There are several ways that property can be occupied but the most the most common is through the granting of a Lease or a Licence. Mandy Kaur, a property law specialist at Tallents Solicitors in Newark explains the important differences that both tenants and landlords should understand so they can choose the best option to suit their circumstances.
What is a Lease?Mandy says:
“When renting a property, be it commercial or residential, most people will have heard of a Lease. This is a legal contract between the lessor, or landlord, where the lessee, or tenant, pays rent in exchange for exclusive possession of the property for a fixed duration.”
What is a License?
“This is a legal contract but holds less weight in court than a Lease would as it is essentially a ‘permission’ for the tenant to use the landlord’s property for an agreed purpose. A Licence can be either for a fixed duration (usually 6 months or less) or ongoing.”
What are the key differences between a Lease and a Licence?
“By occupying a property through a Lease, the tenant will have certain legal rights, such as security of tenure. This protection provides the tenant a right to remain in occupation of the property after the end of the Lease and the ability to request a renewal of the Lease from the Landlord.
“A License is a legal contract but holds less weight than a Lease,” says Mandy. “The core principle here is that it is does not afford the Tenant exclusive possession of the property, but merely permission to use the property for an agreed purpose. A Licence can be either for a fixed duration (usually 6 months or less) or ongoing. It tends to be used when either party is looking for a flexible or short-term arrangement, or perhaps a tenant needs access to a property while the Lease is being negotiated.
“It’s worth noting that if a License is drafted with the intention of avoiding a Lease, then there is severe risk that it will be held as a Lease by the courts and will create the same legal ties as a Lease. This means that the tenant could claim the same protections granted as a Lease under the Landlord and Tenant Act 1954.
“We do come across occasions when a landlord has tried to avoid giving a tenant security of tenure and has granted a Licence. Invariably this Licence is in fact a Lease and will give the tenant security of tenure which is exactly what the landlord didn’t want. It is therefore important to get the correct advice to ensure that the correct document is drafted on your behalf.”
“This can be a complicated area of property law and if you are considering allowing third-party occupation of your property, then we would suggest seeking legal advice to ensure the substance of the chosen document reflects your true intentions regarding the occupation of the property.”