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Occupation Licence UK: Commercial Property Guide

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Part ofCommercial Property

Written by Brad Askew Solicitor (non-practising)
Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice.
Updated June 2026 · England & Wales
If you need to use commercial premises for a short period without taking on a full lease, an occupation licence can be a practical option. These arrangements give a person or business permission to use space for a defined purpose, without transferring the exclusive possession that a tenant would normally receive. For pop-up retailers, serviced office users, businesses between properties, or owners needing short-term storage, a licence can offer speed and flexibility that a lease simply cannot match. That said, the legal line between a licence and a lease is narrower than many people realise, and getting it wrong can have real consequences for both parties. This guide walks through how occupation licences work in practice, when they tend to be appropriate, and the points to watch before putting anything in writing.

What this document is

An occupation licence is a personal permission granted by the party in control of a property (the licensor) to another party (the licensee) to use the premises for a stated purpose over a stated period. It is a contractual right, not an interest in land, which is the fundamental difference between a licence and a lease.

Because no estate in the property is created, the licensee generally cannot assign the benefit to anyone else, and the rights end when the licence does. Crucially, the licensee does not usually have exclusive possession, meaning the licensor retains the ability to enter the premises and, in most cases, can require the licensee to move to a different part of the building.

Courts look at the substance of the arrangement rather than the label on the document, so calling something a 'licence' does not automatically make it one. If the occupier has exclusive possession for a fixed term at a rent, a court may treat the arrangement as a tenancy, even where the paperwork says otherwise.

This distinction matters because business tenancies can attract statutory protection under the Landlord and Tenant Act 1954, which a genuine licence does not.

How to use this document

  1. Confirm a licence is genuinely the right structure. Before drafting anything, think carefully about whether the arrangement actually behaves like a licence or whether it looks more like a lease in practice. If the occupier will have exclusive use of a defined space for a fixed term and pay regular rent, a court may find a tenancy exists regardless of what the document is called.
  2. Define the permitted use and area clearly. The licence should set out exactly what the licensee is allowed to do on the premises and where. Vague drafting creates arguments later, so specify the business activity, the parts of the property being used, any shared areas, and anything the licensee is not permitted to do.
  3. Agree the duration and termination rights. Licences are usually short and often terminable on short notice by either side. Be explicit about the start date, the end date or maximum duration, how notice is given, and what happens if the licensor needs the space back sooner because of a sale, redevelopment, or change of circumstances.
  4. Address fees, deposits, and outgoings. Set out what the licensee pays, when it is due, and whether anything is refundable. Clarify who covers utilities, cleaning, insurance, business rates, and any shared service costs, because assumptions here are a common source of disputes once occupation begins.
  5. Document insurance, liability, and exit obligations. Confirm that the licensee holds appropriate public liability cover, agree who bears responsibility for damage, and spell out the condition in which the space must be handed back. Include any requirement to remove goods, signage, or fixtures by the end of the licence period.

Common questions

If you're dealing with this kind of situation, speak to an experienced legal adviser who can walk you through it — from £149.

Common questions

Q What is the practical difference between a licence and a lease?
A lease gives the tenant exclusive possession of a property for a fixed period, creating a legal interest in the land. A licence is only a personal permission to use the space, usually without exclusive possession. The licensor generally keeps a right of access and control. Leases often carry statutory protections that licences do not, which is why the distinction matters more than the label used on the document.
Q Can a commercial occupation licence be challenged as a lease?
Yes. Courts look at how the arrangement works in reality, not just at the wording. If the occupier has exclusive possession of a defined space for a fixed term in return for payment, a judge may decide a tenancy exists even if the document is titled 'licence'. This can matter significantly if the occupation ends up lasting longer than planned or becomes contested.
Q Are occupation licences suitable for long-term arrangements?
Generally no. Licences work best for short, defined periods such as pop-up shops, transitional occupation, or temporary storage. The longer and more settled the occupation becomes, the greater the risk that it starts to look like a tenancy in legal terms. For any arrangement expected to run for a meaningful period, a properly drafted lease is usually more appropriate.
Q Does a licensee get protection under the Landlord and Tenant Act 1954?
A genuine licence does not attract protection under Part II of the Landlord and Tenant Act 1954, which applies to business tenancies. This is one reason landlords sometimes prefer licences for short-term use. However, if the arrangement is later found to be a tenancy in substance, those statutory rights could apply, which is why careful drafting and honest structuring are important.
Q Can the licensor end an occupation licence early?
This depends on the terms of the licence itself. Many licences allow either party to end the arrangement on short notice, which reflects their flexible nature. Some are linked to a specific event, such as the sale of the property or completion of works. Always check the termination clause carefully before signing, because notice periods and triggers vary considerably.
Q Do I need to register an occupation licence anywhere?
No. Because a licence does not create an interest in land, it is not registrable at HM Land Registry. This is part of what makes licences quicker and cheaper to put in place than leases. That said, it is still sensible to have the terms recorded in writing and signed by both parties so that expectations are clear from the outset.
Q What happens to goods or equipment left behind at the end?
A well-drafted licence should address this directly, setting out the licensee's obligation to remove items by a stated date and what the licensor can do if they do not. Without clear wording, dealing with abandoned goods becomes awkward and potentially expensive. Agreeing the position up front avoids a difficult conversation later when the occupation period comes to an end.
If you're dealing with this kind of situation, speak to an experienced legal adviser who can walk you through it — from £149.

Sources

This guide is based on primary UK law and official guidance.

Brad Askew, Solicitor (non-practising)

Written & reviewed by

Brad Askew Solicitor (non-practising)

Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice. LegalDocuments.co.uk is not a law firm and does not provide regulated legal advice.

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Legal disclaimer
This article is for general information only. It is a tool to help you find your way — not legal advice, and not a substitute for speaking to a qualified adviser about your situation.