Short term lettings: avoiding the pitfalls

Empty property is bad news for landlords.  It costs money in maintenance and rates, as well as being a possible target for vandals and squatters.  To maximise income from property, landlords may wish to seize opportunities for short-term lettings to fill gaps between long-term arrangements.  However, if you decide to take this course, it is vital to get the paperwork right.

If a potential occupier wants to get into your property and start trading and paying rent immediately, you may be tempted to skip the formal paperwork, but this can lead to real problems as business tenants can quickly acquire the right to stay on even if they occupy under an oral agreement only.   From a landlord’s perspective, unintentionally giving an occupier security of tenure might get in the way of your long-term plans for the property.

The good news is that with the right advice and assistance from your solicitor you should be able to protect your position.   For lettings of six months or more, a lease that excludes the tenant's legal right to stay on is almost sure to be the best option.  However, this is not the right approach for shorter arrangements.  Instead, your solicitor may suggest an occupational licence or a tenancy at will.

Let’s look in turn briefly at each of these shorter-term options:

Occupational licence

An occupational licence is a personal permission for an occupier to use the property, in return for payment of a licence fee.  Like rent under a tenancy agreement or lease, the licence fee can be paid in a lump sum or in regular instalments.

As a personal licence only - as distinct from a tenancy - it does not create any registrable interest in the property and, if implemented carefully, will not allow the occupier to acquire rights to stay on beyond the end of the contractually agreed period.  There is no strict legal requirement for a licence to be in writing, but it is always better to set out clearly what the parties have agreed, particularly in this field where the distinction between a licence and a tenancy can be tricky.

There are two areas where landlords must be especially careful when granting licences.  The first is that the occupier must not be given exclusive possession, because that would normally indicate that the arrangement is a lease, not a licence.  The courts have made it clear they will look at the substance of the arrangement – the underlying reality, in other words - not the label the parties give to it, so just calling something a licence is not enough.  To avoid the occupier having exclusive possession, the licence should make it clear that they have no right to prevent the landlord exercising their right to possess and control the property.   For example, some occupational licences give the occupier permission to use the property only for designated hours during the day, not round the clock 24/7.

The second danger point is the period of occupation.  If someone carries on a business in the property for more than 12 months then the landlord is vulnerable to a claim that the arrangement was, in fact, a lease and the occupier has acquired a right to remain in the property.  If it is likely that the arrangement will go on for longer than six months, a lease excluding these legal rights is the best approach.

Tenancy at will

If a licence is not suitable, the other short-term option is a tenancy at will.  This can be very useful, for example if the occupier if to be allowed to take up occupation on a provisional basis pending a formal lease or, alternatively, has already been in the property for a while and there is some doubt about whether they may have acquired legal rights to stay on.  A tenancy at will can  prevent or stop any rights of this sort from arising.

Like a licence, a tenancy at will is a personal arrangement between the landlord and the tenant.  The basis for a tenancy at will is that it has no fixed term but continues at the ‘will’ of the parties, which means until one of them brings it to an end.  Tenancies at will can be put in place very quickly but, as with licences, there are traps to be avoided.  The most important one is that a written tenancy at will must not set out any notice period for either party to end the arrangement, because that would mean it was a periodic tenancy, not one at the will of the parties.  In practice, if the landlord serves notice to end the tenancy at will, the tenant will be entitled to a reasonable time to remove its property from the building, but this should not be put into writing.

It is important also to appreciate that a tenancy at will by its nature is intended to be a short-term measure.   If it is allowed to drift on indefinitely then over time it may conceivably attain a different status offering the tenant greater security that had originally be envisaged.


Tenants increasingly seek flexibility and so understandably landlords may wish to consider taking advantage of short term occupation to keep rental income flowing. However, mistakes at the outset have the potential to create long-lasting and costly problems. This is one of those situations where specialist advice at the outset can prove both timely and cost-effective.

For advice and assistance with short-term lettings or any other commercial property matter please contact Bill Montague or one of his commercial team colleagues on 0118 939 3999 or email him at

The contents of this article are for the purposes of general awareness only.  They do not purport to constitute legal or professional advice.  The law may have changed since this article was published.  Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.

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