Lease, Licence or Tenancy at Will

Feb 11, 2019

Lease, Licence or Tenancy at Will, which one should you use?

Tenancy at Will
A tenancy at will is the most flexible option out of the three. It is a personal relationship between a landlord and tenant, which creates no legal interest in the land and can be ended at any time by either party for any reason. A landlord may wish to use this to allow a tenant immediate access to the property to commence their fit out or to start trading whilst formal lease negotiations continue to take place.

Licence
A licence also does not create a legal interest in land and simply gives the licensee permission to use the premises for a particular purpose.

Licences to occupy are used in a variety of situations, including between a buyer and seller in the period between exchange of contracts and completion of the sale, or between a landlord and tenant, after the agreement for lease has been exchanged but prior to completion of the lease.

Care should be taken as just because an agreement is referred to as a licence, it does not mean the courts will view it as such. If the agreement satisfies all the requirements of a lease then it will be treated as such. If a licence is held to be a lease the parties could find themselves in a legal position which was not intended and which can have cost implications for each. For example, a landlord could find that they now have a tenant with a protected tenancy which grants the tenant the right to stay on in the property even after the expiry of their licence and also to demand a new agreement on substantially the same terms.

Lease
A lease is a contractual relationship that grants a right of exclusive possession over a property or land for a determinable period of time, and it is the only tenancy out of these three to give the tenant a legal interest in the land.

A lease will grant exclusive possession whereas a licence or tenancy at will will not. Exclusive possession means that a tenant may exclude all other parties, including the landlord, from the premises.

As a lease grants a legal interest in the land this will ensure that, even if the landlord sells the land, the tenant’s lease is protected and they can remain in occupation.

The above gives a brief overview of the different occupational agreements open to both landlords and tenants. Every circumstance is different and if you are unsure of which agreement best suits your needs, or have a question on this article, please get in touch with our Real Estate department who will be happy to assist by emailing rosie.edwards@herrington-carmichael.com or calling 01276 854920.

This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.