When a guest becomes a tenant

Janet Felder, a partner and member of the property disputes team at Fladgate Felder, examines the issue of long-stay guests.

The problem

A customer books a room in your hotel for a week but stays on indefinitely. The bill is paid promptly and the customer causes no problems. Eventually, you decide to sell or refurbish the hotel and you ask him to leave. He refuses and says that his room is his home and he is a tenant.

The law

Premises need not necessarily include cooking facilities to be someone's home. If the occupant has exclusive possession of the room, with no element of sharing, he could be a tenant. This has noteworthy consequences.

A residential tenant cannot be evicted without court proceedings (Protection from Eviction Act 1977). A tenant has significant statutory protections, depending on the date he first moved in. If the tenant first occupied before 15 January 1989, the Rent Act 1977 applies - any increase in what the tenant pays may be restricted. The tenant can register a "fair rent", which you may not find fair at all.

There is limited legal room for manoeuvre when trying to repossess a room from a guest who has become a tenant. Substantial rent arrears, physical damage to the premises or behaviour amounting to nuisance are grounds for repossession. Otherwise, you could provide reasonable alternative accommodation. The tenant may be moved to another room within the hotel or elsewhere, provided this is reasonably suitable for the tenant's needs.

If the tenant first moved in between 15 January 1989 and 28 February 1997, he will be an assured tenant under the Housing Act 1988 and a market rent is payable, so you should recover your normal room rate.

Expert advice

If you owned the hotel when the guest first took up occupancy, you could argue a case for intended redevelopment. If you bought the hotel with the tenant already in place, you cannot rely on this.

Two months (or more) of arrears of rent, or persistent delay in paying rent, or other "bad tenant" grounds, are also grounds for repossessing the room. Otherwise, you can provide suitable alternative accommodation (as for the Rent Act 1977).

If, however, the guest first took up occupancy after 28 February 1997, he will be an assured short-hold tenant under the Housing Act 1988. This means you are guaranteed repossession of the room, but must give not less than two months' notice and you must take proceedings if the tenant will not vacate voluntarily. That inevitably involves cost and delay.

Rent Act tenants or assured tenants will already be protected against your efforts to evict them, and all you can do is manage their position. For new guests, try to prevent the situation arising. The more you maintain full hotel service, the less likely a court would find for a tenancy.

Beware!

It is a criminal offence to evict a residential occupier without court proceedings. You may also be liable for damages for wrongful eviction and considerable legal costs.

Check list

• Take advice on evicting any long-stay occupant. If you own the hotel and have lived in it since the tenant moved in, then the tenant may have significantly reduced protection. Different rules may apply for asylum seekers or their dependants.
• Reinstate or provide regular services. The tenant may simply accept the status of a guest.
• State that any discount for long-stay guests is for lack of voids, not reduction in service.
• Ensure that all charges for long-stay guests include breakfast, and that breakfast is provided.
• State room-only rates, and include full hotel services such as cleaning, change of linen and any other services (which are, in fact, provided).
• Move the guest to a different room regularly.
• Check that your terms and conditions state that long-stay guests do not become tenants. This will not be decisive but may be influential.
• Only make long-stay arrangements with corporate customers (a company is not protected under residential legislation except the Protection from Eviction Act 1977).
• Take advice early.

Contacts

Janet Keeley Tel: 020 7462 2268
Fax: 020 7629 4414
E-mail: jkeeley@fladgate.com