Types of Occupation

Freehold

  • Freehold is essentially ‘outright’ ownership of property
  • Freehold ownership lasts forever it does not end, no time limit
  • The land under freehold is unburdened land and the landowner can do whatever he likes to his property.

Possible Restriction on Use of Freehold

  • The limits to the freedom of ownership are set by planning law, environmental health law and in some cases a local authority may even be able to compulsorily purchase freehold property against the owners will. (very rare occurrence, mostly it happened when the motorways were built in the UK)

 

  • The private law may also restrict the use to which a freeholder of land may put it in so far as it affects In some cases, transfer of land may be burdened by rights of use {easement}, e.g. right of way, as well as restrictions on use {restrictive covenants}.

 

  • It is also possible for freehold occupier to lose the freehold where, in the case of bankruptcy, the trustee in bankruptcy requires the sale of the property or where a court transfers ownership in the course of matrimonial breakdown. Freehold is, subject to these qualifications, the most secure form of occupation of land.

 

  • In regards to the occupation of residential property, flats are generally not freehold. This is due to the fact that those occupying flats in a building generally have obligations of upkeep and repair in regards to the common areas, entrance, communal hall/stairways etc.

 

  • Neighbouring freeholders may enforce such obligations against one another in the form of covenants (Promises made at the time of purchase of Flats) but such ‘positive covenants’ (Promise to do something) will only apply to the original parties and do not attach or transfer with the change of ownership of the land, consequently occupation of flats is generally leasehold.

Example

  1. Jordon bought a freehold land and decided to build an extra shed. Jordon as a freeholder is allowed to do whatever he likes with his property subject to planning permission from his council.
  2. Jorden decided to lease out his shed for 10 years, he is within his rights to do so. As a freehold owner, he can do whatever he likes to do with his property.

Leasehold

  • A leasehold is strictly a form of tenancy although it is treated as a form of owner-occupation due to the greater rights enjoyed by those with a long lease.
  • Under Leasehold the leasehold owner buys a time period for his occupancy, normally 99 years but there are leases ranging from 3 to 99 years.
  • After the end of lease time period, the property will go to the freehold owner of the land
  • Leaseholder has limited rights of ownership
  • Leaseholder holds fewer rights than a freeholder and is not allowed to do whatever he likes unlike a freeholder
  • The lease is granted on payment of a sum of money to the landlord or on assignment from the original leaseholder.

 

  • On assignment, the new occupier steps into the shoes of the original leaseholder and thus the length of time remaining on the original lease is irrelevant in regards to the rights enjoyed by that new occupier.
  • Positive covenants (Promises to do something) which are ‘attach to the land’ are enforceable against a leaseholder by the landlord
  • The leaseholder will usually pay ground rent and service charge.
  • The ownership will revert to the landlord on expiry of the lease but there is a right to buy the freehold and other forms of protection.

Example

  1. Ali took the lease of his new house/flat from the developer for 99 years through a mortgage. Ali is the new leasehold owner of the house

 

  1. Ali purchased a lease for 50 years for £200,000 for his three-bedroom house. After 50 years the property will go back to the freehold owner.

 

  1. Ali has a lease of 30 years and he is the original leaseholder. Ali assigns the lease to John for 10 years and charged him an annual rent of £10,000. John is new sub leaseholder

Commonhold

  • The Commonhold and Leasehold Reform Act 2002 introduced a new form of occupation known as Commonhold.
  • This overcomes the problem of enforcement of positive covenants (Promises to do certain acts) in regards to communal areas by providing for ‘commonhold’ ownership of the communal areas. Thus, it is now possible for flats to be occupied as freehold.

Tenancy

  • In most cases occupiers of property who do not hold the freehold are tenants.
  • Leaseholder are also tenants as they have purchased a time period
  • A lease for over 21 years is treated as a form of ownership but with limited rights
  • A tenancy arises where it is granted by a person who is in a practical position to do so and does not necessarily need to have an interest in the property themselves
  • Most tenancies of residential property are fixed term and/or periodic tenancies.
  • The periodic tenancy may be weekly, monthly, quarterly or even annually.
  • A periodic tenancy does not have to be in writing,
  • A fixed term tenancy of more than 3 years must be written in the form of a deed

The 'four qualities' of tenancy

  • Four conditions must exist in order to establish a tenancy, where any one of these is absent the occupier will be a licensee. These are as follows
  • Identifiable Landlord and Tenant
  • Identifiable Property
  • Identifiable Time Period
  • Exclusive Possession

Identifiable Landlord and Tenant

There must be two identifiable parties, landlord and tenant. This does not mean that the tenant must be able to identify the landlord, e.g. where an agent acting on behalf of the landlord grants the tenancy.

