Here, general practice surveyor Phil Dickins advises property owners to take a long term view to short term occupations.
Providing for short term occupation of commercial property is a not uncommon situation, for example, where an occupier needs early possession and the solicitors are still working on the lease. In such cases, a licence agreement frequently offers a solution to cover the respective parties’ positions whilst a more formal agreement is put in place and, typically, such an arrangement meets both prospective landlord’s and tenant’s interests successfully.
However, equally frequently encountered in practice, and more problematic, is the position where an occupier seeks a short term commitment and enters into a licence agreement on, say, a monthly renewable basis with either owner or occupier having the right of termination on a set period of notice but where the period of occupation then stretches out for an extended period, in some cases for many years, creating a position which neither party originally anticipated.
In such circumstances the title attached to the agreement, whether lease or licence, is of little substance, as the courts will look to the nature of the relationship created between the parties, their original intentions, whether exclusive possession has been granted to the occupier/ the extent to which rights of entry have been reserved for, or implemented, by the owner and also the original bargaining position of the parties.
All too often the interpretation of such agreements, in the course of valuation instructions, leads to the unfortunate conclusion that the document in question is in fact a tenancy agreement, giving the occupier statutory rights of protection and, potentially, compensation if the owner seeks possession.
Accordingly, property owners are advised to take a step back and contemplate the long term view when faced with a short term requirement to occupy.
P A Dickins Bsc(Hons) MRICS
Lease Consultancy Department