Commercial property owners are often eager to secure tenants and sometimes either overlook the need for the terms of occupation to be documented or allow a tenant in before the terms have been finalised. Despite good intentions this can give rise to a whole host of issues.
Commercial property dispute resolution specialist Eleanor Cornthwaite gives an overview of the common bases of occupation and explores the risks of not formally documenting arrangements between owner and occupier.
License to occupy
Licences to occupy are commonly granted where occupation is on a short-term basis. A licence to occupy is a personal right to use the premises, granted to the occupier or licensee.
The licensee does not have a right to exclusive possession and the owner is at liberty to bring the licence to an end and regain possession at any time, in accordance with the contract or licence.
Tenancies at will
Tenancies at will are common where a person occupies a property pending negotiations for a lease. A tenancy at will entitles an occupier to exclusive possession however, it can be terminated at any time.
Periodic tenancies
Periodic tenancies often come into existence when an owner lets a person exclusively occupy a premises, without documenting the arrangement, and rent is accepted.
A person who has the benefit of a periodic tenancy of business premises generally obtains security of tenure, meaning that they have the right to remain in the premises at the end of the term. As a result, landlords have to serve a statutory notice in order to obtain possession again.
Leases
A lease grants the right to exclusively possess premises for a certain period of time, so are often used to govern long-term periods of occupation by tenants.
Issues for landlords
Generally, only leases and tenancies create an interest in land. These tenants will benefit from statutory protection when the contractual term has expired, meaning they will be entitled to a new lease on substantially the same terms as the previous lease, unless it’s specifically contracted out of the provisions of the Landlord and Tenant Act 1954.
This can be a problem for landlords who might not have intended for the tenant to be afforded an automatic right to renew their lease when first allowing them into occupation. Landlords may not then be able to obtain possession or it may become a time consuming and costly process.
Solutions
Licences and tenancies at will, if properly drafted, give a personal right to occupy and do not entitle occupiers to remain in the premises upon expiry of the contractual term. They offer flexibility, so are beneficial for both owners and occupiers of property who are happy with a short term agreement.
A professionally drafted lease, licence or tenancy at will offers certainty to all parties, so it is vital to properly draw up a lease before entering into a new tenancy agreement for your commercial premises.
Woodcocks Haworth and Nuttall can assist if any difficulties arise in relation to the basis of occupation, terminating occupation or regaining possession, as well as preparing the correct documentation to ensure that your interests are protected while minimising the risk of any issues arising in the future.
For information on commercial property disputes, contact Eleanor Cornthwaite on 0161 761 4611 or email her at eleanor.cornthwaite@whnsolicitors.co.uk