Example

Simon, Signed the tenancy 20 Carshalton Road from the Agent, Croydon Properties. It will sufficiently fulfil the first condition that both parties (landlord and Tenant) must be identified.

A tenant cannot hold a tenancy of his/her own property and cannot hold tenancy of land that has no owner. However, a person can be a tenant of land or property owned by a company of which s/he is an employee, director, or shareholder or in which s/he is a partner.

 

Identifying the Landlord

The landlord of a weekly tenancy is obliged by law to provide a rent book or similar document, failure to do so is a criminal offence. The Such a tenant may make written request for the name and address of the landlord from the last person to collect rent, failure to comply with this request within 21 days is an offence.

 

All landlords of premises which include residential property are legally obliged to provide a written notice of an address in England or Wales to which tenant notices may be served, no rent is due until such notice is provided

Identifiable Property

There must be identifiable property. The tenancy must be an identifiable property, this can be anything from a single room to a large estate of land.  It is not possible to hold a tenancy of only part of property or premises, e.g. a shared room.

Identifiable Time Period

  • There must be an identifiable period of time. Before a tenancy can take effect, it must be possible to identify both the time of its commencement and the period for which it is to run.
  •  A fixed-term tenancy will have a date of commencement, the duration must be identifiable e.g. 6 or 12 months.
  • Periodic tenancies run from the date of commencement of the period of the tenancy e.g. one week or one month etc. The periodic tenancy automatically renews at the end of each period until determined by a notice to quit.

Exclusive Possession

  • The tenant must exercise or hold an exclusive possession of the property
  • Under exclusive possession. The tenancy agreement must convey to the tenant use of the property exclusive of all others including the landlord or the landlord’s agents or any others to whom the landlord purports to grant access. Under exclusive possession, the landlord is not allowed to interfere with the tenant’s right of quiet and peaceful enjoyment of the rented property.
  • Neither is exclusive possession negated where the landlord reserves a right to visit, e.g. to inspect for disrepair, or where services such as cleaning are provided as part of the tenancy. These are ‘visits’ and ‘services’ and do not constitute a right to use the property. Such visits will not breach the exclusivity principle

Important Note

Where the right of access is unrestricted there will not be exclusive possession i.e. where a landlord can get in and out freely and without the permission of the tenant. In hostel accommodation where the landlord reserves the right to move tenants from room to room, even where the occupier has exclusive possession of the room they currently occupy, there is no exclusive possession. This is known as the ‘control test’, where the landlord has control over the use of the accommodation.

Sham agreements

In the past, the existence of a tenancy created a level of security of tenure that was unwelcome to many landlords who wished to maximise their control over a property and thus their profits from renting. Some landlords were in the habit of inserting (sham) clauses into tenancy agreements excluding them from the four conditions outlined above. Such agreements and arrangements are unlawful and are not recognised in English Law.

Where an occupier remains in a property pending resolution of a dispute regarding their status, exclusive possession and periodic payment of rent may not imply creation of a tenancy  

Joint Tenancy

  • A joint tenancy arises wherever more than one person shares a tenancy.
  • Joint tenants do not each have exclusive possession of separate parts of residential property but each has an equal right to enjoyment of the whole property.
  •  Joint tenants must, between them, be able to establish the four elements of tenancy but are not required to establish them,
  • Unless the agreement expressly states otherwise each tenant is liable for the full rent
  •  Where there is no joint liability for rent a joint tenancy will not be found
  • Where one of the joint tenants dies or vacate the premises the surviving joint tenant/s will become the sole or joint tenants by the right of survivorship

Example

Sheldon, Raj, and Ammi took the joint tenancy of their flat. They all have access to all parts of the house. They all are liable for full amount of rent unless they agree otherwise.

Sheldon

Sheldon moved out the house, now Raj and Ammi will be joint tenants and are responsible for whole flat.

  • Where only one of a group of occupiers of property is named or has signed the lease the presumption will be that there is a sole tenancy, it will be difficult but not impossible to establish joint tenancy
  • In most cases, those who are not named in or having signed the lease will be assumed to be licensees instead of Tenants

Example

Raj, Sheldon and Ammi have a tenancy in their name, they invited Penny to live with them. Penny’s name is not on the lease or tenancy. She will be treated as Licensee.

