What is a Commercial Property Licence Agreement?
A commercial property licence agreement is an agreement between tenant and landlord (or licensee and licensor) that gives the tenant the right to occupy a property in a commercial capacity for a predetermined period.
More important than what a licence is, is what it is not. A licence is not a lease. Crucially, a licence grants the licensee permission to use the premises in question, but it does not confer any further rights, for example to exclusivity, rent control, or right to remain. Usually licences are granted where you share premises either with the landlord or other businesses.
Getting these two terms confused can be disastrous. A tenant might get a nasty surprise when their landlord decides to terminate their licence; equally, if a landlord has granted their tenant a lease rather than a licence, they may find themselves tied into a lengthy contract they would have preferred to avoid.
What are the advantages of a Commercial Property Licence Agreement?
A commercial property licence agreement is typically a short-term agreement between landlord and tenant. They offer no security of tenure and can be terminated by either party after a notice period. This makes them ideally suited to temporary arrangements, where their flexibility and low cost are advantageous.
What are the disadvantages of a Commercial Property Licence Agreement?
For the same reason that commercial property licence agreements offer advantages to landlords and tenants looking for a flexible, short term solution, they have many drawbacks compared to leases for those looking for a long term, stable arrangement.
Licences do not offer many rights beyond simple permission to occupy the premises. Crucially, they do not benefit from the security of tenure – the right to remain at a property once the licence has come to an end. There is also no rent control and no rights to exclusive use of the property included in commercial property licences.
How Our Expert Solicitors Can Help
If you are looking for a premises to locate your business, or you are a landlord with a property and are seeking tenants, it is crucial you are aware of the difference between a licence and a lease.
This is particularly important as simply labelling an agreement a licence or a lease does not necessarily make it one. If you are a landlord and your contract offers your tenant exclusive use of your premises, for example, then you are placing yourself at risk of having that agreement be deemed a lease, regardless of whether your intention was only to grant a licence.
Leasing commercial property can often involve negotiating a complex world of legal jargon and lengthy contracts. Whether you are a prospective landlord or tenant, it is strongly advisable that you seek legal advice and guidance from an experienced commercial property solicitor before committing to any agreements. Our commercial property team have many years of experience demystifying legal terminology, offering guidance, and helping landlords and tenants make arrangements that suit their specific needs.
An experienced commercial property solicitor will have an initial consultation with you, free of charge, to discuss your situation in more detail. Once we understand your circumstances better, we can provide you with a clearer understanding of how we can help you. We will also provide you with a price quotation and a choice of funding methods at the outset.
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