Types of Tenancy

A tenancy is granted between a landlord, commonly the property owner (but doesn’t have to be the freehold owner) and a tenant. The tenant will typically be the person wishing to occupy the property as their home. However, a tenancy can exist between a company or a person without needing occupation as a home.

Once a tenancy has been granted, giving a person the right to occupy the property as their only or principal home, the tenant will have the right to exclude all persons, including the landlord.

When an agent draws up a tenancy agreement for a landlord, the agent can sign the tenancy on behalf of the landlord.

A tenancy is a contract between a landlord and a tenant on mutually agreed terms. Landlords or prospective landlords should understand the various types of tenancies with different rights and obligations.

Occupation Contracts

From the commencement of the Renting Homes (Wales) Act 2016 (RH(W)A), most tenancies will be known as occupation contracts. An occupation contract is a standard contract or a secure contract.

The only relevant occupation contract for private landlords will be the standard contract. A secure contract is typically used by community landlords (local authorities, for example).

A private landlord can give a secure contract, but that procedure isn’t discussed.

A standard contract is one of two things:

  • a fixed-term contract
  • a periodic contract

These two types of standard contracts are similar to a fixed-term or periodic assured shorthold tenancy before the commencement of the new Act.

On this page, the following is considered –

  • When a tenancy is an occupation contract
  • Tenancies that are not occupation contracts
  • What is a dwelling?
  • Existing tenancies on the start day of Renting Homes

When a tenancy is an occupation contract

An occupation contract will apply in most situations for private landlords.

Section 7 provides that a tenancy or licence is an occupation contract if all the following apply-

  • it is made between a landlord and an individual (and if there are two or more persons, at least one of whom is an individual);
  • it confers on the individual (or, if there is more than one individual, on one or more of them) the right to occupy a dwelling as a home;
  • rent or other consideration is payable under it; and
  • it is not exempt under Schedule 2.

This is similar to the requirements for an assured shorthold tenancy (AST). However, there is a notable big difference.

For an AST, the individual must occupy the property as their only or principal home. For an occupation contract to apply, it is simply a requirement to have the right to occupy a dwelling as a home.

For example, if a tenant has two homes (due to working away for periods, for example), under the Housing Act, only the principal home could be an AST, and the second home would have been a contractual tenancy. However, under RH(W)A, both homes would be an occupation contract. Where the letting is by a private landlord, it will be a standard contract.

Similarly, the rule that a tenancy for greater than £100k per annum wouldn’t be an AST is gone, so any letting over £100k is an occupation contract.

Others that will be an occupation contract and not a contractual tenancy include:

  • resident landlord (where a landlord lives in one dwelling and lets another dwelling in the same converted building)
  • where the dwelling consists of or comprises licensed premises for the supply of alcohol
  • tenancies with high rateable values or low rent

Tenants are contract-holders under the Act, and an individual under 18 can’t be a contract holder.

Tenancies that are not occupation contracts

Several tenancies are not occupation contracts by default but can be made by giving notice. Others can never be an occupation contract.

Not occupation contracts but can be by notice

The below uses of a dwelling will not be automatically an occupation contract.

  • Letting to a company. One similarity to ASTs is that the letting must be to an individual (or at least one, if multiple) and includes a letting to a charity or local authority. By default, this continues to be a contractual tenancy.
  • An occupation contract must be for the payment of rent or other consideration (for example, the tenant works for the landlord instead of paying rent). By default, it will be an excluded tenancy or licence; see section 3A(7)(b) Protection from Eviction Act 1977.
  • Holiday letting
  • Provision of accommodation in a care institution
  • A temporary expedient
  • Shared accommodation where the tenant or licensee shares any accommodation with the landlord, and immediately before the tenancy or licence is made, the landlord occupies as their only or principal home a dwelling which includes all or part of the shared accommodation (and continues to occupy). This is the typical lodger situation, where a landlord lets a room in their main home. “Accommodation” does not include an area used for storage, a staircase, passage, corridor or other means of access. An actual lodger agreement (sharing accommodation with the landlord) will continue to be an excluded licence by default; see section 3A Protection from Eviction Act 1977.

Where the dwelling is used or let to any of the above, the tenancy or licence will not be an occupation contract by default. But, it will be an occupation contract if, before or when the tenancy or licence is made, the landlord gives a notice to the person with whom it is made stating that it is an occupation contract.

It’s unlikely to be helpful for a lodger or rent-free letting. Still, it might be beneficial for a company letting, given that occupation contracts will become the norm and more familiar.

