A licence to occupy, and how it differs from a tenancy

In one line. A licence to occupy is a paper giving someone permission to use space, where a tenancy hands over the space itself — and the difference shows up in a small number of phrases you can find by reading.

The pair turns up whenever somebody puts a desk, a chair, a market stall or a spare room in front of somebody else and needs paper for it. Two documents are offered, they look similar at a glance, and the words on the front are the least reliable part of either one.

This page describes the vocabulary. It does not say which paper fits your arrangement, and it does not say what protections attach to either — that turns on local law and on what actually happens on the ground.

What the paper says it is

A licence to occupy is written as permission. One side has space; the other side is allowed to use it, for a stated purpose, on stated terms, and the paper usually keeps the owner very present. The owner comes in. The owner can move the occupier to different space. The owner supplies services, sets hours, and often keeps a key.

A tenancy agreement is written as a handover. The tenant gets defined space, for a defined period, and the paper spends its length on what the tenant may do with it, what the landlord must maintain, what the rent is and how the arrangement ends. Entry by the landlord becomes something arranged rather than assumed.

Read the two side by side and the difference is one of posture. One paper is about access; the other is about possession.

What is the difference between a tenancy and a licence to occupy?

Exclusive possession. A tenancy hands the occupier space that is theirs for the period, to the exclusion of everyone including the owner; a licence does not.

That is the phrase the whole comparison turns on, and it is worth knowing that in many legal systems the answer is taken from what the arrangement really is rather than from the heading on the document. A paper labelled licence that hands over a locked room, indefinitely, with no right of entry and no ability to move anyone, is describing something the label does not match.

Which is why this comparison is a reading exercise rather than a naming one. The heading tells you what someone intended. The clauses tell you what they wrote.

The words that differ

A handful of phrases do most of the separating.

Exclusive possession, or shared use. A tenancy names the space and gives it over. A licence commonly says the occupier has no exclusive right to any particular part.

A right to relocate. Licences often reserve the right to move the occupier to comparable space. Tenancies of a named unit rarely can.

Entry. A licence usually says the owner may enter at any time. A tenancy sets out notice and reasons.

Personal, or transferable. Licences are commonly stated to be personal to the named occupier and not capable of being passed on. Tenancies deal with assignment and subletting as a real question, sometimes permitting it with consent.

What the money is called. Licence fee rather than rent. This one is cosmetic on its own and appears in nearly every pair.

How long does a licence to occupy last?

For whatever period the paper names, and the periods tend to be short.

Licences commonly run for months rather than years, or roll on until one side gives notice — often quite short notice, stated in days or weeks. Tenancies more often run a fixed term with a defined end, or a periodic arrangement with a longer notice mechanism written into it.

Duration is not what makes a document one thing or the other. A short tenancy is still a tenancy and a long licence is still a licence. But the length and the notice clause are a decent hint about which shape the drafter had in mind, and they sit next to each other on the page.

Which one you are reading

Skip the title. Find four things: whether particular space is named, whether the owner can enter freely, whether the occupier can be moved, and how the arrangement ends. Those four answers usually settle which document is in front of you, whatever it calls itself.

If the arrangement matters — the space is a home, or a business is being built in it — ask a lawyer, because the consequences of the difference are set by local law and not by us.

At the door. contracts.io makes paper, not legal advice. Describe the arrangement in your own words and read back either a licence to occupy or a residential tenancy agreement in plain language, with the governing law named on purpose — England and Wales, Scotland, Ontario and the rest of the governing law list. The naming problem has a companion post: tenancy agreement or lease.