Commercial Property: a Lease or a Licence?

Landlords and Tenants often contact Lawdit Solicitors to seek advice on whether a lease or a licence is appropriate when renting premises. No doubt every situation is different and what would be appropriate for one situation may not be suitable for all. I will try to highlight some of the main differences between the two.

The Lease

A lease is subject to the Landlord and Tenant Act (the Act), and features the following characteristics:

-Â Â The tenant has exclusive use occupation of the property

-Â Â It is for a set period of time for a rent

-Â Â The Act gives the tenant the right to renew the lease when the existing term ends (security of tenure), though there is a prescribed procedure offered by the Act to exclude this right before the lease begins.

-Â Â To gain repossession of the premises, the landlord can use either Common Law (forfeiture – this is the quickest procedure of all) or go to Court to obtain a judgment and/or order.

-Â Â Where rent is owed by the tenant, distraint for rent is available, when the landlord instructs a Bailiff to enter the premises and remove the tenant’s goods to sell to recover the rent. Alternatively, the landlord can apply for a County Court Judgment (CCJ) for the rent arrears, which can then be transferred to the High Court and enforced by a High Court Enforcement Officer (HCEO) under a writ of fieri facias (known in short as a ‘fi fa’). This process takes longer, but it does allow the HCEO to attend other addresses where the debtor may have goods or assets. It can be combined with a possession order.

The Licence

-Â Â It provides a method of granting occupation of business premises without the tenant acquiring a security of tenure (i.e. the tenant does not have the right to remain in the premises and have a fresh lease when the initial tenancy ends).

-Â Â By its very nature is suitable only for a temporary arrangement – often used during the period of occupation when the formalities of the lease are being finalised

-Â Â It is more adaptable and can be modified to suit different situations

-Â Â To gain repossession, the landlord will obtain a CCJ judgment and/or order and have it transferred to the High Court for enforcement. He can also apply for a combined writ of fi fa and possession if required.

It is important that a licence is drafted very carefully, since if any dispute reaches the court, the judge will scrutinise the terms and spirit of the licence and decide whether it is in fact a lease.

share this Article

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp
Share on email

Recent Articles

How are NFT’s regulated in the UK?

The Financial Conduct Authority (FCA) has not yet provided guidance on NFT’s specifically with regards to regulation in the United Kingdom (UK). However, the FCA

What is an NFT and why create one?

NFT stands for non-fungible token. Non-fungible essentially means the token is unique and cannot be replaced with another. For example, a Bitcoin is fungible, so,