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Licence to Occupy Commercial Premises

Our Template Licence to Occupy Commercial Premises:

  • Over 600 sold!
  • A licence template for any commercial premises
  • Provides a flexible way to let business property
  • Drafted by David, a UK Solicitor, for reliability and peace of mind
  • Easy-to-edit template, with guidance notes and telephone customer support
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How Does It Work?

  • 1. Download
  • 2. Edit
  • 3. Print
  • 4. Sign

Our Licence to Occupy Commercial premises provides a flexible way to let out or occupy commercial space in England or Wales, without getting tangled in the complexities of a formal lease. Perhaps you have spare office space, a workshop area, or a retail concession you want to utilise quickly and efficiently?

Our solicitor-drafted Licence to Occupy template provides a clear, reliable, and cost effective solution. It’s specifically designed for landlords and businesses seeking a straightforward, short-term agreement for the non-exclusive use of business premises. 

Think of it as the agile, adaptable option in the property agreement toolkit.

If you want a longer fixed period than 12 months, then use a commercial lease (and ensure you contract out of the Landlord and Tenant Act 1954).

What is a Licence to Occupy Commercial Premises?

In simple terms, commercial a Licence to Occupy is a legal agreement granting permission for one party (the ‘licensee’) to do something on another party’s (the ‘licensor’s’) property – in this case, to use specified commercial premises for business purposes. The licensee pays a ‘licence fee’ (similar to rent) for this right.

Crucially, unlike a lease, a licence doesn’t grant the licensee an interest in the land itself or exclusive possession. You should think of it like a permission slip rather than handing over the keys with full control. This distinction has significant legal consequences, particularly regarding long-term rights and flexibility.

A licence to occupy provides a flexible solution for a landlord looking to let out all or part of a property, whilst retaining access rights for themselves to at least part of the premises.

Our template makes setting up this specific type of arrangement straightforward. It provides a legally sound agreement that has been carefully drafted by David, a UK solicitor and a co-founder here at Legalo.  

When is This UK Licence to Occupy Template Your Ideal Solution?

Knowing when to use a Licence to Occupy is just as important as knowing what it is. This template is designed for commercial properties in England and Wales only, and is ideal for use in the following specific situations:

  • Short-Term Requirements: Perfect for arrangements that you expect to last under 12 months, or where an ongoing, flexible month to month setup is preferred over a fixed commitment.
  • Non-Exclusive Occupation: Absolutely essential when the licensee does not need sole, uninterrupted control of the entire defined area. This is key! Examples include:
    • The landlord needing access to the area the licensee uses.
    • The licensee sharing common areas (kitchens, corridors, reception) with the landlord or others.
    • The area being part of a larger unit primarily controlled by the landlord.
  • Shared Premises Scenarios: Ideal when a landlord wants to utilise spare capacity within their own operational space.

Unlike typical lease arrangements a licence to occupy can be terminated with relatively short notice (typically one or two months), allowing adaptability for changing business needs.

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Real-World Examples Where This Template Excels:

  • Co-working & Serviced Offices: Granting rights to use specific desks or small office rooms where common areas are shared and the provider retains overall control.
  • Retail Concessions: Allowing a brand or small business to operate within a defined space inside a larger department store or retail unit.
  • Therapy & Treatment Rooms: Renting out rooms within a clinic or wellness centre on specific days or hours.
  • Workshop & Studio Space: Letting out a bench, bay, or specific area within a larger workshop or artist’s studio.
  • Pop-Up Shops: Short-term retail use where exclusive possession isn’t strictly necessary or guaranteed.
  • Storage Use: Granting permission to use a specific part of a warehouse or unit for storage, where the owner retains access.
  • Project or Temporary Team Space: Providing office space for a short-term project within a company’s main premises.

Is This Commercial Template Right For You? A Quick Check:

  • Is the property in England or Wales? (Yes? Good.)
  • Is the intended use for business/commercial purposes? (Yes? Good.)
  • Is the arrangement intended to be flexible or short-term (ideally, initial fixed term under 6 months, or rolling)? (Yes? Good.)
  • Will the occupier need exclusive control, barring the landlord almost completely? (No? Good. If Yes, consider a Lease or Tenancy at Will).

