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This document is called a Business Licence to Occupy. It creates a legal agreement for one party (a licensee) to use certain parts of a property owner's (the licensor's) land/building. A licence is used where the parties do not wish to create a formal lease agreement. This document is designed for use where the property which will be the subject of the licence is based in England and Wales and where the property will be used for a commercial purpose. Where the parties would like to create an informal residential licence to occupy in the form of a lodger agreement, a different document should be used.
A licence to occupy creates a short-term right for a licensee to use parts of the licensor's property for a specific purpose. A formal lease agreement creates a legal relationship between the parties, whereby the property owner is a landlord and the other party is a tenant. This is different to the legal relationship between a licensor and a licensee.
Features of Licences
A formal lease agreement will give the tenant the right to occupy a defined property or premises to the exclusion of others for a fixed term in exchange for rent. A licence, in contrast, will have some of the following features:
Even where a licence agreement states that no tenancy is created, it is possible that the licensee can argue that a tenancy agreement exists. It is therefore particularly important to ensure that the licensee is not granted exclusive possession over the whole of the licensor's property. The licence agreement will specifically state that the licensor may change the defined area which the licensor may use, in order to address this.
Common Uses for Licences
This licence to occupy has been created in a universal style, and can be adjusted to suit the specific circumstances of the licensor and licensee. Please note that we have specific licences available for parking space agreements and storage agreements.
How to use this document
This document should be completed in full with all the relevant information. A Plan of the licensor's property/land should be attached to the licence at Schedule 1. A plan is helpful because:
The licensor may already have a plan which may be used. Alternatively, if the licensor needs to obtain a plan, HM Land Registry office provides general information about the features which may be included in property plans. Many local government websites also provide general information about property plans. The licensor will mark out on the plan the boundaries of their property and they can mark out any particular spaces that the licensee shall be permitted to use. The use of colours or hatching will often be used to mark out details on a property plan. The licensor will retain the discretion to change the spaces that the licensee shall be permitted to occupy.
The parties may also chose to attach a schedule of condition to the document. If this option is selected this should be attached at Schedule 2. A schedule of condition is used to record the condition of a property at a particular date. It will show the agreement that the parties have reached about the state and condition of the property at the time of entering into an agreement. It usually will include a description of any defects and may also include photographs. It is possible to read more about what a schedule of condition involves on the government website.
Once the parties are satisfied that the licence contains all the relevant information, it should be signed by both parties. Each party should retain a signed copy.
Some of the key provisions which are relevant in determining the distinctions between leases and licences are:
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