The Use of the Sham Licence

September 15, 2017

Dispute Resolution

The Use of the Sham Licence

Residential tenants under assured tenancies and assured shorthold tenancies (the normal type) have a degree of security of tenure and protection from eviction.  They also have the comfort of knowing that their deposits are protected under statutory schemes.

Tenancies are one thing; licences are another.  There are relatively few situations nowadays where a   licence will exist in a residential context. However a licence might arise where an employee is required to live in accommodation provided by the employer for the better performance of duties or where no rent at all is payable.

The licensee has less protection than a tenant and has no right to the statutory protection of deposits.

The Islington Gazette recently reported a case involving letting agents in the Holloway Road.  These agents were providing accommodation seekers with what were described as licences.  More to the point, deposits paid were not protected and the “licensees” were not able to use the statutory means of challenge when landlords helped themselves to more of the deposit than was justified.


Just calling a relationship a licence is not good enough.  The law looks at what it actually is.  If it is a tenancy arrangement, then that is it.  The position was colourfully stated in the House of Lords in 1985 as follows:

“The manufacture of a five pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade.”

Back to the Holloway Road.  The reality was that the agreements made were tenancies and not licences. The occupiers complained to their local authority (because they could not get their deposits back).

The local authority prosecuted the agents.  They were fined £11,000 in respect of two sham licences plus compensation and costs totalling £4,500.

posted by Julian Freeland | September 15 2017