Licences to Occupy – Pitfalls and Problems

Few areas of law give rise to as many disputes as Licences to Occupy.

Although the parties often intend a licence to cover a short temporary occupation, problems often arise as:-

1. The initial period of occupation is commonly extended either by the occupier remaining at the property after the end of the agreement, or by a series of agreements.
2. Even though the agreement is called a “licence”, it may be considered by the court to be a tenancy. If the occupier is granted exclusive possession of the property, the agreement will almost certainly be treated as a tenancy.
3. If the occupier does, in fact, have a tenancy, he may be entitled to security of tenure :-
   1. If the premises are commercial – as a business tenant under the Landlord & Tenant Act 1954; or
   2. If the premises are residential – as a protected residential tenant.

A couple of recent cases illustrate the problems which can arise:-

London College of Business Limited v Tareem Ltd (2018)

• A London college was held to be a business tenant protected by the Landlord & Tenant Act 1954 even though the agreement under which it occupied was called a “licence”.

Gilpin v Legg (2017)

• The owners of beach huts situated on a landowner’s property were held to be tenants rather than licensees.

In both cases, the landowners were not entitled to possession without following the required procedures for termination of the relevant tenancies and in the former case, the landowner had to pay damages to the tenant for wrongly attempting to repossess the property (even though the tenant was at the time in arrears with rent).

Where an occupier is, in fact, a tenant (rather than a licensee), a landowner may be entitled, in some cases, to recover possession, but it is likely to incur significant costs and delay in doing so. In some circumstances, however, the landowner would not be entitled to possession where the occupier is a tenant with security of tenure and is saddled with a sitting tenant for a considerable period of time.

How does a landowner protect himself?

Before allowing anyone into occupation, a landowner should take legal advice. There are a number of ways in which a landowner can protect himself, for example:-

• For commercial properties either by a tenancy at will or a tenancy excluded from the Landlord & Tenant Act 1954
• For residential properties by an assured shorthold tenancy or (for employees) a service occupancy

The best solution will depend on the circumstances and any such agreement needs careful legal drafting. If you would like more information please contact BHW’s Commercial Property team on 0116 289 7000 or email info@bhwsolicitors.com.