Licence to Occupy Agreement: What Documents Look Like & Key Clauses
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RishitaRishita
27th Aug 2025
6 min read (1,193 words)
Key Points:
- Understand the structure – A licence to occupy agreement clearly outlines parties, permitted use, payments, access, obligations, and termination.
- Essential clauses – Include licence grant, permitted use, payments, access, landlord rights, liability, and vacating procedures to ensure enforceability.
- Risks of misdrafting – Granting exclusive possession or unclear terms can result in courts reclassifying a licence as a lease, triggering statutory tenant protections.
- Implementation best practices – Tailor templates to the property, define rights and obligations clearly, and seek legal review to avoid disputes or unintended tenancy.
Introduction: What Is a Licence to Occupy Agreement?
A licence to occupy is often used when a landlord wants to give someone short-term access to a property without creating a formal lease. Unlike a lease, which grants the tenant exclusive possession and security of tenure, a licence simply gives the occupier a contractual right to use the space, usually on a non-exclusive and temporary basis. This distinction matters because only tenants receive statutory protection under landlord and tenant legislation, while licensees have fewer legal rights and are generally easier to remove once the licence ends. For businesses, landlords, and property managers, this approach is ideal for coworking offices, pop-up retail, interim access, and situations where maximum flexibility and operational control are desired.This practical guide breaks down what a licence to occupy document entails, why it is essential, its structure, the key clauses required for enforceability, and the steps to implement it effectively for properties of all types.
Structure of a Licence to Occupy Document
When reviewing a licence to occupy agreement template, one may notice it follows a clear structure designed to emphasise use, payments, and control.
Step-by-Step Document Structure
- Title & Date: Identifies the agreement and its start date, crucial for defining the occupation period.
- Parties: Clarifies the licensor (property owner) and licensee (person/company occupying).
- Definitions: Specifies key terms, such as “premises,” “licence period,” and “permitted use”, ensuring all parties understand their rights and restrictions.
- Grant of Licence: Formally gives the licensee the right to occupy under the specified conditions, but makes clear it is not exclusive possession.
- Payments & Deposit: Sets out the licence fee, payment schedule, and any security deposit requirements, plus penalties for late payment.
- Access & Use of Premises: Details how the premises may be accessed and used, hours of occupation, and any shared facilities.
- Licensee Obligations: Lists maintenance duties, insurance, compliance with health and safety, and responsibility for behaviour.
- Licensor Rights: Outlines the owner’s right to inspect, maintain, and reclaim the property, and enter for repairs or emergencies.
- Termination Provisions: Specifies how either party can end the arrangement, notice periods, and immediate termination triggers (e.g. breach, insolvency).
- Inventory & Vacating Procedures: Requirements for the condition on entry and exit, return of keys, and strip-out responsibilities.
- Miscellaneous: Covers indemnities, liability, dispute resolution, and governing law.
- Signatures & Witnesses: Legal execution page for both parties and their witnesses.
Essential Licence to Occupy Clauses Explained
When drafting or reviewing a licence to occupy, certain clauses are particularly important to make sure the agreement is clear, enforceable, and avoids future disputes:
- Licence Grant: Makes clear the occupier only has permission to use the space, not a tenancy. It should state that the licensee does not have exclusive possession and that the landlord can enter or allow others to use the premises.
- Payments and Deposits: Sets out the licence fee, when it is due, and any late payment charges. If service or facilities charges apply, these should be included. Any deposit should also be covered, along with the conditions for its return.
- Permitted Use: Defines exactly how the space can be used; for example, for certain business purposes or within specific hours. This helps the landlord retain control.
- Access and Shared Areas: Sets out how the occupier can use shared spaces, such as kitchens or bathrooms, and makes clear that these facilities are not for their exclusive use.
- Occupier’s Duties: Day-to-day responsibilities, like keeping the premises in good order, following relevant laws, and avoiding anything that would put the landlord in breach of a head lease.
- Landlord’s Rights: Allows the landlord to come in for inspections, repairs, or to give access to others, so they can manage the property without restriction.
- Ending the Agreement: Explains how the licence may be brought to an end, usually on short notice (a week or two), and the circumstances where it can be terminated immediately if the occupier is in breach.
- Liability and Risk: Clarifies who bears responsibility for damage, loss, or third-party claims, giving both parties certainty over insurance and risk management.
- Vacating and Handover: Describes the process at the end of the licence; returning the space in good condition, paying any outstanding sums, and recording the condition of the premises.
Licence to Occupy Agreement Template Examples
To start, consider these common template structures (simplified for illustration):
Parties: The Licensor (property owner) and the Licensee (occupier).
Grant: The Licensor grants the Licensee non-exclusive use of the premises from [start date] to [end date].
Payments: Licensee will pay £X per month on the 1st of each month; a refundable deposit of £Y is held.
Use: Permitted use is “office workspace during business hours, excluding weekends”.
Termination: Either party may terminate by giving 28 days’ notice in writing. Immediate termination for nonpayment or breach.
Customisation is essential; each licence to occupy document should be tailored to the property, intended use, and risk profile. Use reliable template sources like GOV.UK , British Property Federation , Legalo , Wonder.Legal , or Genie AI for editable models.
Practical Implementation & Legal Advice
Choosing a licence versus a lease is about duration, control, and flexibility. Licences suit pop-up offices, desk shares, interim retail, and transitional arrangements, while leases are for longer exclusive use with statutory protections.
Risks if Drafted Incorrectly
If a licence is drafted or implemented incorrectly, particularly if it grants exclusive possession, courts may reclassify it as a lease. This exposes the landlord to statutory tenant rights such as security of tenure and restrictions on rapid repossession. Landlords must ensure:
No exclusive possession is granted.
Termination procedures are clear, and allow prompt removal if needed.
Indemnity clauses cover the owner’s risks.
Regular review with a qualified solicitor from Leanspace's partner network is recommended, especially for longer terms or higher value properties.
Common mistakes include:
Not expressly denying exclusive possession
Vague or missing termination provisions
Failing to include indemnity or insurance language
Not documenting the condition of the premises at both entry and exit
Summary & Next Steps
A licence to occupy agreement offers a flexible and practical solution for temporary or shared property use, but only when the document is carefully structured and includes the essential clauses to protect all parties.
Start by clearly defining rights and restrictions.
Use template examples, but tailor the final document to the specific use and property.
Seek expert legal review before implementation to avoid disputes or accidental grants of tenancy rights.
Actions:
Download a sample template
Speak to a property law advisor. You may get a starting point from Leanspace's trusted commercial law partners .
Read our full guide on licences to occupy for more information.