If you answered ‘Yes’ to the first 3 and ‘No’ to the last of these key suitability questions, this template is likely the perfect fit for your premises. However, if you need exclusive occupation, especially for a fixed term exceeding 6-12 months, then you should look at putting in place a Commercial Lease Agreement or a Tenancy at Will.

Alternatives to Consider:

  • Commercial Lease Agreement: The standard for longer-term, fixed arrangements granting exclusive occupation. Remember to address the security of tenure issue in the Landlord and Tenant Act 1954 (by ‘contracting out’).
  • Tenancy at Will: A highly flexible agreement also granting exclusive occupation, but terminable ‘at will’ by either party. Often used for very short periods or as an interim measure while negotiating a full lease.

Unpacking the Key Benefits: Why Choose Our Commercial Licence Template?

Opting for this template, drafted by David, brings tangible advantages for both landlords and occupiers in the right circumstances:

  • ✅ Unmatched Simplicity & Speed: We’ve prioritised clarity. The template uses plain English, avoiding dense legal jargon where possible. Coupled with our comprehensive guidance notes, you can confidently prepare a robust agreement, often in under 15-20 minutes.
  • ✅ Supreme Flexibility: Business needs change. This licence facilitates adaptability. Short notice periods (customisable in the template) allow either party to end the arrangement without being locked into a long, fixed term. Perfect for uncertain periods or testing a business concept.
  • ✅ Solicitor-Drafted Reliability & Peace of Mind: Why risk using a generic, unverified template? This document is crafted by David, our co-founder and a UK solicitor with 29 years’ specialist property law experience. You get professional-grade quality reflecting current legal standards in England and Wales. (Trusted by hundreds – over 600 sold!).
  • ✅ Significant Cost Savings: Access expert legal drafting without the ££££ price tag. Bespoke solicitor fees for even simple agreements can run into hundreds, if not thousands, of pounds. This template offers exceptional value.
  • ✅ Highly Versatile & Editable: Downloaded in Microsoft Word format, it’s easy to tailor the specifics of the template – define the exact premises, outline permitted uses, set the licence fee, and adjust notice periods to match your requirements. It works for various commercial property types.
  • ✅ Crystal Clear Guidance Included: Don’t feel lost navigating the clauses. The included guidance notes, also prepared for you by David, explain the purpose and implications of each section, empowering you to complete the template accurately and confidently. Think of it as built-in support.
  • ✅ Avoids Leasehold Complexities: Steers clear of the more stringent regulations, repair obligations, and potential security of tenure issues associated with formal leases under the Landlord and Tenant Act 1954.

Licence vs Lease vs Tenancy at Will: A Deeper Dive

Getting this wrong can lead to unintended consequences, particularly around security of tenure – the tenant’s right to potentially stay on or renew after the initial term expires. Let’s break down the critical distinctions beyond the summary above:

The Core Concept: Permission vs. Interest

  • Licence: Grants permission to use. It’s a personal right between the licensor and licensee. It doesn’t grant ownership or a formal ‘stake’ (interest) in the property itself.
  • Lease/Tenancy: Grants an interest in the land for a defined period. This gives the tenant more robust rights, including the crucial right to exclude others, even the landlord (except for specified reasons like emergencies or agreed inspections).

Exclusive Possession: The Litmus Test

This is often the deciding factor in law. Does the occupier have the right to exclude everyone, including the landlord, from the defined premises?

  • Lease/Tenancy at Will: Yes, generally. This is the hallmark of a tenancy.
  • Licence: No, generally. The landlord usually retains the right to enter, inspect, repair, or even use the premises alongside the licensee (depending on the agreement’s specifics). If an agreement calls itself a licence but grants exclusive possession in reality, a court might deem it a lease, irrespective of the label.

Security of Tenure (Landlord and Tenant Act 1954)

This is a major consideration for commercial property in England and Wales.

  • Lease: Business leases generally fall under the Landlord and Tenant Act 1954, granting tenants statutory rights to request a new lease on expiry. Landlords can require tenants to ‘contract out’ of these rights before the lease starts (and usually do), but it requires a specific formal procedure.
  • Licence/Tenancy at Will: These typically fall outside the 1954 Act’s security of tenure provisions. The licensee/tenant has no statutory right to renew. This is a key reason landlords opt for licences for short-term, flexible arrangements where they want certainty about regaining possession.
  • The Danger: Granting a ‘licence’ that behaves like a lease (exclusive possession, long fixed term) without formally contracting out of the 1954 Act could inadvertently give the occupier renewal rights – a potentially costly mistake for the landlord.

