Licence to Occupy Commercial Premises

This Licence to Occupy Commercial Premises should be used where a Licensor permits a Licensee to use part of the Licensor’s building for commercial use on a temporary basis. This might be because the Licensee is only going to occupy the premises for a short time (say, less than 6 months) or if the Licensee is not going to have exclusive use of the land, and it would therefore be appropriate to grant a Licence.

Here at Simply-Docs there are a number of template licences to occupy which are for specific commercial uses. This template Licence to Occupy Commercial Premises can be tailored to suit many commercial uses including studios and guest houses.

A Licence is similar to a lease in that it has a fixed term. However, a Licence is unlike a lease in that it is not an interest in land and a licensee cannot acquire security of tenure. An arrangement is a lease if the occupier has exclusive possession of premises for a fixed term.

Such an arrangement is a lease whether or not the parties call it a lease. A court might decide that the licensee is really a tenant who has security of tenure. It cannot be a licence just because the parties call it a licence. This Licence is drafted in such a way that the licensee does not have exclusive occupation of the premises.

The Licence is also drafted on the basis that the Licensee occupies part of a building so that the Licensor is responsible for repairs and maintenance and for providing the facilities and services to the building that are needed on a day to day basis. If the Licensor is not providing a significant level of services and/or the Licensee is occupying the whole of the building it would be advisable to use a lease instead and exclude the tenant’s security of tenure.

If there is any doubt as to whether a proposed arrangement will be a lease or a licence, the safest approach is to grant a lease which excludes the tenant’s right to security of tenure.

Clause 1 contains the definitions. The “Licence Fee” should include a charge for any services provided by the Licensor if there is to be no separate service charge. Provision of services is covered in Clause 4. If there is a separate service charge do not include the charge for any services in the Licence Fee and make sure to include the service charge provisions in Clause 5.

The definition of Premises makes optional reference to a plan. It is recommended that a plan is included, showing the Premises edged red, so that the extent of the Premises is clear.

The “Permitted Hours” should reflect the building’s opening hours.

Clause 2 contains the grant of the Licence and the procedure for terminating it before the end of the Licence Period.

Clause 3 contains the Licensee’s covenants. These cover payment of the Licence Fee and other outgoings, use, alterations and the Licensor’s right of entry.

Clause 4 contains a covenant regarding the provision of facilities and services. The list of services should be checked carefully and amended to reflect the services the Licensor will actually provide. Clause 4 also provides for the Licensee to have access to the Premises via the common parts of the building, use certain facilities in the building (if necessary), and park in the car park on the Licensor’s adjoining premises (if necessary).

Clause 5 contains service charge provisions. Include these provisions if you are charging a separate service charge.

Clause 6 contains some standard clauses including a requirement for notices (e.g. a notice to terminate the Licence) to be served in accordance with section 196 of the Law of Property Act 1925. This means that notices should be delivered by hand or sent by recorded or special delivery post. If the notice is sent by recorded or special delivery post, service is deemed to occur at the time at which the letter would “in the ordinary course” be delivered.

Optional phrases / clauses are enclosed in square brackets. These should be read carefully and selected so as to be compatible with one another. Unused options should be removed from the document.

This Licence to Occupy Commercial Premises is in open format. Either enter the requisite details in the highlighted fields or adjust the wording to suit your purposes.

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