleaning) were provided to the rooms. The absence of any power to move Mr Roynon between areas in the building was considered to be a significant factor in indicating that there was a tenancy and not a licence. The Court concluded that Mr Roynon had a monthly assured shorthold tenancy.

This case is a reminder that it is not simply enough to label a document a licence if the arrangements that are in place do not reflect the reality of the situation. The consequences of failing to recognise when an agreement is a tenancy can be serious. The result of this case means that the landlord will have to terminate the agreement in accordance with the rules for terminating an assured shorthold tenancy. In a commercial context, it could mean that a landlord is unwittingly entering into an agreement which enjoys the protection of the Landlord and Tenant Act 1954 and will only then be able to recover possession if it can establish a ground of opposition under that Act. Consequently, landowners should be sure that documents are carefully drafted and arrangements put in place to ensure that the agreement is in fact a true licence.