Hotel Guest - Tenancy, Licence or Lodger?

An interesting question on the helpline has been raised in this article. In fairness, it won't be of much practicality to most of our members, but all the same, I think it raises interesting questions.

Background

The member runs a hostel in Cornwall. It is primarily used by backpackers seeking a cheap overnight stay. Occasionally, contractors will seek accommodation for longer when there is work in the area. 

The occupier (neither a backpacker nor contractor) sought a room from the hostel. It soon became apparent it would be for longer than a couple of nights. Housing benefit was claimed by the occupier and was paid to the owner of the hostel. Housing benefit has ceased and wasn't covering the total cost, which means serious arrears have accrued because of the current nightly rate (some £3,000 arrears). 

For obvious reasons, the hostel owner wishes the occupier to move on. The local authority has contacted the owner and said that the occupier is an assured shorthold tenant, so they must serve a section 8 notice and obtain a court order. They cite for a tenancy mainly because "the owner has received government funds in the way of housing benefit". This action, so say the local authority, has created a tenancy.

The Question

The question, therefore, is two-fold. (a) Can the receiving of housing benefits alone turn a lodger (or hotel guest) into a tenant, and (b) what the status of this occupier (tenant or lodger) is?

Housing Benefit

If a landlord has an occupier who is not a tenant (perhaps a lodger), does the acceptance of housing benefit turn that occupation into a tenancy? This part of the question seems to me easy to answer. No. The Housing Benefit Regulations 2006 define what payments housing benefit will cover. Regulation 11(1) says that one of those payments is "rent". Rent is defined in regulation 12(1) as being:

… the payments in respect of which housing benefit is payable in the form of … allowance are the following periodical payments which a person is liable to make in respect of the dwelling which he occupies as his home– (a) payments of, or by way of, rent; (b) payments in respect of a licence or permission to occupy the dwelling; (c) payments by way of mesne profits or, in Scotland, violent profits; (d) payments in respect of, or in consequence of, use and occupation of the dwelling; …

As can be seen, housing benefit is payable for a "licence or permission to occupy" and for payments "in consequence of .. occupation of the dwelling". Therefore, no licence or tenancy is needed for somebody entitled to housing benefit. I would therefore submit with relative certainty that the mere acceptance of housing benefit and nothing else indicating a tenancy does not on its own create a tenancy.

Tenancy or Lodger?

Whether a person is a lodger or the dwelling has been let as a tenancy will depend on the circumstances of each case [Somma v Hazelhurst [1978] 1 W.L.R. 1014]. There are many variations of occupancy ranging from the occupier of a detached property under a whole repairing lease, who is, without doubt, a tenant, to the overnight occupier of a hotel bedroom, who is, without doubt, a lodger. The dividing line will not usually depend on a single factor but on a combination of factors. [_Aslan v Murphy_ [1989] 3 All E.R. 130 , 133. Brillouet v Landless (1995) 28 H.L.R. 836 (hotel guest).]

The facts in Brillouet v Landless mentioned above were that the hotel was a perfectly ordinary hotel with no special features to distinguish it from thousands of other hotels up and down the country.

On September 20, 1995, Mr John Claud Brillouet, the appellant, arrived at the hotel accompanied by his young daughter and asked for accommodation on a bed and breakfast basis. The appellant agreed to the rates which were proposed. A few days later, Mr Brillouet indicated to the hotel that he and his daughter would wish to stay for longer. They were offered accommodation in the annexe. Instead of the twin-bedded room, there were separate rooms.

The terms for accommodation in the annex were £100 per day, including VAT and breakfast. Mr Brillouet accepted that offer. In the annex that Mr Brillouet occupied, there are various hotel facilities. They involve, for example, Sky television, a telephone, and chambermaid involvement in the sense that chambermaids visit the suite regularly to change linen and to clean. Unhappily it soon became apparent that the hotel was not going to receive the £100 per day which had been agreed with Mr Brillouet, and arrears accrued.

The local authority was involved to an extent because Mr Brillouet was relying upon finance from the local authority to assist him in paying for his accommodation. The local authority was not prepared to pay £100 per day. Accordingly, in the early part of November, the hotel proprietor, Mr J.K. Landless, the respondent to the appeal, indicated to Mr Brillouet that he and his daughter would have to leave. That prompted Mr Brillouet's application to the Uxbridge Country Court for an injunction restraining Mr Landless from taking steps to evict Mr Brillouet and his daughter from the hotel accommodation. A short interim injunction was obtained with a return date.

The matter came before Mr Assistant Recorder Smithson on November 8, 1995. Before the assistant recorder, Mr Brillouet submitted that he was, in reality, a protected tenant of the accommodation that he occupied in the hotel and consequently entitled to the protection afforded by the Housing Act 1988 and the Protection from Eviction Act 1977. In a short judgment, the learned assistant recorder rejected the submissions made by the applicant for the injunction.

