Housebuilder Top Tip: Get Off My Land – why the lease/licence distinction matters

Published 29 octubre 2019

We are often asked to advise on the prospects for and timing of the obtaining of vacant possession of occupied development land. The nature of the occupation will determine the speed, and ease with which vacant possession can be achieved. Occupation generally splits into two categories, occupation under a lease and under a licence. A licence is a personal, contractual right to occupy, a lease is a legal interest in land.

The distinction matters because under a licence the licensee has very little protection under common law or statute if the licensor wishes to bring the licence to an end. In contrast, if the premises are let by a lease for business purposes then the tenant has the protection of the Landlord and Tenant Act 1954. This means that even if the contractual term of the tenancy is approaching, has passed, or can be imposed by way of a break clause or notice to quit, the landlord will still need to serve notice under this Act to terminate the statutory tenancy that is created automatically when the contractual term expires or is ended. The notice must be at least six months and specify a ground for possession; usually for our purposes, the demolition and redevelopment ground is put forward. Importantly the tenant will also be entitled to statutory compensation on vacation based on the rateable value of the premises.

The key factor in distinguishing a licence from a lease is whether the occupier has “exclusive possession”. Can they keep all others from the premises, including the landlord, at all times? If they can, then they almost certainly hold a lease not a licence. Do not be fooled by documents which state they are licences, but which grant exclusive possession, or which operate in practice to give de facto exclusive possession.