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Tenancy at will

What is a tenancy at will? A tenancy at will arises when a tenant occupies a property, with the consent of the landlord, for an indefinite period on the basis that either party may end the arrangement on demand (i.e. immediately when notice is given). A tenancy at will is neither a lease nor a licence and is ordinarily only suitable to be used on a temporary, short term basis.

What are the key features of a tenancy at will?

  1. It can be terminated by either party on demand. This means that no notice period needs to be given by either the landlord or tenant
  2. They are not for a fixed term or a minimum period
  3. If drafted correctly, the tenant will not benefit from security of tenure (meaning the tenant will have no statutory right to remain in the property once the tenancy has been terminated)
  4. A tenancy at will is a personal relationship between the landlord and the tenant. Which means it cannot be assigned (i.e. transferred) to a third party
  5. The tenant must vacate if the landlord sells the property
  6. They are only suitable on a temporary basis and are often used to allow the tenant to take occupation of the property whilst the landlord and tenant negotiate the terms of a substantive lease
  7. A tenancy at will tends to be a much shorter document than a lease

Landlords and tenants considering entering into a tenancy at will should always seek legal advice to ensure the document they enter into is as they intend, our commercial property solicitors can assist with this, call us on 0161 696 6174 or complete our online enquiry form and we will contact you directly.

 

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Differences between a lease, licence to occupy and tenancy at will

 

Lease

Licence to occupy

Tenancy at will

Short term or long term option?

Long Term

Short Term

Short Term

Termination

Usually, a lease is for a fixed term and is not terminable until the fixed term comes to an end.

Subject to negotiation, however, licences are usually terminable on notice by either party.

Either party may terminate on demand.

Exclusive possession

Yes, the tenant has the right to exclusively occupy the property.

No, the licensee does not have an exclusive right to occupy the property. Which means the property may be shared with other licensees.

Yes, the tenant has the right to exclusively occupy the property.

Security of Tenure

 

Yes, unless the parties agree to contract out of the relevant provisions of the Landlord and Tenant Act 1954.

No

No

SDLT

SDLT may be payable.

No SDLT payable

No SDLT payable

 

What are the advantages of a tenancy at will?

  1. If correctly drafted, the tenant will not benefit from security of tenure. This is advantageous for landlords as it will allow it to retrieve possession of the property with relative ease and will mean that statutory compensation will not be payable to the tenant.

  2. It is generally a short document which means it can be prepared and negotiated quickly and at minimum cost.

  3. The tenant will not have to pay Stamp Duty Land Tax or, if in Wales, Land Transaction Tax.

  4. As either party can terminate the agreement on demand, it means that both the landlord and tenant have a greater degree of flexibility in contrast to the flexibility afforded under a normal lease agreement.

What are the disadvantages of a tenancy at will?

  1. If drafted incorrectly, it could end up being a periodic tenancy, in which case, the tenant will benefit from security of tenure.

  2. It will not offer the tenant any certainty that it can remain in occupation for a specified period of time. This can be problematic for certain tenants, particularly if it has generated a degree of goodwill as a result of operating from the premises.

  3. As the tenant can terminate the agreement at any time, the landlord will not benefit from certainty of income for a specified period.

Terminating a tenancy at will?

As stated above, the key component of a tenancy at will is that it can be terminated by either party on demand.

To bring the tenancy at will to an end, all the landlord needs to do is demand possession of the property, at which point, the tenant must vacate. After the landlord terminates, the tenant will be afforded reasonable time to enter the property to remove its goods.

The tenant may terminate the agreement by vacating the property. A tenant’s notice to terminate the agreement is not enough to bring the tenancy at will to an end, it must actually give up physical possession of the property.

A tenancy at will automatically ends once a longer fixed term tenancy (i.e. a lease) is entered into.

The importance of a correctly drafting a tenancy at will

It is vitally important that a tenancy at will is drafted correctly. If drafted inaccurately, the agreement may be held to be a periodic tenancy. In such a circumstance the tenant will benefit from a statutory right to remain in occupation of the property even after the tenancy has been terminated. This may become problematic for a landlord wanting to regain possession of the property and may result in the landlord having to (i) take the tenant to court; and (ii) pay the tenant statutory compensation to vacate the property.  

It is important to note that the name given to a document is immaterial, what is importance is the document’s substance. Therefore, simply because a document is labelled a tenancy at will does not make it so. Landlords and tenants considering entering into a tenancy at will should always seek legal advice to ensure the document they enter into is as they intend.

Legal costs associated with a tenancy at will

Usually, the legal costs associated with a tenancy at will are less than those payable on the grant of a lease. This is because a tenancy at will is generally much shorter than a lease and is entered into without the tenant carrying out the usual property due diligence.

Who meets the cost of preparing and completing the tenancy is down to negotiation although it is not uncommon that each party meets their own costs.

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