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What is a tenancy at will? A tenancy at will arises when a tenant occupies a property, with landlord consent, indefinitely, on the basis that either party can end the arrangement by giving immediate notice at any time. It can be both informal and in writing. A tenancy at will is usually only suitable for temporary, short term use.
Risks for tenants are that they can be required to vacate a property on no notice.
Risks for landlords are that the terms of the tenancy at will are not as detailed or protective as full lease terms.
Tenancies at will can be useful, where occupation is required quickly, and there is not sufficient time to deal with finalising lease negotiations, terms, due diligence and the final lease. The tenancy at will secures occupation for the tenant and an income for the landlord, whilst they can then have unpressured time to agree longer term letting arrangements.
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 and offer document drafting and review services, call us on 0161 696 6174 or complete our online enquiry form and we will contact you directly.
| 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 |
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.
It is generally a short document which means it can be prepared and negotiated quickly and at minimum cost.
The tenant will not have to pay Stamp Duty Land Tax or, if in Wales, Land Transaction Tax.
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.
If drafted incorrectly, it could end up being a periodic tenancy, in which case, the tenant will benefit from security of tenure.
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.
As the tenant can terminate the agreement at any time, the landlord will not benefit from certainty of income for a specified period.
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.
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.
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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