Whether it is in a commercial or residential setting, a fundamental aspect of occupying property under a lease or tenancy agreement is that the occupier obtains a proprietary interest in the property concerned. Included within this interest is a right of exclusive possession, allowing the lessee or tenant to exclude third parties, and to a lesser degree the landlord, from entering the property. The importance of the leasehold interest is further recognised in statute law, which has brought about several legal frameworks which provide for security of tenure, restricting the ability of the landlord to evict the occupier from the property.
Because of the rights which derive from possessing a leasehold interest, property owners will sometimes instead grant a right to occupy under a licence. A gratuitous licence merely makes lawful an act which would otherwise be unlawful – in the case of occupying property, it is the consent of the owner that prevents the occupier from being a trespasser – and such a licence can be revoked at any time by notice to the occupier. A licence to occupy can also be granted by contract, and quite often the contract will provide for a specified period of notice necessary to revoke the licence. However, whilst such a licence can seem like a lease or tenancy agreement (and can even require periodic payments from the occupier), the right to occupy is a purely contractual right, and does not reflect any proprietary interest held by the occupier.
Consequently, there exists the danger that a property owner will allow a person to occupy their property under the terms of a written agreement, the occupier believing this to be a lease or tenancy agreement, and later will attempt to retake possession of the property, claiming that they only ever granted a licence to occupy. In such disputes, the courts will determine whether the document created a lease or a licence on the basis of the effect of the terms of the document, and not on the terminology used, or even the professed intentions of the parties. In general, an agreement creates a lease and not a licence where the following three elements are present:
- there is a grant of exclusive possession;
- the grant is for a fixed or periodic term; and
- there is a stated rent payable
That said, the courts also recognise various circumstances that weigh against the presumption of a tenancy, even were exclusive possession has been granted to the occupier. This is a highly technical area of law and, as such, if you are currently negotiating to occupy property and require legal advice to ensure the legal relationship you are entering into is suitable to your requirements, please contact Jonathan Finebaum on 020 7790 2000 or jfinebaum@adamslaw.co.uk
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