Business Licence to Occupy

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:

• A licence does not create any legal interest in the land.
• A licence will grant only a basic right to use the licensor's land for a specific purpose.
• The right to use the land will generally cover only certain sections of the licensor's land (i.e not the whole of the land).
• A licence will not grant the licensee exclusive possession (they will not have the legal right to exclude the licensor from the land as a tenant would to their landlord).
• licensees do not have any security of tenure as is present in business leases (a tenant will have certain rights to remain in possession of a premises at the conclusion of a lease agreement).

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

In view of the above features, a commercial licence to occupy is commonly used:

- in office spaces, to allow 'hot-desking' in a shared workspace;
- in shopping centres where there are different stalls or kiosks where sellers may sell goods for a short period; or
- in other commercial retail buildings for temporary periods.

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:

• it clearly displays the whole of the building/land which is owned by the licensor; and
• it gives the licensee a point of reference to understand which sections of the property they shall be permitted to use.

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 choose 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.

Relevant law

Some of the key provisions which are relevant in determining the distinctions between leases and licences are:

• The Law of Property Act 1925
• The Landlord and Tenant Act 1954
• The case of Street v Mountford [1985] UKHL 4

Help from a lawyer

You can choose to consult a lawyer if you need help.

The lawyer can answer your questions or help you through the process. You will be offered this option when you complete the document.

How to modify the template

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.