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Occupational differences

Owners of commercial premises often have to decide how they should document the occupation of a property says commercial property agent Prop-Search.  Principally, there are three ways that this can be done: a lease, a licence or a tenancy at will.

A lease grants the occupier an interest in land - a legal title - albeit a time limited one and gives the lessee the right to exclude all others.  By having a lease, the tenant is granted exclusive possession of the property under the terms of that lease and is able to exercise the rights of an owner of that land.

The advantages with a lease is that is provides a landlord with a secure period of income, while at the same time giving the tenant some security and certainly that they can exclusively possess the property for a fixed period of time.

Ian Harman BSC MRICS, a Director of Prop-Search, said: “Licenses on the other hand, offer both landlords and tenants a higher degree of flexibility.  The advantages are that licences cover a relatively short period of time, usually up to six months, whereas leases usually run for some or many years and can have onerous conditions.  Most licences give both the landlord and tenant the right to terminate the agreement when required, with a typical notice period being one tenancy term (rent period) or 28 days.”

A license agreement is typically straightforward and does not need a solicitor to prepare each time, as is the case with a complex lease, and is therefore inexpensive to set up.  Basically both parties sign a standard agreement with the landlord having the right to enter the premises at any time and the tenant having no right to renew the licence once it has expired.

A tenancy at will is also a short, flexible tenancy or license and in most respects is more like a licence than a lease.  A tenancy at will is from the outset intended to be short and can be terminated at any time by either party, and is often used as an interim tenancy, allowing the parties to negotiate the terms of a longer lease and must not be prolonged.

Ian added: “In each case, a lease, license or tenancy at will, it is very important to have a properly drafted agreement to fully protect the rights of both parties without any ambiguity.  A landlord may want to avoid an indefinite commitment to a tenant, and likewise a tenant may not want to be trapped in a long-term lease agreement.”

Another distinct difference between a lease, licence and tenancy at will is that leases are subject to Stamp Duty Land Tax whereas the other two are not.

Further information or advice can be obtained from Prop-Search - Tel: 01604 492000 / 01933 223300 or its website: www.prop-search.com


Thursday, November 19, 2015