Term Length & Flexibility

  • Lease: Usually for a fixed term (e.g., 3, 5, 10 years). Ending early typically requires negotiation or specific break clauses.
  • Licence: Often rolling (month-to-month) or for a short fixed term (e.g., 6 months). Termination is usually simpler via the agreed notice period.
  • Tenancy at Will: Highly flexible, terminable by either party ‘at will’ (often with reasonable notice implied). No fixed term.

Formality & Complexity

  • Lease: Generally more complex documents covering extensive obligations (repairs, insurance, alterations, use restrictions, rent reviews). Often requires more involved negotiation.
  • Licence/Tenancy at Will: Typically shorter, simpler documents focusing on the core permission, payment, and termination terms.

Commercial Licence to Occupy v Commercial Lease v Tenancy Agreement – At a Glance

Aspect Licence to Occupy Commercial Lease Tenancy at Will
Legal status Personal right or permission to occupy Proprietary interest (a legal estate in land) Creates a tenancy that exists at the will of the parties, with no fixed term
Exclusive possession Typically not granted Grants exclusive possession Can grant exclusive possession
Security of tenure No security under the Landlord and Tenant Act 1954 May qualify for security of tenure under the 1954 Act (unless excluded) No security under the Landlord and Tenant Act 1954
Term Usually short-term or flexible Fixed term, often longer duration No fixed term; continues until terminated by either party
Formality Less formal; can be oral or written Must be in writing (if over 3 years) and may need to be registered (if over 7 years) Less formal, though often documented in writing
Rent / Fee May be charged a licence fee Rent payable under the lease terms May be charged rent or licence fee
Alienation rights No right to assign or sublet May include assignment or subletting rights, subject to conditions No right to assign or sublet
Registration at Land Registry Not registrable Registrable if term exceeds 7 years Not registrable
Repair & maintenance Typically less obligation on licensee Often more extensive repairing obligations on tenant Typically minimal obligations unless agreed otherwise
Termination Can usually be terminated on short notice More difficult to terminate without legal process Terminable at any time by either party without notice
Commercial use implications Often used for temporary, shared, or pop-up arrangements Suitable for long-term business occupation and investment Useful for short-term, interim arrangements before a lease is formalised

Why Does This Matter So Much?

Choosing the correct agreement type ensures:

  • Legal Compliance: You use a structure appropriate for the reality of the occupation.
  • Managing Expectations: Both parties understand their rights and limitations regarding duration, access, and ending the arrangement.
  • Avoiding Disputes: A clear, correctly labelled agreement minimises the risk of arguments later, particularly about renewal rights or termination.

Our template is carefully drafted to establish a genuine licence arrangement when used appropriately for non-exclusive, flexible occupation.

How It Works: Your Path to a Signed Agreement in 4 Simple Steps

We believe legal processes shouldn’t be complicated. Getting your Licence to Occupy finalised is designed to be refreshingly straightforward:

  1. Instant Download: Complete your purchase and immediately download your template bundle. You’ll receive the core Licence Agreement as a Microsoft Word (.docx) file, ready for editing, plus the invaluable PDF Guidance Notes.
  2. Easy Editing & Customisation: Open the Word document. Follow the Guidance Notes step-by-step. They explain each clause, prompting you to insert specific details like names, addresses, the precise description of the premises (or part), the licence fee, payment schedule, and agreed notice period. It’s designed for ease of use, even if you’re not familiar with legal documents.
  3. Printing: Once you’ve tailored the agreement and double-checked all details, print sufficient copies for all parties involved (licensor and licensee(s)). Printing on good quality paper adds a professional touch.
  4. Formal Signing: The final crucial step! Ensure all parties sign and date each copy of the agreement. Both the licensor and licensee should retain a fully signed original copy for their records. This formalises the permission and makes the terms legally binding.

A Commercial Licence – Drafted by a UK Solicitor: The Legalo Advantage

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In today’s world of readily available online templates, quality and reliability are paramount. Why should 

you trust the Legalo Licence to Occupy template?

