Licences are dangerous

A Landlord wants short-term income from an empty unit. An occupier wants to trade temporarily from that unit. What is the problem? If the correct paperwork is completed, there is no problem. However, often it is not clear on what basis the occupier is allowed into possession and the occupier can then claim a tenancy having the protection of the Landlord and Tenant Act 1954.

This happened in National Car Parks Limited -v- Trinity Development Co (Banbury) Limited, a case heard in the High Court on 9th November 2000. The landlord entered into a Licence with NCP allowing NCP to operate a car park. The landlord was given rights to use about one fifth of the spaces for its staff and the Licence was terminable by either party on three months notice.

The new landlord of the car park served notice to terminate the Licence and NCP claimed the notice was invalid as the Licence was in reality a tenancy giving NCP security of tenure. The Court considered the terms of the Licence and decided that the landlord’s right to use some of the spaces was consistent with a licence arrangement rather than a tenancy. NCP effectively did not have exclusive possession of the land.

Although the landlord was successful in obtaining vacant possession from NCP, the case serves as a useful reminder to ensure that short-term occupancies are properly documented. As the Christmas period approaches, many landlords will be receiving requests to allow traders into empty shops for the Christmas trade.

The best way to proceed is as follows:

Enter into an agreement for a fixed term not exceeding six months with no rights to renew. The tenant cannot claim a tenancy under the Landlord and Tenant Act 1954 unless it or its predecessor in title has already been in occupation of the premises for a certain period of time.

Enter into a lease or tenancy agreement excluded from the Landlord and Tenant Act 1954. A Court Order will need to be obtained before the occupier is allowed into possession of the premises. There are other possibilities such as a tenancy at will or Licence, but these could be challenged by an occupier and therefore they are best avoided.

Remember - a short-term gain can cause long term pain if you get it wrong!