A Lease, a Licence and a Tenancy at Will - What's the Difference?

Land owners of commercial premises often have to decide how they should document the occupation of a property on a short term basis. There are three ways that this can be done: a lease, a licence or a tenancy at will.

A lease grants the occupier an interest in land. A licence does not. A licence is just a personal right. If a tenant has exclusive possession under a lease of land then he is able to exercise the rights of an owner of that land. A tenancy at will is a flexible form of tenancy - it is sometimes difficult to tell a tenancy at will from a licence. Tenancies at will allow either party to terminate the tenancy at any time and are often used as an interim measure while the parties negotiate a lease.

Commercial Property Partner at Frettens Solicitors, Oonagh McKinney, explains “The distinction is important because a properly drafted licence or tenancy at will does not confer any security of tenure on the occupier. A tenant who occupies premises for business purposes generally has statutory rights to renew the tenancy and a landlord can only oppose renewal on certain limited grounds.”

There are advantages and disadvantages of each type of arrangement. With a lease, there is a period of security, but Stamp Duty Land Tax may be payable and it generally takes longer to negotiate. A licence is quick to draw up, but landlords should be careful as incorrectly drafted licences may be challenged. From the licensee’s point of view, they will not have a high degree of control over the property. A tenancy at will is also exempt from Stamp Duty Land Tax, confers no security of tenure and allows the landlord to retrieve possession immediately. For tenants it can be drawn up quickly and cheaply, allowing quick access to the property. It can be determined instantly so may not offer enough security for either occupier or landlord.

Oonagh concludes “Licences and tenancies at will are attractive options where an occupier is seeking a short term occupational arrangement. However, care must be taken to ensure that a landlord does not inadvertently grant a secure lease.”

For a free initial Meeting, call 01202 499255 and Oonagh or a member of her team will be happy to answer any questions you may have.