  • Direct Solicitor Authorship: This template wasn’t assembled by interns or paralegals. It was meticulously drafted from scratch by David Cammack, our co-founder and a practising UK solicitor boasting 29 years of dedicated experience in property and commercial law. His expertise is embedded in every clause.
  • Focus on England & Wales Law: Generic international templates can be dangerous. Ours is specifically tailored to the legal nuances and requirements governing commercial property agreements within England and Wales, ensuring relevance and compliance.
  • Up-to-Date & Legally Sound: Property law evolves. David ensures our templates reflect current best practices and legal standards, giving you confidence in their robustness.
  • Clarity Meets Precision: We strive to make legal documents understandable. While ensuring legal precision, the template avoids unnecessary complexity and uses plain English wherever possible, aided significantly by the guidance notes.
  • Proven Track Record: Theory is one thing, real-world application is another. With over 600 of this specific Licence to Occupy template successfully purchased and used by businesses and landlords across the UK, its practical value and reliability are well-established. You’re choosing a tried-and-tested solution.

Choosing Legalo means choosing peace of mind, knowing your agreement is built on a foundation of genuine legal expertise.

Key Clauses & Considerations Within the Licence Template (What to Expect)

While we can’t reproduce the entire template here, understanding the key areas it addresses will help you appreciate its comprehensive nature:

Parties

Clearly identifies the Licensor (property owner/landlord) and the Licensee (the business/person being granted permission).

Premises

Precisely defines the specific area the licence covers. This needs to be unambiguous – is it the whole unit, a specific room, a designated area marked on a plan? Detail is key, especially for non-exclusive use.

Grant of Licence

The core clause stating the Licensor grants the Licensee permission to occupy the defined Premises for the permitted use. It will explicitly state it’s a licence and does not grant exclusive possession or create a tenancy.

Term & Termination

Specifies the start date and how the licence continues (e.g., rolling monthly) and, crucially, the notice period required by either party to end the agreement.

Licence Fee

States the amount payable, frequency (e.g., monthly), payment method, and due dates. May also address consequences of late payment.

Permitted Use

Clearly defines what the Licensee can use the premises for (e.g., ‘office use’, ‘retail of clothing’, ‘storage of dry goods’). Restrictions are important.

Licensee’s Obligations

Outlines the ‘dos and don’ts’ for the occupier. Common obligations include:

  • Paying the licence fee on time.
  • Keeping the licensed area clean and tidy.
  • Not causing nuisance or annoyance.
  • Not making alterations without consent.
  • Complying with relevant laws (e.g., health & safety).
  • Allowing the Licensor access for inspection/repairs (reinforcing non-exclusive nature).

Licensor’s Obligations

May include clauses about providing services (if any, like utilities in a serviced office context) or maintaining common parts, though licences often place fewer obligations on the licensor compared to leases.

Insurance

May specify insurance requirements for the licensee (e.g. public liability).

No Assignment

Typically includes a clause preventing the licensee from transferring (assigning) the licence to anyone else.

Legal Notices

Specifies how formal notices under the agreement should be served.

Our template structures these points logically, and the guidance notes explain the rationale and options for each, helping you create a fair and clear agreement tailored to your situation.

Navigating Termination: Ending the Licence Agreement Smoothly

The inherent flexibility of a Commercial Licence to Occupy premises extends to its termination. Here’s what you need to know:

  • The Power of Notice: Unlike breaking a fixed-term lease, ending a rolling licence is typically straightforward. The agreement will specify a notice period (e.g., one calendar month, two months). Either the licensor or the licensee can serve written notice on the other party. Once the notice period expires, the licence ends.
  • Why Written Notice Matters: Verbal agreements to end the licence are risky. Always serve notice in writing, delivered according to the method specified in the agreement (e.g., recorded delivery, hand delivery). This creates a clear record and avoids disputes about when notice was given.
  • Customisable Notice Period: Our template allows you to define the notice period that suits both parties. While one month is common for maximum flexibility, you might agree on a slightly longer period if appropriate for your circumstances.
  • No Need for Default (Usually): Termination by notice doesn’t require either party to be ‘at fault’. It’s simply exercising the agreed right to end the flexible arrangement. (Separate clauses usually cover termination for serious breaches, like non-payment).
  • End of Licence Obligations: The template will typically include clauses about the licensee needing to vacate the premises by the termination date, remove their belongings, and leave the area in a specified condition (e.g., clean and tidy, making good any damage).

