Another landlord fined £20K+ for issuing "sham" licence agreements

Tower Hamlets council has successfully prosecuted a landlord for offences under the Consumer Protection from Unfair Trading Practices Regulations 2008. The London-based landlord was fined £22,000 for issuing "license agreements" to occupants who should have been given tenancy agreements.  This follows on from a similar court case in Islington in 2017 when an agent was ordered to pay over £20,000 in fines for breaching consumer protection legislation. 

What is the issue?

Both cases centred on property managers who erroneously told their tenants that they were "licensees" as opposed to tenants. The court concluded that the occupiers were, in fact, tenants and should have been granted Assured Shorthold Tenancies (the relevant legal tenancy for new private tenants in England). The court found that failing to issue the correct agreement was an unfair practice as it led the occupiers to believe that they had limited rights in the property. While tenants enjoy protection afforded by statue such as the Rent Order (NI) 1978 and the Private Tenancies (NI) Order 2006, these protections are not extended to licensees, whose rights are instead set out in a contract. Where there is no contract, a licensee enjoys very little legal protection and can be very vulnerable to homelessness and other abuses. 

Consumer protection legislation

After detailed investigations, Tower Hamlets' Trading Standards team took legal action against the landlord, who faced 11 charges of offences under the Consumer Protection from Unfair Trading Regulations 2008. These regulations apply equally in Northern Ireland. The objective of these CPRs is to prohibit businessess from engaging in unfair commercial practices and apply to landlords and letting agents in the same way that they apply to other service or goods providers. 

Regulation 3 prohibits unfair commercial practice, which includes any misleading actions or ommissions and aggressive practices. A trader will also be guilty of an offence if he or she engages in a practice that materially distorts, or is likely to materially distort, the economic behaviour of the average consumer with regard to the product. Where a landlord issues a tenant with an agreement that states that the person is a licensee, this is an attempt to remove the tenant's legal rights to notice to quit and associated due process of law as licensees do not enjoy the same right to written notice of a prescribed length. While a landlord must still obtain a court order to evict a licensee, this is generally a much smoother process and while councils can prosecute a person who illegally evicts a tenant, there is no similar enforcement action against a person who illegally evicts a licensee. 

Local application

It is not unusual for a landlord to issue a tenant with a license agreement. Some landlords may even regard this as good housing management, particularly if they are renting out HMO properties or renting properties on a room by room basis, as they may assume that a license agreement gives them greater flexibility to remove a person who is behaving antisocially or who is not gelling with the other occupants. However, if the facts of the arrangement give rise to a tenancy, the person is a tenant and the landlord's decision to create a license agreement or to refer to the arrangement as a licence to occupy is a misleading action under the Consumer Protection Regulations. 

Landlords who are unclear on the distinction between a tenancy and a license should seek advice from Landlord Advice. In England, an arrangement where a person shares accommodation with a live-in landlord is precluded from being an assured shorthold tenancy, but this is not the case in Northern Ireland where you can create a tenancy even if you own and live in the property with the other occupant. 

Any person who believes that they have been issued with a licensce agreement when they are, in fact, a tenant should get advice urgently by contacting Housing Rights. Housing Rights advisers can assist the client in gathering evidence to present a case to Trading Standards who are the prosecuting authority for these offences. In Northern Ireland, Trading Standards services are centralised and fall under the remit of the Department for the Economy.