Property Landlords advice: Resident Landlord agreements (Part 1)

By Mike Edwards

Deciding if a Resident Landlord agreement is the correct solution to any situation can be a nightmare for Landlords to determine. What can on the face of it look straight forward may not be and vice versa. What happens if there is completely separate access for the tenant? Or what if their accommodation is like a granny annexe or a garage converted into a studio, or a building in the garden? The list goes on!

Popular practice

These situations are becoming more common as the credit crunch inspires some innovative use of spare accommodation by Landlords, but do we treat these scenarios as tenancies or licences? And above all if they are tenancies then should they be ASTs which means registering the deposit – or a fine if you don’t!

Some definitions

If the building as originally constructed is a purpose built block of flats no matter how small and the Landlord occupies a unit as their main residence it can never be a Resident Landlord case. But if you have a conversion to self contained flats and the landlord lives downstairs it is a Resident Landlord case but the tenant cannot have an AST because it is a Resident Landlord situation. In the conversion if the occupier has their own bedroom but shares facilities with the Landlord then only a license can be granted. This is because under the 1988 Act the tenant only needs exclusive possession of “any part of the dwelling” to have a tenancy so the exclusivity of the bedroom is enough to make them a tenant and an AST can be created if there is no Resident Landlord.

And more definitions

Rules on exclusive possession are different outside the 1988 Act as to be a tenant the occupier must have exclusive possession of all essential living accommodation. Therefore if the tenant cannot have an AST as the landlord is in the building, he must have exclusive possession of all essential living accommodation before he can be a tenant and therefore be granted a Common Law tenancy (as in the example above of the two self contained flats above).

Further legal implications

However all this throws up another key issue. In managing the situation, you must make sure it should not have been an AST for if it is then the deposit must be protected. So if you wrongly designate an occupier as a licensee and do not give them an AST when you should have done so then you will be open to a claim for mishandling their deposit.

Link to Res LL Part 2