Leases are the most common arrangement in property transactions. But be aware: they’re not always the best fit for every scenario.

Alternative arrangements like licences to occupy and tenancies at will, could offer greater flexibility for the parties involved depending on their commercial interests. However, it is crucial that landlords and tenants understand the differences between the arrangements.

Lease

Leases grant exclusive possession of the property or land for a set period, providing stability for landlords and tenants alike. But be aware – negotiations can be long, and tenants might find themselves locked in without a break clause.

The laws relating to commercial leases differ significantly from that of a tenancy for a house or flat.

Commercial tenants have protection to renew their lease provided it remains within the Act (also known as having security of tenure) and certain conditions are met, and there have been no breaches.

However, a Landlord may make it a condition before granting the lease to a Tenant that the lease is not protected under the Act and there is no security of tenure, as they may have other plans with the site in the future.

Leases offer a secure period of income for the landlord as well as security and certainty for the tenant.

Licence to Occupy

These are efficient and perfect for short-term needs. Licences to occupy offer a quick solution, but always be careful. The lack of security could leave you vulnerable. Plus, if the land changes hands, your licence may end.

A licence is permission for a licensee to do something on a licensor’s property. Some examples of where a licence to occupy can be used include serviced office space and occupation pending completion of a sale.

A licence does not offer security of tenure on the licensee and termination depends on the terms of the licence. However, if exclusive possession is granted, there is a risk that the arrangement may later be challenged. If the owner sells the land, the licence will end, although the licensee may have a right of action for breach of contract.

Tenancy at Will

With the power to terminate at any moment, they’re ideal for a landlord. But for tenants, the lack of security may be a concern. If not properly executed, a tenancy at will could cause long-term issues.

A tenancy at will exists where the tenancy is on terms that either party may end at any time.

A tenancy at will may be written or implied by actions and can sometimes be hard to distinguish from a licence to occupy. Tenancies at will are often used where the parties are negotiating for a fixed-term lease and want to document a short-term occupational arrangement pending the lease’s completion.

A tenancy at will favours the landlord in retrieving possession of the premises from the occupier. As a tenancy at will can be terminated instantly, it may not offer enough security and certainty for an occupier. If not properly drawn up, it could end up being a periodic tenancy in which case the tenant will have immediate security of tenure.

In Summary:

Leases are most commonly used to formalise property arrangements, but they’re not your only option. Parties can tailor their arrangements to meet specific circumstances.

We’re here to help, speak to us about your options and we’ll support you with a solution that works for you. Call the team on 0300 124 0406.