Never an occupation contract

The following can never be an occupation contract at any time when the relevant exclusion applies:

  • if all the persons with whom it is made are under 18 years of age;
  • a tenancy to which Part 2 of the Landlord and Tenant Act 1954 (c. 56) (business tenancies) applies;
  • a protected occupancy or a statutory tenancy within the meaning of the Rent (Agriculture) Act 1976;
  • a protected tenancy or a statutory tenancy within the meaning of the Rent Act 1977;
  • a tenancy of an agricultural holding within the meaning of the Agricultural Holdings Act 1986;
  • a farm business tenancy within the meaning of the Agricultural Tenancies Act 1995 (c. 8);
  • a long tenancy (fixed term of more than 21 years);
  • armed forces accommodation (see paragraph 9 of Schedule 12);
  • direct access accommodation (see paragraph 10 of Schedule 12).

What is a dwelling?

For an occupation contract to apply, the letting must be of a “dwelling” (see section 7).

Mobile Homes

“Dwelling” is defined by section 246 as not including “_any structure or vehicle which is capable of being moved from one place to another_“.

There is likely to be a dispute over what is “capable of being moved”, but it’s probable if something needs to be destroyed to move it, it will not be “capable” of being moved.

As such, letting a caravan or mobile home (assuming it’s capable of being moved) will not be an occupation contract.

Land together with the dwelling

For a property to be a dwelling, it may include any amount of land, except the following types of land occupied together with the property:

Agricultural land exceeding 0.809 hectares (less than 0.809 continues to be a dwelling)

Pleasure grounds (including parks or gardens)

Land used mainly or exclusively for purposes of sport or recreation or land used as a racecourse

“Agricultural land” means—

  • land used as arable, meadow or pasture ground only;
  • land used for a plantation or wood or the growth of saleable underwood;
  • land used for poultry farming, market gardens, nursery grounds, orchards or allotments, including allotment gardens within the meaning of the Allotments Act 1922

Existing tenancies on the start day of Renting Homes

One of the most significant changes introduced by the RH(W)A is that all assured shorthold tenancies (and others) are abolished on the commencement day under section 239 (our highlights below).

239 Abolition of assured, secure and other tenancies

(1) On and after the appointed day, no tenancy or licence (whenever made) can be—

(a) a restricted contract;

(b) a protected shorthold tenancy;

(c) a secure tenancy;

(d) an assured tenancy (including an assured shorthold tenancy);

(e) an introductory tenancy;

(f) a demoted tenancy.

As a result, on 1 December 2022 (at the stroke of midnight, to be precise), all assured shorthold tenancies and the others listed above cease to exist in Wales.

See the section "converted contracts" for information about converting from an assured shorthold tenancy to an occupation contract.

Licences and Lodgers

A licence is where someone can occupy the property but does not have a tenancy. The ‘licence’ or permission of the owner prevents the occupier from being a trespasser. Some of the protective legislation for tenants does not apply to licences.

The three main tests for a tenancy are:

  • exclusive possession
  • a fixed or periodic term
  • the payment of rent.

If these three factors are present, there will be a tenancy.

If the occupier does not have exclusive possession, i.e. they share facilities with an occupying owner, they will only be a licensee. The essential difference between a tenant and a licensee will be having exclusive possession. A person with exclusive possession of residential premises for a definite period is a tenant (known as a contract-holder) unless exceptional circumstances exist.

Other circumstances where a tenancy will not occur are ‘serviced’ accommodation, where the landlord needs to have frequent access to cleaning and meals are provided, such as in a hotel, and where the occupier shares living accommodation with the landlord (here, the occupier is usually referred to as a lodger).

Excluded Occupiers

The Protection from Eviction Act 1977 protects both tenancies and licences. However, in some circumstances, certain tenancies or licences are known as an “excluded licence” or “excluded tenancy” if it is listed in section 3A of the Act.

Tenancies or licences excluded are not necessarily excluded from the entire Act but are excluded from some parts, such as minimum notice periods and some court procedures.

Even when a tenancy or licence is excluded this way, it is always unlawful to evict a person by force from a dwelling they occupy.

Some excluded occupiers include where:

  • the landlord occupies the dwelling, and the occupier shares any accommodation with the landlord (lodger)
  • the licence or tenancy is to occupy the premises for a holiday only
  • the licence or tenancy is granted otherwise than for money or money’s worth

See this page provided by Shelter for more information on excluded occupiers.

Contractual Tenancies

A contractual tenancy is often also known as a common-law tenancy. This type of tenancy is used in certain circumstances where a tenancy cannot be an occupation contract.

The primary use of a contractual tenancy will be for a company letting, and an employee (including a director) is entitled to occupy the dwelling as a home.

Regulated Tenancies

Most lettings by private landlords, which began before 15 January 1989, are regulated tenancies under the Rent Act 1977 unless the landlord and tenant live in the same house. Regulated tenants have greater security of tenure and are subject to rent control.

A tenant whose tenancy is regulated by the Rent Act 1977 is unlikely to be evicted unless significant rent arrears have been accumulated or the landlord can provide suitable alternative accommodation. You can find more information in the leaflet Regulated Tenancies available from the GOV.UK website. 

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