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Explanatory Notes
Licence to Occupy Offices
This template contract is designed to create a licence of business premises. In practice, the term licence usually refers to a relatively flexible, short term agreement of less than six months where the licensee does not have a right of exclusive occupation - that is whether he or she can keep other people (including the landlord) out of defined premises. Otherwise the arrangement may be construed as a tenancy. As a general rule: • the grant of exclusive possession,
• for a term,
• at a rent, will create a tenancy rather than a licence. The differences between a lease and a licence matter a great deal. In relation to business tenancies, leases are generally protected by Part II of the Landlord and Tenant Act 1954. This means that when the contractual term of the business lease comes to an end, the tenant's right to occupy the premises continues and (subject to other requirements in the 1954 Act), a landlord would not be able to recover possession of the business premises unless a notice procedure has been complied with and one or more of a limited number of grounds of possession has been established. With a licence, by contrast, you have no right to renew a licence once the landlord asks you to leave. It is not sufficient to label an agreement a 'licence' for it to take effect as a licence. If the legal effect of the terms of an agreement is to create the rights and obligations of a tenancy, then a tenancy is created even though an agreement is called a 'licence'. This document should not be used where exclusive possession is to be granted to the occupier. You should consider, in these cases, using a tenancy at will or a short term lease contracted out of the Landlord and Tenant Act 1954. If in doubt, take specialist legal advice. Our comments on the specific clauses of the agreement are set out below. Date and Parties Please refer to the additional notes on signing agreements and contracts at the end of these Explanatory Notes.
1. Definitions These need to be completed according to the particular circumstances of your contract. Note specifically that the Licence Period should be one of less than six months. 2. The Licence This Clause sets out the purpose of the contract. 3. Licensee's undertakings These Clauses set out the Licensee's obligations to pay the licence fee and a fair proportion of the outgoings. It also sets out the other obligations of the Licensor with regard to maintenance, insurance etc. 4. Power of Licensor to affix notice boards
This Clause sets out the rights of the Licensor to affix notice boards for sale or letting and rights of prospective purchasers or tenants to view the Premises. 5. Power to determine Licence This deals with the right of the Landlord to terminate the Licence if the Licensee fails to perform any of its obligations under the Licence. 6. General This Clause deals with general provisions relating to the Licence as follows: 6.1 the Licence is not capable of assignment; 6.2 the Licensor undertakes no liability for the condition of the Premises or in connection with the use to which they are to be put; 6.3 payment of legal costs in connection with the Licence; 6.4 the giving of notices by either party and 6.5 sets out that the provisions of the Contracts (Rights of Third Parties) Act 1999 will not apply to this Licence. (This Act came into force on 11 May 2000 and applies to contracts entered into on or after that date. It allows the parties to a contract to confer rights on third parties so that a third party may enforce the contract as if he were a party to it).
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