Guide to our Licence to Occupy Template

Posted by Stephen on 30th April 2015

This is our guide to our Licence to Occupy template. It is for use by a commercial landlord to let business premises or part of a premises to a licensee on a short-term and relatively informal basis.  This short template is not nearly as comprehensive as a full business lease agreement would be, because it is deliberately intended to be an abbreviated and simplistic document. It is suitable for letting commercial properties that are in England or Wales. *

If more protection for the landlord is wanted or the arrangement might be longer-term, then use a lease – a Commercial Lease template is available separately from Legalo.  A lease will give much better protection for the landlord in the long-run.

This guide walks you through completing our template document once you have purchased it.

Please note that if the licensor controls the premises, then it may owe a duty of care to the licensee and its employees and visitors, etc under the Occupier’s Liability Act 1957.

Guide to Clauses in our Licence to Occupy

This is an excerpt from the full guide to our licence to occupy template which comes with your purchase.

Numbered clauses

1. Interpretation

This clause defines the main terms used in the agreement.

  • Interest – Check the rate and complete the name of the bank you want it linked to.
  • Licence Fee – Insert the level of the rent. This is the “basic” rent payable under the licence to occupy. You should set the rent at a sufficient level that it covers the following:
  1. any service charge levied for the common parts of the building (e.g. cleaning and repairs to lifts, stairs or car park);
  2. non-domestic rates, water rates and other utilities charges (i.e. whatever you include in the definition of “Facilities and Services”); and
  3. buildings insurance.

If the occupation might be longer than short-term, then you may wish to alter the licence to have utilities costs charged separately to the licensee, based on use.

  • Permitted Use – Insert the relevant details of the permitted use of the property.  If you are not linking the use to the classes of use recognised under the planning law Acts, then delete the second phrase which is in square brackets.
  • Permitted Hours – Insert the relevant details of hours during which the licensee can use the premises.
  • Property – Insert the name of the property, preferably with full postal address.  If it is only part of a building, make it clear which part/parts.  If you are adding a plan of the premises to make it clearer which areas are being let, then also add the words “which is shown for identification only as the area outlined in red on the plan attached to this agreement”.

2. Licence to occupy

Fill in the set period of the licence in clause 2.1. There are risks in fixing the licence period. If, in reality, the licensee occupies the property exclusively for a fixed period exceeding six months, then the licensee could claim it has a “tenancy”. The Landlord and Tenant Act 1954 would protect such a tenancy.  You could make the term indefinite instead if preferred, until terminated in accordance with clause 4.1, in which case delete the words “before the date of expiry detailed above” from clause 4.1.

In clause 2.2 state the day of the month the rent is due.  Clause 2.4 envisages that you are not giving exclusive possession of the property to the licensee.

If the licensor is in turn a tenant under a lease, its granting a licence to the tenant may well be in breach of that lease. However, granting a sub-lease (with exclusive possession) may be seen as a more serious breach.

3. Licensee’s obligations

This clause provides a list of dos and don’ts for the licensee.

Delete clause 3.1.6 if the licensor would not be able to relocate the tenant to suitable alternative premises. For example, this could be to another part of the building if the Property is part of a larger unit.

4. Termination

Under clause 4.1, the either party can terminate the licence before it expires, by one month’s notice. So insert a longer period if desired.

Schedule 1

Here insert details of any other facilities and services the licensor is providing.

Footnote

* It has come to our attention that some landlords in England and Wales are using a free template licence to occupy which is available from a Scottish organisation. Scottish templates are different to those needed in England and Wales, as property laws are different in Scotland. A Scottish template should not be used to let property that is in England and Wales, just as our template should not be used to let property located in Scotland.

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