Renting property is becoming more and more the norm nowadays, with an increasing percentage of households living in rented accommodation.
However, there is a lot of confusion over what a tenancy actually is and who owns a property under certain circumstances – such as a leasehold flat.
In this article, we’re going to look at the rights that people have and some examples of the different types of ownership of land.
What’s the difference between freehold and leasehold?
Freehold is where you own the property and the land it sits on.
Leasehold is where you own the land or property for a specified period of time, after which it reverts back to the freeholder. For example, the owner of an individual flat would usually be a leaseholder.
However for that time, you ‘own’ it and the rights of the freeholder are limited to the right to receive rent and the right to get the property back at the end of the lease (the ‘reversion’).
Owning land at the same time as someone else
You might say “How can a leaseholder own the property if it belongs to the freeholder?”
As an example, let’s consider a large imaginary house that has been divided into flats. The following people could all own a legal ‘interest’ in the property:
• Fred, who owns the freehold
• Larry who owns a long 99 year lease of one of the flats
• Lydia who owns another of the flats on a 99 year lease
• Tanya who rents Lydia’s flat under a 12 month assured shorthold tenancy, and
• the Megabank Ltd who own a mortgage of the whole property
The fact that two of the flats are leased does not mean that Fred stops owning the freehold. Likewise, the fact that Lydia has rented her house out to Tanya does not stop her from owning her lease. But both Fred and Lydia have lost the right to use the flats while the lease or tenancy is in place Many landlords do not realise that a short tenancy is a legal interest of property ownership, and so think that they have the right to just walk in and out as they please. This is not the case.
The tenant has strong rights, and one of these is quiet enjoyment of the property unless there are extenuating circumstances - such as a fire at the property.
Occupation which is not a type of land ownership
Occasionally, a property, or more likely part of a property, will be occupied by a tenant who has a licence to occupy rather than a tenancy agreement. For example, this will happen in the following situations:
• If you rent a room to someone in your own home and share other living accommodation with them (such as a bathroom and kitchen) – here they are normally described as a lodger.
• In hotels and B&Bs where the hotel staff have the right to enter the room, for example to do cleaning and to change the bedding.
• In hostels where people share a room (or dormitory) with other people.
• Where a job, such as a nanny or housekeeper, requires an employee to live in the property.
Whether you have a license (permission to occupy the property which prevents you from being a trespasser) or a tenancy (a legal interest in the property) will depend upon the circumstances. For example, a contract for a holiday let won’t be considered a tenancy agreement where the purpose of the tenancy is to give the tenant a right to occupy for a holiday only.
Types of tenancy
If you’re renting the property, either from the freeholder or leaseholder, then you should have some form of tenancy agreement in place so that everyone’s rights are protected. There are two types of tenancy agreements that can be held in England and Wales; assured and assured shorthold.
A landlord that has an assured shorthold tenancy agreement has an automatic right to regain possession of their property at any time after any fixed term of the tenancy agreement has expired, although they must wait for the fixed period to end before giving notice. In most cases with both assured and assured shorthold tenancy agreements, 2 months' notice is required.
A tenancy agreement made on or after 28 February 1997 will automatically be an assured shorthold agreement.
There are slightly different rules around tenancy agreements in Scotland and Northern Ireland, so if you have any doubts about which type of tenancy you have in place, please seek legal advice.
This post was contributed by Tessa Shepperson, Founder of the Landlord Law Blog.