This pre-agreed, relatively simple termination process is one of the key attractions of using a licence for shorter-term, less critical occupation arrangements.

Common Mistakes to Avoid With a Licence to Occupy

While our template provides a solid foundation, pitfalls can arise from misunderstanding or misusing the licence concept:

1. Granting Exclusive Possession

The #1 mistake. If you give the occupier keys, unrestricted 24/7 access, and the ability to exclude you (the landlord) entirely, you’ve likely created a lease, regardless of calling the document a ‘licence’. This could trigger 1954 Act security of tenure if not properly contracted out and if the term is for a minimum of 6 months. Solution: Ensure the agreement and the reality reflect shared access or landlord control.

2. Setting Long Fixed Terms

Granting an initial fixed term of over 6 months (some argue even slightly less) significantly increases the risk of it being deemed a lease. Solution: Use rolling terms or very short initial fixed periods (e.g., 3-6 months) followed by a rolling continuation. For longer fixed terms, use a formal lease.

3. Vague Premises Description

Not clearly defining the exact area covered by the licence can lead to disputes. Is it Room 3, the blue-taped area on the floor plan, or the entire first floor? Solution: Be precise. Use room numbers, descriptions, and attach plans if necessary.

4. Ignoring Landlord Consent (If Sub-letting)

If you are a tenant under a lease wanting to grant a licence to someone else (a sub-licence), your own lease almost certainly requires your landlord’s prior written consent. Failure to get this can breach your lease. Solution: Always check your lease and obtain landlord consent before granting a licence.

5. Forgetting Written Agreement

Relying on a verbal understanding is asking for trouble. Memories fade, disagreements arise. Solution: Always use a comprehensive written agreement, like this template, and ensure it’s signed by both parties.

6. Not Addressing Essential Terms

Failing to clearly state the licence fee, payment dates, permitted use, or notice period invites confusion and potential conflict. Solution: Complete all relevant sections of the template carefully.

7. Using it Outside England & Wales

Property law varies. This template is specifically for England and Wales. Solution: Seek appropriate legal documentation for properties in Scotland or Northern Ireland.

Being aware of these common errors helps you use the Licence to Occupy correctly and effectively, achieving the flexibility and simplicity it offers, without unintended legal consequences.

Commercial Licence to Occupy: Your In-Depth Questions Answered (FAQ)

We’ve gathered answers to more detailed questions that often arise:

Q: Can an administrator grant a licence to occupy?

A: If a company owning freehold property goes into administration, the appointed Administrator generally has the power to grant licences (or leases) as part of managing the company’s assets. If the insolvent company was a tenant under a lease, the Administrator’s ability to grant a sub-licence depends heavily on the original lease terms and usually requires landlord consent.

Q: What happens if the property owner (Licensor) sells the property?

A: As a licence is a personal permission, it generally doesn’t automatically bind a new owner of the property in the same way a lease might. The new owner might choose to honour it or terminate it (subject to any specific terms agreed or required notice). This lack of guaranteed continuity is a key aspect of licences offering less security for the occupier compared to a lease.

Q: Are Business Rates payable on a property occupied under a Licence?

A: Liability for business rates depends on who is deemed to be in ‘paramount control’ or occupation of the property. With licences, especially for parts of premises, the situation can be complex. Often, the landlord (licensor) may remain liable for the overall rates, potentially recharging a contribution to the licensee via the licence fee or as a separate charge. However, if the licence grants very extensive control over a clearly defined area, the Valuation Office Agency might assess the licensee directly. It’s crucial to clarify responsibility for business rates within the licence agreement.

Q: Who is responsible for insurance under a Licence to Occupy?

A: The licensor (landlord) is typically responsible for insuring the building itself. The licence agreement should specify whether the licensee needs to obtain their own insurance, such as public liability insurance (to cover injury to third parties) and contents insurance for their own equipment and stock. It’s common and advisable for the licence to require the licensee to hold adequate public liability cover.

