Tenancy at Will

A tenancy at will occurs when a landlord and a tenant agree that a tenant will be allowed to occupy a property before a lease has been issued. A tenancy at will is often granted when the landlord and tenant are in negotiations regarding a new lease. A tenancy at will means that the tenant

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A tenancy at will occurs when a landlord and a tenant agree that a tenant will be allowed to occupy a property before a lease has been issued.

A tenancy at will is often granted when the landlord and tenant are in negotiations regarding a new lease. A tenancy at will means that the tenant can move into the property whilst negotiations continue. For example, they may have to vacate their current premises as a result of the expiration of a rental contract. The lease can be finalised at a later date.

As long as the agreement governing the arrangement is drafted correctly, the landlord or tenant will be able to terminate the tenancy relatively easily. This right of termination and ability for either party to bring the agreement to an end at any time is the most important feature of a tenancy at will. Such determination is immediate (subject to the tenant being afforded reasonable time to retrieve any goods from the property). If the arrangement continues until the lease is finalised and completed, it will automatically be succeeded by the lease and the new provisions will supersede any previously agreed tenancy at will obligations.

It is important to note that a tenancy at will is only suitable on a temporary basis and should not be used as an alternative to a full tenancy arrangement.

Drafting a tenancy at will

It is extremely important that a tenancy of will is correctly drafted as if it is incorrectly drafted, it may be held to be a periodic tenancy, as was the case in Javad v Aquil [1991] 1 WLR 1007. Factors that led to this determination included the length of rent-paying occupation and the lack of insistence on a formal lease. There were, of course, a number of other factors and although each case will be determined on the relevant facts and based on the parties’ intentions, if an arrangement is deemed to be a periodic tenancy there will be longer notice periods and other legal issues.

Tenancy vs. Licence

As explained, a tenancy at will is a form of tenancy, but there is often much confusion about whether an arrangement is a tenancy at will or a licence. A licence is personal in nature and does not allow an interest in the land (as opposed to a lease).  Simply put, a licence is permission for the licensee to do something on the property of the licensor and is generally a less useful right for an occupier than a tenancy or lease.

The permission ensures that the particular act which the licensee is given permission for is not considered trespass. Further, it is important to ensure that the agreement is correct in substance, and not simply what the agreement is called. For example, in Street v Mountford [1985] UKHL 4, the House of Lords explained that simply naming an agreement as a licence did not necessarily mean that it would be considered a licence, and a number of characteristics would be analysed, including whether or not the agreement grants exclusive possession, whether it is for a fixed term and what the rent provisions dictate.

Advantages of a tenancy at will

There are a number of advantages of using a tenancy at will. As mentioned above, it is easier for a landlord to regain possession although this is never completely straightforward with residential premises and legal advice should always be sought. Simply taking back possession is very dangerous in such circumstances and can lead to criminal as well as significant civil penalties.

With a tenancy at will there is no security of tenure for the tenant. Given its simple nature when compared to a full lease, a tenancy at will is usually a short agreement and therefore can be easily and quickly drafted without large legal fees. Finally, there is no Stamp Duty Land Tax payable on any relevant transactions.

Disadvantages of a tenancy at will

There are also a number of disadvantages involved with tenancies at will. As explained, it is important to ensure that any agreement is correctly drafted. The disadvantage associated with this is that such agreements are commonly misinterpreted and challenged as periodic tenancies as otherwise, and if found to be such, means that the advantages of such tenancies become obsolete. Further, the tenant does not have much certainty as the agreement can be terminated instantly.  This termination provision also means that the landlord does not have a guaranteed income as there is no fixed rental period.

For any property law, tenancy or licence issues visit our commercial property page or get in touch, I can advise in a  cost effective and timely way.

James Swede • Property law

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