Licence to Occupy / Lodger Agreement

A. Licence to Occupy

 A Licence to Occupy gives the licensee the right to occupy the property for a defined length of time. A licensee has only a personal interest and this interest can be revoked by the landowner at any time. This is normally a short-term arrangement that can be used in domestic (e.g. Airbnb) or commercial (e.g. WeWork) contexts. It can be in favour of the Licensor / Licensee / neutral.

In many jurisdictions, it may be illegal to let out domestic property on a daily basis without a hotel / an Inn licence. You may want to check your local laws before doing so.

B. Lodger Agreement

A lodger agreement is a type of licence to occupy which would allow a property owner (or even tenants) in furnished houses or apartments to rent a room and share the common parts of the property (such as a bathroom, toilet, kitchen, and living room) with the tenant. A tenant must obviously check the terms of the original lease agreement to ensure that one is permitted to sublease to the sub-tenant before doing so. Many people would get into an informal lodger arrangement with a friend without any documentation. However, it is always recommended that the arrangement be put in writing using a lodger agreement template to protect both the landlord and tenant should any disputes arise.

If the tenant of the property is renting out the room, they should also check the original lease/tenancy agreement to see if there is any restriction on subletting. 

C. What are the differences between a Lease/ Tenancy and a Licence to Occupy? 

The main difference between a lease and a license, legally, is that a lease creates an interest in the land but a licence to occupy merely gives you permission to use the property. A licence to occupy is a legal agreement between the licensor (the party who owns or leases the property) and the licensee (the party seeking to occupy the property), giving the licensee the right to occupy the property for a defined length of time. A licensee has only a personal interest and this interest can be revoked by the landowner at any time, whereas a tenant/lease has an interest in the underlying property.

There are a few advantages of entering into a licence to occupy for the landlord over a tenancy/lease. Firstly the licence to occupy is for non-exclusive possession, he, therefore, can let to several different businesses under separate agreements. The second is that occupation is on a short-term basis. The licensor is therefore not committed for a long period of time but instead is able to make a temporary arrangement. However, the main purpose of granting a licence to occupy a business is to avoid "security of tenure" in many jurisdictions (legal protection afforded to tenants under legislation against arbitrary rent increases and landlord's attempts to repossess the property through eviction). 

One important point to note is that there are many cases where a document has been stated to be a lease but in fact is found to be a licence to occupy and vice versa. The label put on the document is therefore indicative only and not conclusive.

Below are some of the documents available on DocPro: