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Licence to occupy - A good alternative for business?

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Acting as an agreement between a property owner and occupier, a licence to occupy gives the licensee non-exclusive possession of a property. This is typically for a set period of time, and can range from a single week to 12 months.

Despite the differences between the licence to occupy and a tenancy agreement or commercial leases, the licensee does give an individual the right to occupy and possess a property for this period of time.

A licence to occupy is a quick and easy way to prevent people from being considered trespassers for living in a property without a licence or tenancy agreement. However, because of this, it’s important to fully understand the advantages and disadvantages of a licence to occupy before you agree to it.

What are the different types of licence to occupy?

There are two different types of licence to occupy to choose from, the bare licence and the contractual licence.

A bare licence is often used in situations where a friend or family member is staying over. It involves giving verbal permission for an individual to stay on your property for a short amount of time.

In comparison, a contractual licence can be a written or verbal agreement. This type of licence to occupy is used in situations where an individual is allowed to stay on your property but there has been some consideration. For instance, if a friend is staying on the property and in exchange contributing to the rent or providing a service.

An individual staying at a property with a contractual licence may become known as service occupancy. This will happen if they perform a large number of services, for instance, helping with repairs, taking care of a child or elderly relative on the property, etc. 

How long can a licence to occupy last?

A licence to occupy is normally a temporary situation. It can be granted periodically each week/month or be for a fixed period, normally spanning 6 months or a year.

Compared to tenancy agreements, this process is incredibly temporary which is why it is so important that details such as the length of time the property will be occupied, are put into writing.

What are the advantages and disadvantages of a licence to occupy?

If you are considering getting or granting a licence to occupy, understanding both the advantages and disadvantages you will face is a great way of making the best decision for you.

The advantages of a licence to occupy are as follows:

  • A licencing agreement is a quick and easy way to get the rights to occupy a property. Especially when compared to getting a lease or even a tenancy agreement, both of which take a lot longer to complete.
  • Having non-exclusive possession of a property allows the licenser to occupy the property themselves or grant other licenses for the property. This gives them more flexibility than if they signed a lease and the licensees had exclusive possession of the property.
  • Without the restrictions of a tenancy agreement, landlords have more control  regarding how long the leaseholder can live in the property. Whereas a tenancy agreement may lead to people demanding a new lease, or staying in the property until they are legally evicted by a court, both of which the landlord would have no way of combating.
  • Having a licence to occupy means that you will not have to pay Land Transaction Tax unless it is written into the agreement.

Overall, a licencing agreement can be the perfect way for an individual to quickly rent a property for a temporary period of time. However, there are a number of disadvantages to the licence to occupy.

The disadvantages of a licence to occupy are as follows:

  • Whereas a tenancy agreement and lease have clearly written agreements, this is not always the case for a licence to occupy. Because of this, even if the agreement is referred to as a licence the court could consider it a tenancy. 
  • License holders are less protected than they would be with a tenancy agreement or lease. The landlord can choose to evict them at the end of the agreed period, as a licence to occupy does not adhere to the Landlord and Tenant Act 1954.

Get in touch with our specialist solicitors in London

At HPLP, our property solicitors have the legal expertise needed to help you manage a licence to occupy agreement. Our friendly team will always take the time to better understand your situation and provide you with expert advice and guidance tailored directly to you.

Speak to one of our expert property solicitors in London now by calling 020 7553 9000 or fill in our enquiry form, and we will call you back.