When Is a Tenant a Tenant

When is a tenant a tenant and when is he a licensee?

In Cyprus, when deciding whether a person is a tenant or a licensee the decisive factor is the granting of exclusive right of possession for a fixed or periodic term at a stated consideration, as George Coucounis explains.

There are many cases where people face the dilemma over whether a legal relation between parties is a tenancy or a license. The issue becomes substantial when dealing with the relation between the owner of particular premises and their occupant since as it may be tenancy which has become statutory.

One could easily see the issue between owners of premises used by business who through a written agreement grant their use and management to another person for a fixed or periodic term at a stated consideration. They call the agreement to be a license, the consideration to be a license fee and the occupant is called the licensee. However the aforesaid agreement is really a tenancy which may have become statutory.

The words used by the parties to describe their relation are not of significance to identify whether their agreement creates a tenancy or grants a license. The agreement should be seen as a whole together with the transaction concerned and if the operative parts of the agreement establish a tenancy, any express provision that negates the tenancy is ineffective; thus, the parties cannot turn a tenancy into a license merely by calling it one.

An occupant of premises with business contacted therein such as restaurants or tourist establishments can validly allege and prove that he is not a mere licensee but a tenant who became statutory, thus his possession is protected by the law. The fact that the premises are furnished and equipped and the agreement provides for the occupant to part with their possession and return them to the owner at the expiration of the term cannot validate the owner to claim that the occupant is a licensee and consequently to vacate the place. A provision in the agreement that the occupant is restricted from granting the use of the premises to another person and for the payment of certain fees, taxes or rights is also not a decisive one to identify the real relation between the parties.

The decisive factor is the granting of exclusive right of possession for a fixed or periodic term at a stated consideration. The aforesaid three elements constitute the correct basis for the distinction between the two terms, the tenancy and the license. Therefore, the intention of the parties at the time of making the agreement is what matters and any action of them thereafter is not relevant.

In a recent case before the Rent Control Court, the occupant alleged to be the tenant of a restaurant and he claimed an amount of money from the owner for making major repairs and restoration therein, based on the provisions of the Rent Control Law. The owner rejected the claim and raised a preliminary objection regarding the jurisdiction of the Court, thus he claimed that the agreement between the parties was a license governed by the Contract Law and not by the Rent Control Law.

The Court examined the dispute and decided in favour of the applicant that the relation between the parties was a tenancy which became statutory and not a license.

According to the judgement of the Court, the owner granted the use and management of the operating business of a restaurant for a specified period of time at a stated consideration. At the same time, with the same agreement and for the purpose of granting the use and operation of the business, the premises were also granted i.e. the building and its contents. Therefore, the parties with one agreement have acted in three ways: the granting of the management and use of the business, the granting of the use of the furniture and equipment and the granting of the use of the premises.

The question here is whether the third granting was a tenancy.

The agreement between the parties provides for the granting for a specified period of time for two years with an option of renewing the term at a stated consideration. The right of option of the applicant for renewing the agreement denotes the granting of an exclusive right of possession which in fact was given. The owner took it that the applicant had the right to exclude him from the premises and due to the applicant’s behaviour he felt unwelcome and stopped visiting the place.

On the other hand, the payment of a monthly amount and the provision for its increase, on its own, was not as such to create tenancy.

Despite that, there is a provision for the payment of fees, taxes and rights by the applicant which is considered to be granting of an exclusive right of possession. Furthermore, the applicant remained in possession of the premises after the expiration of the fixed term and its renewal without any claim by the owner for trespass who continued to collect “the license fee” without any reservation. Consequently, the third granting was a tenancy and the applicant was declared as a tenant who under the circumstances became statutory. The premises were situated within an area controlled by the law and they were built before the 31st December 1999.

With regard to the amount claimed, the applicant was not successful since he failed to provide the Court with proper and acceptable evidence. However, he succeeded in establishing to be a tenant of the restaurant and not a licensee.