Licences to occupy are a common legal arrangement in the UK property market, especially when businesses or individuals need short-term, flexible access to premises. While often confused with leases, licences offer different legal rights and responsibilities. If you’re considering granting or entering into a licence to occupy, it’s essential to understand what it means, how it works and when it’s the right option.
In this article, we’ll explore what a licence to occupy involves, how it differs from a lease and when it’s most commonly used in commercial settings. Whether you’re a landlord, business tenant or property manager, this guide will help you navigate the legal landscape with confidence.
What is a licence to occupy?
A licence to occupy is a legal agreement that allows someone to use a property or part of a property without transferring any legal interest in the land. Unlike a lease, which grants exclusive possession for a defined term, a licence is simply permission to occupy – and it doesn’t provide the same security or rights.
Related: Licence to Occupy vs Lease: What’s the Legal Difference?
In legal terms, the key distinction is possession. A leaseholder typically has exclusive possession and can exclude others (even the landlord) from the premises during the lease period. A licensee, on the other hand, has limited rights and must share control with the owner. This means the landlord retains access and the ability to enter or use the premises, subject to any terms in the licence.
Licences to occupy are often informal in appearance, but they are legally binding documents. They must be carefully drafted to ensure they don’t unintentionally create a lease. This is why it’s advisable to seek legal advice when preparing or reviewing such agreements – especially when there is potential for a dispute over occupation rights.
When is a licence to occupy used?
Licences are commonly used in situations where flexibility is important and long-term security of tenure is not required. One of the most typical scenarios is in the commercial property sector – particularly for serviced offices, shared workspaces or pop-up shops. These arrangements allow tenants to access the space quickly, often with minimal notice periods and reduced legal complexity.
They are also useful for temporary arrangements. For example, when a landlord is awaiting planning permission or is in the process of selling a property, they may offer a short-term licence to generate income without committing to a longer lease.
Legal differences between a licence and a lease
Understanding the distinction between a licence and a lease is critical, as it affects your rights, obligations and remedies under UK law. A leaseholder enjoys greater protection under the Landlord and Tenant Act 1954 (in commercial cases), including potential rights to renew the lease. A licensee, however, generally does not.
This makes licences attractive to landlords who want to retain more control over the property and avoid the legal complexities of ending a formal tenancy. However, it also means that licensees have less security – they can be asked to leave with relatively short notice and have limited recourse if the arrangement ends abruptly.
It’s worth noting that simply labelling a document as a ‘licence’ does not make it one. Courts will look at the substance of the agreement and the conduct of both parties. If exclusive possession is granted and the terms suggest a fixed term or rent, the court may decide that a lease exists, even if the document says otherwise. This makes professional legal drafting essential.
Drafting and enforcing a licence to occupy
A well-drafted licence to occupy should clearly state:
- The identity of the licensor and licensee
- The property or part of the property being licensed
- The duration of the licence (fixed-term or rolling)
- The amount and frequency of any licence fee (similar to rent)
- Any conditions on use of the space
- Termination rights, including notice periods
- Whether the licensor retains rights of entry or shared use
The agreement must avoid language or terms that indicate exclusivity or permanence or it may inadvertently become a lease. Care must also be taken where both parties believe they are entering into a low-commitment arrangement, as misunderstandings over rights can lead to disputes.
When disputes do arise, such as if a licensee refuses to vacate after termination, the licensor may need to apply to the court for possession. Although generally quicker than evicting a tenant under a lease, it still requires following the correct legal process.
When to seek legal advice
Licences to occupy may seem simple on the surface, but the legal implications can be significant. Whether you’re a landlord using a licence to provide short-term occupation or a business entering a commercial premises, legal advice can help ensure that your rights are protected and your obligations are clear.
At Osbourne Pinner, our commercial property solicitors have experience drafting and reviewing licences to occupy, as well as advising on disputes involving possession, termination and misuse of space. We can help you create a robust agreement that avoids ambiguity and meets your goals.
We offer a free 30-minute consultation to discuss your situation. Contact us today via the form below, call 0203 983 5080 or email [email protected] to speak with a commercial property solicitor near you. We’ll arrange an appointment at our offices in Harrow, Canary Wharf, Piccadilly Circus and Manchester – or remotely if you’d prefer.
