Licence to Occupy Agreement: What Documents Look Like & Key Clauses
-min-1400x934.jpg&w=3840&q=100)
RishitaRishita
29th Aug 2025
6 min read (1,123 words)
A Licence to Occupy (LTO) provides short-term, flexible access to property, ideal for coworking desks, pop-up shops, and temporary arrangements. Unlike a lease, an LTO does not grant exclusive possession or statutory tenant protections, making it easier for property owners to retain control and end the arrangement when needed.
Key Points
- LTOs allow temporary use of property without creating the legal protections of a lease.
- They work best for interim use, shared offices, retail pop-ups, and situations needing flexibility.
- The most important clauses cover: parties, licence grant, permitted use, payments, rights of access, obligations, landlord controls, termination, liability, and vacating.
Why Wording Matters
If an agreement even suggests exclusive possession, courts may decide it is in fact a lease, granting tenants rights such as security of tenure and eviction protection .
Sample Licence Grant Clause
“The Licensee is permitted to occupy the Premises as described above for the Licence Period. The Licensee acknowledges this is not a tenancy and does not have exclusive possession. The Licensor retains the right of access and control at all times."
Structure of a Licence to Occupy Document
When reviewing a licence to occupy agreement template, one may notice it follows a clear structure designed to emphasise use, payments, and control.
Step-by-Step Document Structure
- Title & Date: Identifies the agreement and its start date, crucial for defining the occupation period.
- Parties: Clarifies the licensor (property owner) and licensee (person/company occupying).
- Definitions: Specifies key terms, such as “premises,” “licence period,” and “permitted use”, ensuring all parties understand their rights and restrictions.
- Grant of Licence: Formally gives the licensee the right to occupy under the specified conditions, but makes clear it is not exclusive possession.
- Payments & Deposit: Sets out the licence fee, payment schedule, and any security deposit requirements, plus penalties for late payment.
- Access & Use of Premises: Details how the premises may be accessed and used, hours of occupation, and any shared facilities.
- Licensee Obligations: Lists maintenance duties, insurance, compliance with health and safety, and responsibility for behaviour.
- Licensor Rights: Outlines the owner’s right to inspect, maintain, and reclaim the property, and enter for repairs or emergencies.
- Termination Provisions: Specifies how either party can end the arrangement, notice periods, and immediate termination triggers (e.g. breach, insolvency).
- Inventory & Vacating Procedures: Requirements for the condition on entry and exit, return of keys, and strip-out responsibilities.
- Miscellaneous: Covers indemnities, liability, dispute resolution, and governing law.
- Signatures & Witnesses: Legal execution page for both parties and their witnesses.
Essential Clauses Explained
Certain clauses deserve particular attention because they protect both parties and prevent disputes:
- Licence Grant: Confirms this is a licence, not a lease. States no exclusive possession is granted.
- Payments and Deposits: Specifies licence fees, due dates, deposits, and return conditions.
- Permitted Use: Defines how the premises can be used (e.g. “office workspace during business hours”).
- Access and Shared Areas: Ensures kitchens, bathrooms, or other common areas are not for exclusive use.
- Occupier’s Duties: Covers day-to-day upkeep, compliance with safety laws, and not causing nuisance.
- Landlord’s Rights: Allows inspections, repairs, and entry when needed.
- Termination: Sets out notice periods and rights to terminate immediately for breach or non-payment.
- Liability & Risk: Allocates responsibility for damage, insurance, and third-party claims.
- Vacating and Handover: Describes how the occupier should leave the property and the process for recording its condition.
Licence to Occupy Agreement Template Examples
To start, consider these common template structures (simplified for illustration):
- Parties: The Licensor (property owner) and the Licensee (occupier).
- Grant: The Licensor grants the Licensee non-exclusive use of the premises from [start date] to [end date].
- Payments: The Licensee will pay £X per month; a refundable deposit of £Y is held.
- Use: Permitted use is "office workspace during business hours, excluding weekends".
- Termination: Either party may terminate by giving 28 days’ written notice. Immediate termination for nonpayment or breach.
Templates available from:
Practical Implementation & Legal Advice
Choosing a licence versus a lease is about duration, control, and flexibility. Licences suit pop-up offices, desk shares, interim retail, and transitional arrangements. Leases are for longer exclusive use with statutory protections.
Risks if Drafted Incorrectly
If a licence is drafted or implemented incorrectly, particularly if it grants exclusive possession, courts may reclassify it as a lease. Risks :
- Unintended security of tenure for tenants
- Restrictions on repossession
Landlords must ensure:
- No exclusive possession is granted
- Termination procedures are clear and allow prompt removal
- Indemnity clauses cover the owner’s risks
- Regular legal review for longer terms or higher value properties. You may explore Leanspace's Law Partners .
Special Cases and Exceptions
Some licences require extra caution:
Estoppel Licences : These can arise when a landlord’s actions or promises lead an occupier to reasonably expect they have ongoing rights to occupy the property. Even without a written agreement, a court may enforce these rights, potentially creating obligations similar to a tenancy.
Hostel Accommodation : In situations like hostels or temporary lodging, courts often examine whether the occupier has exclusive possession of a room. If exclusive possession is found, the arrangement may be treated as a lease, giving the occupier statutory tenant protections.
Contractual Licences vs. Tenancies : The legal classification depends on the substance of the arrangement, not just the document title. Even if a licence is called a “Licence to Occupy,” if it grants exclusive possession and regular rent, a court could treat it as a tenancy.
Long-term guests : Licences intended for short-term use can become de facto tenancies if the occupier stays for an extended period or indefinitely. Factors like ongoing rent payments, control over the space, and exclusivity can trigger tenancy rights.
Relevant Terms
Exclusive possession | Contractual Licence | Estoppel | Protection from Eviction Act 1977 | Licence Agreement
Before You Sign: Checklist for LTOs
- Does the agreement deny exclusive possession clearly?
- Are payment and deposit terms easy to understand?
- Are rules for use and access defined, including for shared spaces?
- Are duties for maintenance and behaviour listed?
- Are termination rights specified?
- Is the property’s condition recorded at entry and exit?
- If in doubt, check if the document has been reviewed by a property lawyer?
Actions
- Download a sample template from trusted sources above
- Speak to a property law advisor ( Leanspace partners )
- Read our full guide on licences to occupy for more information
Final Takeaway
A well-drafted Licence to Occupy offers flexibility for landlords and occupiers while avoiding the legal complexities of a lease. To get it right:
- Define rights and restrictions clearly
- Avoid granting exclusive possession
- Tailor the agreement to the property and intended use
- Seek legal review for higher-value or longer-term arrangements
Done carefully, an LTO ensures clarity, control, and flexibility for both sides.
