Licence to Occupy: When is it appropriate in commercial property?
RishitaRishita
29th Aug 2025
4 min read (620 words)
Quick Facts
- A Licence to Occupy (LTO) grants temporary, non-exclusive rights to use commercial premises.
- Common for pop-up shops, serviced offices, co-working spaces, and interim storage.
- Provides flexibility, speed, and lower upfront costs, avoiding many statutory lease obligations.
- Not suitable for businesses needing long-term security or exclusive occupation.
- If poorly drafted, an LTO may be legally reclassified as a lease.
Understanding the Basics
Licence vs Lease
A licence is a personal, short-term right to use a space, which does not create a legal interest in land (meaning the occupier does not gain ongoing property rights that attach to the premises itself). The landlord can revoke it easily, and it does not grant exclusive possession.
By contrast, a lease creates a legal interest in land: the tenant has exclusive possession of the premises, enjoys statutory protections, and usually enters into a longer-term commitment. Leases over six months often fall within the Landlord & Tenant Act 1954 , giving tenants security of tenure.
Advantages
- Fast and simple to put in place (often within days)
- Flexible exit and entry terms
- Lower upfront costs and generally no Stamp Duty Land Tax
- Allows sharing or multiple use of spaces
Disadvantages
- No long-term protection or security of tenure
- Can be terminated at short notice
- Not ideal for businesses seeking stability
- Risk of being reclassified as a lease if drafted incorrectly
Typical Scenarios Where an LTO is Appropriate
- Flexible co-working: Start-ups and hybrid teams use rolling licences for agile growth.
- Short-term office use: For project teams, serviced offices, or early access between exchange and lease completion.
- Pop-up retail/events: Ideal for temporary shops, concessions, or exhibitions.
- Interim storage/operational space: Useful when awaiting property completion or planning decisions.
- Testing new locations: Businesses can trial new markets or formats without a major commitment.
See Leanspace Vacant Space Solutions for additional short-term arrangements.
Timing Considerations
A Licence to Occupy is most appropriate when:
- Speed of occupation is critical and delays would harm operations.
- Agility and flexibility are needed, such as in uncertain market conditions.
- Landlords want to avoid statutory lease obligations like security of tenure.
Decision-Making Framework
When assessing whether a Licence to Occupy is right for your situation, ask:
- Is exclusive possession required?
If yes, a lease is likely needed. - How long is the occupation intended?
Short-term use is suited to a licence, while longer periods require a lease. - What level of risk is involved?
Lower-risk, temporary projects align well with an LTO. - How important are cost savings?
LTOs often avoid hefty legal costs and taxes associated with leases.
Practical Examples & Unique Use Cases
- A technology firm takes a two-month licence for temporary office space during a product launch, allowing rapid scaling with minimal costs.
- A retailer runs a three-week pop-up store without navigating complex lease negotiations.
- A logistics company uses warehouse space on a short licence while awaiting planning approval before committing to a long-term lease.
- A recently merged business trials a new workspace for six months under a rolling licence.
Key Legal Considerations & Compliance Tips
- Consult a commercial property solicitor – legal drafting is essential to avoid granting exclusive possession or unintended lease rights. See our legal partner network for recommended advisors.
- Ensure clarity – agreements should set out permitted use, occupation terms, fees, and exit rights with precision.
- Check compliance – ensure the arrangement aligns with insurance, planning permission, and local licensing rules.
Conclusion
A Licence to Occupy is best suited to short-term, temporary, and flexible commercial arrangements. It is particularly valuable for businesses that prioritise speed, agility, and low commitment over long-term security.
For tailored advice on whether a Licence to Occupy is right for your needs, you can book a consultation with our team .
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