According to the Property Act of 1925 a landlord shall not have more than 4 tenants in one tenancy agreement. So, what happens when a good tenant turns up with a family of five or six?
There seems to be a bit of a confusion here in interpreting the rules. Most of the landlords and letting agents have heard of the provisions under Section (2) Law of Property Act, which stipulates the 4-person rule, which is contrived that a rental agreement shall not have more than 4 people, however this is not quite true.
The 4-person rule applies only in relation to the legal hold or ownership of the property. The Act further stipulates that if there be more than 4 tenants figuring in the agreement, the first 4 of the lot shall hold the property “on trust” on behalf of the remaining number of tenants. Thus, the law can be interpreted that tenants one to four shall own legal title on the property and hence will automatically hold the interests of the remaining tenants figuring in the agreement.
This is similar to the way private trusts function, for example family trusts that are set up for minors will have trustees who will be the actual owners of the property. These trustees will also be managing the financial affairs of the minors until they reach adulthood.
When it comes to ownership of property, whether on lease or as freehold, there are two parts in the English law under which they come. One is legal ownership and the other is beneficial ownership. While the legal owner can be a different entity and the beneficial owner can be someone totally different. The tenant who has been bestowed with the beneficial interest has every right to enjoy and make use of the property after taking possession. Hence, when there are more than 4 tenants figuring in the agreement, the additional tenants will enjoy the same rights enjoyed by the first 4 tenants.
Of course, the first 4 tenants will still have a say in the legal ownership of the tenancy, for themselves and on behalf of the additional 5th, 6th or 7th tenants. This happens by default, hence there is no need to specifically mention it in the tenancy agreement, merely listing of the tenants will do just fine. However, it is important to name each tenant clearly, and they will also have to append their signatures in the agreement, indicating that they agree to the terms and conditions set in the agreement.