When is a Licence to Occupy Appropriate for Commercial Property?
RishitaRishita
27th Aug 2025
4 min read (785 words)
Key Points:
- Temporary, flexible use – LTOs grant non-exclusive access for short-term commercial purposes like pop-up shops, serviced offices, interim projects, and co-working.
- Speed and agility – Licences can be executed quickly, often in days, allowing businesses to occupy space without lengthy lease negotiations.
- Ideal scenarios – Short-term office use, trial locations, temporary retail, interim storage, or flexible coworking arrangements are all well-suited to LTOs.
- Legal and financial considerations – LTOs avoid statutory lease obligations and often reduce upfront costs, but require careful drafting to prevent misclassification as a lease.
Introduction
A Licence to Occupy (LTO) gives a party temporary, non-exclusive use of a commercial space. It is widely used for pop-up shops, serviced offices, interim projects, or flexible co-working . Deciding when to use a licence to occupy instead of a lease is crucial for landlords, property managers, solicitors, and commercial occupiers as it defines rights, regulatory risks, and long-term security.
Understanding the Basics
Licence vs Lease Commercial Property:
A licence grants temporary, personal rights ; it is non-exclusive, easily revocable, and does not create a legal interest in land.
A lease provides exclusive possession, statutory protections, and a stronger legal interest ; leases over 6 months typically fall under the Landlord & Tenant Act 1954 .
Compliance:
Licences avoid many statutory lease burdens, but risk being reclassified if not drafted carefully ( Wright Hassall ).
Quick Advantages/Disadvantages:
- Advantages: Quick setup, flexibility, minimal upfront costs .
- Disadvantages: No long-term legal protection, risk of misclassification, limited operational scope .
Typical Scenarios Where an LTO is Appropriate
- Short-term office use : Suitable for project teams, serviced offices, or when early access is needed between exchange and lease completion.
- Pop-up retail/events : Temporary shops, concessions, or exhibitions.
- Interim storage/operational space : Quick access while awaiting property completion or finalising lease terms.
- Testing new locations : Businesses trial new markets with minimal commitment.
- Flexible co-working : Start-ups and hybrid teams use rolling licences for agile growth.
See Leanspace Vacant Space Solutions for more short-term commercial arrangements.
Timing Considerations
- When business speed is critical and waiting for lease negotiations would delay occupancy.
- Where agility, rapid scaling, or market uncertainty demand a flexible approach.
- To help landlords avoid statutory obligations like security of tenure or minimum term requirements.
Decision-Making Framework
Ask:
- Is exclusive possession required? If so, a lease is usually necessary.
- Intended occupancy duration : LTOs suit short-term use; longer terms mean lease.
- Liability/risk level : Use LTOs for low-risk, temporary business needs.
- Cost comparison : LTOs tend to have lower fees, with no stamp duty unless special conditions apply.
If your needs favour flexibility, speed, and short-term goals, a licence to occupy is likely the best choice.
Practical Examples & Unique Use Cases
- A technology firm launches a product using a two-month LTO for extra space, rapid scaling, easy exit, cost of £1,800 all-in.
- A retailer runs a three-week pop-up , paying £2,000, avoiding complex negotiations.
- A logistics company uses warehouse space during planning approval period before formal lease.
- A merged company trials new workspace , flexibly occupying for six months under a rolling licence.
For tailored arrangements, see Leanspace , where we also market your vacant office space on Hubble .
Key Advantages & Limitations
Advantages
- Speed : Licences to occupy can be completed in days, saving weeks of legal work.
- Flexibility : Businesses may scale, exit, or expand swiftly; ideal for uncertain sales forecasts.
- Cost-effectiveness : Often no Stamp Duty Land Tax or Land Transaction Tax is required, unlike standard leases.
- Multiple use/shared spaces : Handy in coworking, concessions, or undefined spaces.
- Short-term arrangements : Perfect for pop-ups or interim needs.
Limitations
- Little statutory protection : No security of tenure, if the owner sells, the licence ends.
- Risk of misclassification : Exclusive possession or long terms can turn a licence into a lease, triggering unwanted statutory obligations.
- Short-term, unreliable for investment : Not suited to businesses needing stable premises.
- Quick termination : Licences can be revoked with minimal notice, posing risk.
Key Legal Considerations & Compliance Tips
- Consult a commercial property solicitor : Essential to avoid exclusive possession or renewal terms that mimic leases.
- Draft explicitly : Clarity on entry/exit, fees, usage, and reserved rights is vital—avoid vague or automatically renewed agreements.
- Confirm compliance : Fit your agreement to insurance, local licensing, and planning permissions.
Conclusion & Call to Action
A Licence to Occupy is the go-to choice for temporary commercial agreements, short-term occupancy, or flexible office arrangements where speed, agility, and reduced commitment are priorities. However, legal care is essential to avoid creating an unwanted lease or losing rights.
Moving forward, consider:
Downloading a sample Licence to Occupy template
Booking a consultation with a property law advisor from the Leanspace partner network
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