  • Where one of a group of joint tenants leaves the property, the remaining joint tenants become liable for the entire rent.
  •  If the landlord imposes a replacement tenant this will be evidence that s/he has possession of the property and that the occupiers are all licensees.
  • Where the remaining joint tenants find a replacement, it is unlikely that they will be able to impose a new tenancy agreement with the landlord and thus the new occupier will be either a sub-tenant or licensee of the remaining original joint tenants.

Sub-Tenancy

  • Where an occupier is the tenant of someone who is a tenant themselves they will be a sub-tenant.
  • In this situation, the first tenant is known as the mesne tenant and the second the sub-tenant. This will be the case where the landlord is the ‘owner’ of property on a long lease rather than freehold, the ‘owner of the property on a long lease is strictly speaking the tenant of the freeholder and thus a person leasing from the ‘owner’ of the long lease a sub-tenant.
  • So long as the mesne tenancy persists the sub-tenant is in no different position than any other tenant.

Example

Ali purchased a leasehold flat from the local council. His lease is for 70 years. Ali then let the flat on yearly basis to Martin. Ali is the owner of the flat and is a mesne tenant and Martin is sub-tenant.

  • The sub-tenancy will be illegal where the agreement of the mesne tenancy includes a prohibition on subletting, this will generally be written in the lease documents or tenancy agreement.
  • Sub-letting is permissible where permission is sought and obtained.
  • Permission can only be refused where such refusal is on reasonable grounds.

   Where the sub-letting is illegal the sub-tenancy may end the original mesne tenancy

 

Licensees

Those who occupy property belonging to another generally do so by virtue of a tenancy. However, there are many who live in more informal arrangements, most commonly by virtue of a licence.

  • A licensee is one who does something or occupies a property, by the permission of a landowner.
  • The key distinction between licence and tenant is that the rights granted to a licencee are not sufficient to amount to the four essential qualities of a tenancy
  • A licence is best described as a personal right as compared with a tenancy which is an interest in land.
  • A licence is not transferable to another person
  • In relation to the occupation of residential property, a licence arises most commonly where someone, e.g. relative/friend/spouse, lives in property the freehold, commonhold, leasehold or tenancy of which is enjoyed by another.
  • Children living in their parent’s home are licencees, as is, strictly speaking, the spouse or civil partner of a tenant of the property.

Example

  • Where a friend comes to stay for a brief visit, even where this extends to several weeks and the friend pays something towards living expenses.

    Where two people move into property at the same time where one is tenant the other will be a licencee

Staying in a Hotel and Hostel

  • In the case of hotels, those staying for short periods are licencees, the courts have held that even where the stay is for a considerable period the only right enjoyed will be that of licencee
  • occupants of hostels such as the will be licencees.

Service Occupiers and Service Tenants

It is sometimes the case that accommodation is offered in relation to employment. Where the four qualities of a tenancy are met such accommodation may be held by the occupier either as a licence or tenant. In this situation, a licence is known as a service occupier and a tenant as a service tenant.

  • The licence of a service occupier ends when the employment ends, the tenancy of a service tenant is subject to the same protection as other tenancies. (Please refer to types of tenancies)
  • A service occupier is one who resides in accommodation where it is necessary to do so in order to carry out her/his occupation
  • Where living in the accommodation is imposed as part of the employment contract and it is necessary to reside in the accommodation in order to most effectively carry out employment duties
  • The fact that it is merely more convenient for the employee to live in the accommodation is not sufficient and it will not acquire the status of a service occupancy

Trespassers

  • A person is a trespasser whenever he/she enters another person’s premises without the permission
  • A person is also a trespasser where he/she has a permission for one purpose and uses it for another purpose
  • A person is also trespasser where he/she has a permission for a particular place in a property and is found in another place

Example

A burglar is a trespasser

A meter reader who has a licence to take your meter’s reading is found in your garden

A visitor who is allowed to be in drawing room and you find him/her in your bedroom

A shopper who is found behind the tills

A shopper who if found in staff/employee’s area only

Disclaimer

While every effort has been made to ensure the accuracy of the information provided in this article, it does not constitute legal advice and cannot be relied upon as such. Each legal case and issue may have unique facts and circumstances, as a result legalally does not accept any responsibility for liabilities arising as a result of reliance upon the information provided. For further help and guidance, you can always rely on and seek advice from our experienced lawyers.

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