Q: What about repairs and maintenance?

A: Unlike leases which often have detailed repair clauses, licences tend to be simpler. The licensor usually remains responsible for structural and exterior repairs and maintaining common parts. The licensee is typically responsible for keeping their specific licensed area clean and tidy, and making good any damage they cause. The exact split should be clear in the agreement.

Q: Can the Licence Fee be increased?

A: For rolling licences, the licensor could potentially seek to increase the fee by giving notice to terminate the existing licence and offering a new one at a higher rate. There usually isn’t a formal ‘rent review’ mechanism within the licence itself as you’d find in a long lease. So any fee changes require agreement or effectively issuing a new licence.

Q: Does Stamp Duty Land Tax (SDLT) apply to Licences?

A: SDLT is generally payable on the grant of leases, particularly those over 7 years or with substantial rent. Genuine licences, being short-term or rolling permissions without creating an ‘interest in land’, typically do not attract SDLT. This can be another cost advantage over formal leases. However, if a document called a licence is deemed to be a lease in substance, SDLT could potentially apply.

Q: What Health and Safety responsibilities apply?

A: Both the licensor (as controller of the premises) and the licensee (as an employer or business operating from the premises) have duties under health and safety law (e.g., Health and Safety at Work etc. Act 1974). The licensor is generally responsible for the safety of the building structure and common parts. The licensee is responsible for the safety of their own operations, equipment, and employees/visitors within their area of occupation. Risk assessments are usually necessary for both parties. The licence might specify cooperation on these matters to meet the parties duties under health and safety law.

Q: Can I use this template for residential property?

A: No. This template is strictly for commercial (business) premises. Residential lettings have entirely different legal frameworks (e.g., Housing Acts). Using a commercial licence for residential purposes is inappropriate and could lead to serious legal issues. Please use our dedicated Residential Licence to Occupy if applicable, or more commonly, an Assured Shorthold Tenancy (AST) agreement for residential lets.

Q: What if I need minor changes to the template clauses?

A: The template is provided in Word format specifically so you can make edits. Our guidance notes explain the purpose of each clause, helping you make informed changes. However, if you need significant alterations or are unsure about the legal impact of a change, seeking brief advice from a solicitor is always recommended.

Who can grant a licence to occupy commercial premises?

An owner of a building or unit can grant a licence to occupy (or grant a lease). If you only “own” it on a leased basis, then the terms of the lease will dictate whether you can let it out.

A tenant under a lease might also be able to grant a sub-lease of the whole or a licence to occupy part of that unit. However, nearly always a tenant will need the landlord’s consent before sub-letting or sub-licensing can be done. The answer depends on the terms of the lease.

An occupier under a licence to occupy cannot sub-licence the licence (i.e. grant a licence to occupy), as it does not have an interest in the land; only a right to occupy it.

Can a licence to occupy commercial premises be assigned?

A licence is not assignable, because it does not create an exclusive right of occupation by way of an interest in land. Therefore, the landlord always has control over who the occupier is. The landlord will want to see that only a credit-worthy and trustworthy occupier has the right to be there.

Licences to occupy are relatively informal documents, so they can usually be terminated by the tenant on fairly short period of notice such as one calendar month. Therefore, there is usually no need to assign the balance of the term of the licence to occupy.

Are licences to occupy personal?

Yes. A licence to occupy cannot be transferred to anyone else by the tenant, as noted above.

What is the difference between a licence to occupy and a lease?

There are many differences between a lease and a licence to occupy. Here are the main ones:
  • You usually use a lease for occupation over 6 months: a lease must be for a fixed-term. A licence is often for occupation under 6 months: it could be for a fixed term or simply on-going.
  • Lease agreements are often much more complex and lengthy than a licence to occupy. Part of the reason for this is that the term of occupation will generally be longer under a lease. Therefore the lease needs to cover more potential issues, such as the increase in rent over time.
  • A lease is often of the whole of a building or unit. A licence is usually for part of a building or unit.
  • Leases usually grant exclusive occupation rights. You are best using a licence when occupation is not exclusive, e.g. where the occupier and landlord (or other occupiers) share some areas and occupation is of part of the whole building or unit.
  • Leases come with certain rights under the Landlord & Tenant Act 1954, although you can contract out of the right for the tenant to ask for an new lease of the same term when the original one expires. Nearly all leases are contracted out of this right. A licence does not have such a right.
  • Leases will incur Stamp Duty Land Tax if they are for a term of 7 years or more. A licence does not incur such a tax (but on the other hand it should never be granted for a term of anything like as long as 7 years, otherwise it will most likely be considered to be a lease).

