Where a property owner grants permission for another person to legally occupy the property, they need to decide whether to do this via a tenancy at will, a lease or a licence. All three have different advantages and disadvantages. A licence simply allows a person to do something on someone’s land and prevents them from being classified as a trespasser. It is a personal right or permission and does not offer the holder any security.
All of these options allow a person to occupy a property that they do not own, but there are quite significant differences between the three.
Licences are highly flexible arrangements that are generally only used for commercial relationships. They can be for a fixed term or can be ongoing. A licence simply grants a person permission to use the land for a particular purpose, such as occupying it, and can be fairly risky since they offer no protection for the licensee. The owner of the property is the licensor and the person who has been granted use of the property is the licensee.
A licence does not grant the licensee with exclusive use of the property, it cannot be assigned and it does not pass to a new owner if the property is sold. This is why the wording of the arrangement is so important to make sure that it actually is what you want it to be. Simply calling an arrangement a licence does not automatically mean it will qualify as one and what is important is the actual substance of the arrangement as well as the specific characteristics, for example:
A lease (as opposed to freehold occupation) is a contract between the owner of the property and the tenant that grants them exclusive use of the premises for a set period of time. A lease is therefore a legal title over the land, albeit with a limited remit. A lease grants a “security of tenure”, which means at the end of the lease the tenant can automatically renew the lease on the same terms and the owner of the property only has limited grounds to be able to refuse the tenant’s request to renew. A tenant is able to assign the lease to a third party since it creates an interest in the land. Where the owner sells the property, then the new owner will also acquire any valid leases.
A tenancy at will is short term arrangement that is very flexible and occurs where the landlord gives a tenant consent to occupy a property indefinitely but with the understanding that either party can give notice and immediately end the arrangement. A tenancy at will is often used during negotiations in relation to a lease to allow the tenant to start their occupation of the property before the details of the lease are finalised. This arrangement can only be used for commercial tenancies.
A tenancy at will can be either express or implied and formal or informal. They can appear very similar to a licence since it also creates a personal right and cannot be assigned to anyone else. However, there are crucial differences- a person will have been granted a tenancy at will where they have exclusive possession and control and can exclude all others, including the owner of the property. However, the arrangement will be a licence regardless of what it is called in the agreement if:
Each of the above situations has its own advantages and disadvantages. For licences these are as follows:
Each of the above situations has its own advantages and disadvantages. For licences these are as follows:
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