Short Term Tenancy Agreements

In a fast moving market, Tenant’s are often keen to ensure they can take occupation of a property as soon as they possibly can, often with severe consequences. In the sudden burst of enthusiasm to start a new business venture, the basics can often be overlooked.

Ordinarily, once terms have been agreed between a Landlord and a prospective Tenant, Heads of Terms are issued to make clear to everyone involved what terms have actually been agreed, and the lawyers then work on the draft of the agreement. Modern, commercial precedent leases are pretty standard these days – owing to our experience, we can ordinarily identify the ‘source’ of a lease that has been sent to us, meaning we can turn it around quickly.

However, the process can take a couple of weeks at least to resolve itself, which is all too often too long for a tenant, itching to start its business. We are regularly asked about timescale and how quickly the keys can be collected. This in turn leads to a conversation concerning Licences and Tenancies at Will.  Whilst there is a distinction between the two, we will save that discussion for another day. The important thing that any prospective must understand is that these are only ever intended to be short term, flexible occupation and must be entered into with caution. For example, if a Landlord were to sell the Property prior to a formal lease being put in place, a Tenancy at Will or a Licence automatically comes to an end. Additionally, the prospective Tenant must realise that if it takes occupation and spends money on the property, then the Landlord can seize a commercial advantage and be particularly awkward in negotiations over the lease – knowing that the Tenant has already committed to the Property and has little choice.

The most important aspect to be aware of though, is that under a Tenancy at Will, either party can bring the arrangement to an end on notice. Taking a prospective Tenant as an example, who has perhaps spent several thousand on fitting out a new property, the Landlord can simply serve notice and the Tenant would have to vacate – without any recourse or compensation. A Licence can sometimes be drafted so as to include a notice period but this is only ever likely to be a relatively short period given that the Licence only ever granted a relatively short period of occupation in any event.

Turning the perspective around to the Landlord, there is always a risk that a Tenant who occupies under a Tenancy at Will or a Licence could argue that they are actually a Tenant, which would then mean the Tenant would benefit from the statutory protection granted to Tenant’s under the Landlord and Tenant Act. It is clear from the case law that irrespective of what the document is called or termed, if the agreement grants exclusive occupation for a fixed term and a set rent, then the Courts can determine that the agreement is actually a lease.

Ultimately, our advice is always that both the Landlord and the prospective Tenant should wait until the formal lease is in a form which all parties are happy with. Whilst we always attempt to ensure our clients commercial goals are met, matters always proceed more easily when there is a realistic timetable from the outset.

For any Commercial Leasehold Property Advice please contact markalexander@vslaw.co.uk