Can a licence to occupy last for more than 12 months?

As a rolling month-to-month contract, a licence might eventually last for longer than 12 months. However, it should not be for a set period of longer than 6 months, or it might be taken to be a lease in reality.

Leases of commercial units are governed by the Landlord and Tenant Act 1954. That Act gives the tenant the right to renew the lease on its expiry unless the landlord has asked the tenant to contract out of the right to renew, which is usual. So if you have a licence to occupy that has an initial term of over 6 months, you would not have contracted out of the right to renew, because you would not have thought it was a lease in the first place. This then causes problems for the landlord, as the tenant probably has a right to renew.

What are the advantages of a Commercial Property Licence Agreement?

A licence to occupy commercial premises is intended to be a short-term arrangement. So it does not provide the tenant with the right to renew the arrangement on its expiry (security of tenure). Also either party can terminate the licence on fairly short notice. Therefore it is better for short-term lettings, where flexibility and simplicity is wanted.

What are the disadvantages of a Commercial Property Licence Agreement?

If the landlord and tenant are looking for a long-term more stable letting, then a licence to occupy is not the solution and a longer-term lease probably is. With a licence to occupy, there are no controls on the “rent” (licence fee), and also the occupier does not have exclusive use of the premises. Either party can terminate it on fairly short notice, so this can create problems. The Landlord and Tenant Act 1954 does not apply to a genuine short-term licence, and so the licencee would have no right to renew the licence when its initial term expires.

Can a licence to occupy be verbal? Does a licence to occupy need to be in writing?

A verbal licence to occupy is pretty dangerous. For any legal relationship, you need evidence in writing, in case it ends up in a dispute. Having anything as only a verbal agreement is asking for trouble. A good legal agreement in writing should:

  • help minimise the risk of disputes;
  • give the answer to most questions about the contract; and
  • avoid your having to go to court.

Since Legalo’s template is so easy to use and good value for money, there is really no excuse not to have a good written document in place.

How do you draft a licence agreement?

You should cover the following issues:

  • The grant of the licence: What initial term, what area does it cover, what licence fee is payable per month?
  • Licencee’s obligations: Set out the details of how the tenant may use the property: dos and don’ts.
  • Termination: The notice period that either side can give to terminate the licence. Any provisions regarding the tenant’s leaving the premises in a clean and tidy condition.
  • Any facilities and services that the landlord will provide: Normally you set these out in a schedule the licence, if any.

So use Legalo’s great template for this. It will cover all the relevant points and only take you a few minutes to complete. Our template is quick and easy to complete. It also has a full written guide, which is easy to follow, and it minimises the use of legal jargon.

Can an administrator grant a licence to occupy?

When an Administrator is managing a freehold property, the Administrator does have power to let it out, so can grant a licence to occupy. This would only occur because the tenant, being a limited company, has become insolvent and an administrator has then been appointed to manage its affairs.

The Administrator of a business that rents property under a lease might not be able to grant a licence to occupy without the landlord’s consent. The answer to this depends on the terms of the lease, but generally they ban sub-letting and the grant of licences to occupy.

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Ready to Create Your Commercial Licence Agreement?

So stop worrying about legal complexities for simple occupation arrangements. Cover of the letting of your commercial property space the straightforward, flexible, and reliable way. Download our expertly drafted Licence to Occupy template today and have your professional agreement ready in minutes, saving time and significant legal costs.

Benefit from:

  • Solicitor-drafted quality thanks to David (England & Wales specific)
  • Easy-to-use Word format
  • Comprehensive guidance notes, also drafted by David
  • Proven reliability (600+ sold)
  • Instant download

Questions before you buy? Call our customer support line and speak to David, who is happy to assist. 

Remember, you get in-depth guidance notes that an experienced UK solicitor has written, to make it extra simple. If you do find yourself with any questions, then simply call David in our customer services team. They are on hand and always happy to assist you.