JARGON BUSTER - LICENCE

"WHAT IS A LICENCE?"

With regard to property, it is simply a licence to occupy. The licensee – the business that occupies space under a licence – does not have a tenancy and cannot be described as a tenant, nor does the occupier pay rent. The payment for the use of the space is a licence fee. 

Licence's are used in Serviced offices and Hope Street Business Centre.

"TAKING A LICENCE"

If your business is very young or is a start-up, it might be better to occupy your premises under a licence rather than taking on a lease. Property owners sometimes find it convenient to grant a licence, partly because the occupier will not qualify for security of tenure.

Licences are usually for much shorter periods than leases and do not require the same level of financial commitment. On the other hand, they need to be drawn up very carefully, and as an occupier you need to examine the licence details very carefully, to be sure they cannot be interpreted in law as a lease. So it is vital to take advice from a solicitor and a chartered surveyor before signing a licence, either as occupier or licensor.

"WHAT ARE TYPICAL TERMS FOR A LICENCE?"

The terms vary greatly with the circumstances. The licence fee (the equivalent of rent) might be payable monthly in advance or even weekly. The licensor (the equivalent of the landlord) might be able to require the occupier to leave after one month’s notice and the occupier might also be able to give one month’s notice of intention to quit. Various services may be provided as part of the licence arrangement.

"WHAT ARE THE ADVANTAGES OF A LICENCE?"

A young business without much financial backing may find it easier to obtain a licence, rather than a lease, for their business space. Typically, you might be required to pay at the outset a deposit equivalent to one month’s licence fee plus one month’s licence fee in advance. If you take a licence you will also find it much simpler and cheaper to extricate yourself if your business plans don’t work out.

"WHAT ARE THE DRAWBACKS OF LICENCES?"

As occupier you have no security of tenure and might have to leave your premises at quite short notice. It can therefore be risky to spend a lot on decorating or furnishing the premises.