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It is a common misconception that commercial premises licences provide greater flexibility for the owner, but less legal protection for the occupier, compared to commercial leases.
4 September 2018
Insight
It is a common misconception that commercial premises licences provide greater flexibility for the owner, but less legal protection for the occupier, compared to commercial leases.
The reality of the situation is, however, that it can, in fact, be the exact reverse. This is because a licence may attract the protection of the Landlord and Tenant Act 1954, providing an occupier of commercial premises greater legal protection than would otherwise be the case.
This article explores a key issue that owners should carefully consider when granting a licence to an occupier of commercial premises.
Whether a particular occupancy arrangement constitutes a licence or a lease, will depend on the particular circumstances at hand. However, a key factor to take into consideration is whether the occupier has exclusive possession of the commercial premises in question, or is sharing the premises with any other person.
It is important to note that if exclusive possession is granted, licences in excess of six months’ duration, may be construed as commercial leases. This then allows the occupier to benefit from the protection of the Landlord and Tenant Act 1954 under the terms of the licence agreement document. This may even be the case if the licence agreement document is entitled ‘licence’ and describes itself as a licence throughout.
If the occupancy arrangement is construed as a lease and not a licence, it may be difficult for the owner to bring that lease to an end due to the Landlord and Tenant Act 1954. This can also be time-consuming and rather costly, usually requiring the advice of both a commercial property solicitor and a chartered surveyor.
The owner’s ability to freely deal with the premises will be severely reduced: something that the owner will no doubt have sought to avoid by the grant of the licence arrangement in the first place.
It is crucial to seek legal advice at an early stage with any commercial occupancy arrangement so that terms can be properly negotiated and all documentation carefully drafted.
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