He said: “The Protection from Eviction Act depends on premises having been let as a dwelling.” He went on to hold that Mr Brillouet had never enjoyed the protection afforded by either statute because he was never the tenant of a dwelling at any stage. Mr Brillouet appealed to the Court of Appeal.

The Court of Appeal

Russell L.J. gave the leading judgment:

“It is an essential prerequisite of any tenancy that the tenant should have, so it is said in some of the authorities, exclusive possession. In my judgment, the facts of this case particularly when one bears in mind that Mr Brillouet, upon his own assertion, avails himself of at least some of the facilities (he goes to the restaurant occasionally for his breakfast) — come nowhere near demonstrating that he has or has had within this room exclusive occupation. At best, in my judgment, he could conceivably be a licensee. One then has to examine the terms of the statute once more to ascertain whether he is a licensee entitled to protection under the 1977 Act. As the section to which I have alluded makes plain, only licensees who occupy as dwelling premises which they do occupy are entitled to protection. If, as in my judgment, the facts here clearly demonstrate the occupant is no more and no less than a hotel guest properly so-called, then the accommodation is not let to the licensee as a dwelling.

... I go first to an authority I find of assistance, Marchant v. Charters [1977] 3 All E.R. 918. In that case, the then Master of the Rolls, Lord Denning, had this to say ... after reviewing several authorities in which the question arose of whether a particular individual was a tenant or a licensee, at p. 922 as follows:

Gathering the cases together, what does it come to? What is the test to see whether the occupier of one room in a house is a tenant or a licensee? It does not depend on whether they have exclusive possession or not. It does not depend on whether the room is furnished or not. It does not depend on whether the occupation is permanent or temporary. It does not depend on the label whether the occupation is permanent or temporary. It does not depend on the label that the parties put on it. All these are factors which may influence the decision, but none of them is conclusive. All the circumstances have to be worked out. Eventually, the answer depends on the nature and quality of the occupancy. Was it intended that the occupier should have a stake in the room, or did he have only permission for himself personally to occupy the room, whether under a contract or not, in which case he is a licensee?

I now go to an earlier authority, Appah v. Parnclife Investments Ltd [1964] 1 All E.R. 838. At p. 842, Davies L.J. said:

Now, using the learned judge's phrase of ‘balance sheet', how does it all add up? In the first place, the plaintiff, like Mr Schumann when he went there, was offered in the first instance a daily rate. It may be that it is possible to have a tenancy from day to day, but that is an animal which none of us has ever encountered before.

...

Finally, there is a recent authority to which our attention was directed. (1995) 27 H.L.R. 439, C.A. It is Mohamed v. Manek. In the course of giving his judgment Auld L.J. said:

"Nor did it accord with the ordinary use of language to describe temporary accommodation in a hotel or hostel as premises ‘occupied as a dwelling under a licence'."

In my judgment, at the end of the day, one has to stand back and look at all the circumstances of the case now before the court in precisely the same way as in the authorities; the court stood back and looked at the original facts of those cases. Here I can see nothing to indicate that Mr Brillouet accepted accommodation from Mr Landless under any illusion but that he was booking into a hotel as a hotel guest at a daily rate for accommodation which included the provision of many services, including the facility to have breakfast and dinner within the hotel if he so wished. This was never a tenancy, for the reasons I have endeavoured to explain, nor in my judgment was it ever a licence to occupy accommodation as a dwelling. In my view, suggesting the contrary is an abuse of language. From beginning to end Mr Brillouet was and always has been, ever since September 20, 1995, a hotel guest. Nothing in the 1988 Act nor the 1977 Act can afford him any protection. Accordingly, in my view, the learned assistant recorder, although his ex tempore judgment did not cover every point, was perfectly right to decline to give to Mr Brillouet the relief that he sought.”

This is the closest case I've come across for the member's question, and it certainly assists. It is worthy of a quick note that in another “hotel occupant” type case, Mehta v Royal Bank of Scotland Plc (2000) 32 H.L.R. 45, the occupier was awarded £100,000 damages for wrongful eviction! In the instant case, the room was let to M as a furnished room in a hotel built as a house, with only minimal services. Both parties knew that a receiver had been appointed, that the hotel would, if possible, be sold as a going concern and that M “wanted possession on a long-term basis.” It was clear that the parties had expressly provided that the arrangements were not to be ordinary arrangements for a hotel room. In light of all those considerations and the fact that the courts hearing M's previous claims had proceeded on the basis that M had no more than a licence, it had to be concluded that M had a contractual licence rather than a tenancy and that a notice period of four months was appropriate.

One must be careful therefore assuming an occupier is a lodger because if they are or become a licensee or tenant, then appropriate notices will need to be served and a possession order obtained.