Licence to Occupy from a Tenant's Perspective: Rights & Protections

The main appeal of licences to occupy, whether periodic or for a fixed period, is their unmatched flexibility. For modern businesses dealing with variable headcount, rapid expansion or contraction, or experimentation with new locations, the ability to enter, use, or exit a property with minimal bureaucracy is a significant advantage.

Agreements are generally simpler, with negotiation cycles measured in days rather than months, and start-up costs are often significantly lower than for leases. Termination provisions can be designed to enable quick pivots without the heavy penalties associated with breaking a traditional lease or tenancy at will.

This flexibility is vital for companies navigating changing work patterns, project-based teams, or hybrid/flexible models. It also allows for easy scaling of workspace, accommodating upsizing, downsizing, or even multi-user and co-working formats that are difficult to structure through conventional leases.

Beyond speed and adaptability, licences may also prove more cost-effective in the short term. They typically eliminate requirements for long-term financial commitments . Instead, users pay for exactly what they need, when they need it, sometimes via a straightforward licence fee. This enables businesses to direct more resources towards core activities and growth, rather than being tied down by capital-intensive premises obligations.

What Are the Disadvantages for Tenants?

Despite these appealing advantages, the limitations facing licensees are fundamental. Chief among these is the absence of security of tenure, a key differentiator from any agreement offering exclusive possession. A licence to occupy offers little or no protection against termination, and there is no legal barrier to an owner demanding the return of the premises.

For tenants reliant on consistent premises to fulfil contracts, deliver services, or meet regulatory obligations, this exposes the business to continuity risks that can be mission-critical. For example, an abrupt termination might leave a company without a physical base and with little means to challenge the landlord’s action or claim compensation for disruption or losses.

There is also no guarantee of privacy or exclusive use . As the licensor retains the right of entry (and can often enter or use the property themselves, or grant similar rights to other occupiers), a licensee may experience unwanted intrusions, which could disrupt work, compromise confidentiality, or limit branding and fit-out opportunities within the premises. This makes licences suitable mostly for businesses undeterred by the prospect of shared space and those whose operations are unlikely to generate or require high levels of client confidentiality or operational security.

The non-transferable, non-assignable nature of licences, including bare and estoppel license forms also restricts adaptability if the business changes significantly. If the company is acquired, restructured, or wishes to pivot its operational footprint, it cannot simply transfer the licence to a new entity or sublet to another business. In the event of unexpected instructions or interruptions, the licensee’s right to damages or reinstatement is limited strictly to what is documented in the contract. For this reason, careful review and, where appropriate, negotiated enhancements to contractual terms are vital to safeguarding the licensee’s interests.

Finally, the blurred boundary between licence and lease, especially if the documentation or operational reality is inconsistent, can create grounds for litigation. Missteps here result in legal and commercial risks, potentially embroiling occupiers and landlords in costly disputes or, in worst-case scenarios, devastating operational uncertainty.

Making the Right Decision: Key Considerations

Selecting a licence to occupy hinges on matching workspace strategy to both operational requirements and tolerance for risk. Businesses should start by reviewing internal priorities, considering if a bare licence, contractual licence, or periodic licence best fits their needs. Those in highly regulated industries, or for whom location stability is essential, may wish to pursue traditional leases, which assign statutory security and a greater degree of exclusivity. If flexibility, speed of entry, or cost minimisation is paramount, and if the risk of losing premises at short notice is manageable, a licence may well be suitable.

It is crucial, however, that tenants:

• Carefully scrutinise the drafted licence, paying particular attention to clauses regarding the licensor’s retained access, termination rights, renewal conditions, and responsibility for outgoings and services.
• Ensure documentation is unambiguous, reflecting the true intent of both parties and describing the operational reality on the ground, including how any notice period or license fee is handled.
• Resist the temptation to fit out, brand, or modify the physical space in ways that would suggest exclusive possession (unless the goal is to push towards a lease, and with the owner’s agreement).
• Use legal counsel with experience in occupier-side real estate strategy to confirm whether there’s any risk of accidental lease creation, service occupancy confusion or disputed classification, and if so, document the parties’ intentions as fully as possible.

Conclusion

A licence to occupy is a flexible, cost-effective way for occupiers to access properties in a fast-evolving market. Yet, this convenience comes at the cost of limited rights and little protection from sudden disruption. For tenants, particularly those in growth, transition, or experimentation phases, a licence can offer unparalleled operational manoeuvrability. However, for businesses with high requirements for certainty, continuity, or exclusivity, the risks may outweigh the benefits, and a longer-term lease arrangement should be seriously considered.

For deeper insight check out our complete guide on License to Occupy , Licensor Risks and Legal Advice.