Tenancy at Will
A tenancy at will is a flexible arrangement where a tenant occupies a property with the landlord's consent, and either party can end the agreement by giving immediate notice at any time.
It provides both the tenant and the landlord with the freedom to end the arrangement quickly when needed. A tenancy at will can be informal or in writing and is typically suitable for temporary or short-term use.
When is a tenancy at will typically used?
A tenancy at will is sometimes used when a landlord wants to allow a tenant to use a commercial property during negotiations for a formal lease or because the landlord has short-term plans for the premises.
In some situations, tenancies at will are handy when a quick occupation is needed and there's not enough time for formal lease negotiations. Essentially, they allow tenants to occupy a commercial space quickly, and provide income for the landlord.
What is the difference between a tenancy at will and a licence?
A tenancy at will is by far the most flexible arrangement between a landlord and tenant. It allows either party to end the agreement at any time for any reason and provides immediate access to the property while lease negotiations are ongoing.
A license is permission to use the premises for a specific purpose, either on a fixed-term or ongoing basis. However, it doesn't grant exclusive possession. Therefore, careful drafting is essential to avoid the risk of the courts treating a license as a lease, which could lead to claims for security of tenure, giving commercial tenants the right to remain on the premises and request renewal following contract inquiry.
What are the benefits of a tenancy at will?
Flexibility for both landlord and tenant is undoubtedly the biggest benefit of a tenancy at will.
This kind of arrangement is particularly attractive for small commercial tenants as it gives them flexibility without the financial commitment that comes with a long-term commercial lease.
For landlords, a tenancy at will enables them to retain tenant interest and generate rental income while having a straightforward way to end the agreement when needed.
These types of tenancies can also be prepared and negotiated quickly, and they are usually exempt from Stamp Duty Land Tax.
What are the risks of a tenancy at will?
For landlords, if a tenancy at will is not documented properly during lease negotiations, it could turn into a long-term arrangement, giving tenants more rights. In these cases, landlords lose the flexibility benefit of the tenancy and, in some cases, might struggle to regain possession.
While tenants benefit from the flexibility afforded by a tenancy at will, it also offers them no security. They can be asked to leave without much notice, affecting the stability of their business.
It is advisable, if a tenancy arrangement is predicted to last more than a few months, that a lease should be used instead.
What protections does a tenancy at will offer?
A tenancy at will provides some legal protections to both parties. For example, the landlord is still required to provide a safe environment as part of their legal obligations and give proper notice to the tenant before entering the property or space.
Tenants also have legal responsibilities under a tenancy at will, such as paying rent, following agreed-upon rules, and taking care of the property. Usually, the tenant is also liable for damages beyond normal wear and tear and must follow certain rules when leaving the property.
Tenancies at will vs periodic tenancies
A periodic tenancy is a tenancy that is granted for a specific time frame (i.e. weekly or monthly). This continues until either party ends it, but there are longer notice periods required compared to a tenancy at will.
Ending a periodic tenancy is more complex and time-consuming compared to a tenancy at will. While a tenancy at will can be terminated at any time, a periodic tenancy or lease requires a minimum notice period and other, additional steps, such as serving a notice to quit.
These types of tenancies can be formed intentionally through an agreement or unintentionally when a tenancy agreement establishes a landlord-tenant relationship with regular rent payments, risking the creation of a periodic tenancy.
Can you charge rent under a tenancy at will?
Yes, rent can be charged under a tenancy at will. However, there is no minimal rental period.
Can a tenancy at will become a protected tenancy?
An implied tenancy at will might turn into a more lasting arrangement, providing the tenant with statutory protection under the Landlord and Tenant Act 1954.
This can happen when negotiations for a new lease stall and the landlord doesn't take steps to protect their position. In some situations a tenancy at will may become a protected tenancy, giving the tenant statutory protection.
What should be included in a tenancy at will?
A written tenancy at will should ensure clear terms for using the property, outlining tenant and landlord responsibilities, and addressing insurance liability and conditions, alongside other considerations such as energy performance assessments.
Both the landlord and tenant should sign this agreement to demonstrate formal acceptance by both parties.
If in doubt about what should be included in a tenancy at will, it's important to seek help from an experienced commercial property lawyer.
How should a tenancy at will be terminated?
In a tenancy at will, either party can terminate the agreement at any time. Alternatively, a tenancy at will automatically come to an end if a longer fixed-term tenancy is agreed upon.
If the landlord wants to end the tenancy, they simply need to request the tenant to vacate the property. For a tenant to terminate the agreement, they should physically leave the property. Just giving notice is not enough, they have to give up possession.
Tenancies at will: practical advice
Tenancies at will can act as a temporary solution, helping both landlords and tenants benefit during lease negotiations. That being said, despite their flexibility, tenancies at will can bring about financial uncertainty and tenants don't have as many rights as other commercial lease agreements.
Therefore, to prevent issues, landlords should be sure to proactively confirm the arrangement in writing as a tenancy at will to reduce the risks linked to implied verbal agreements.
How much does a tenancy at will cost?
Creating a tenancy at will is usually less expensive than a lease. Since it's shorter and involves less due diligence, legal costs are generally lower. Both parties can negotiate who pays for the preparation and completion of the tenancy, with each party often covering their costs.
Is a tenancy at will right for me?
Choosing between a lease, license, and tenancy at will involve careful consideration of the implications of each. While a tenancy at will can be quick and simple and comes with the bonus of not attracting Stamp Duty Land Tax, typically there’s no security of tenure to tenants and, in theory, the rug could be pulled from either party with very little notice.
Therefore, it’s really important to understand all of your options when making the right choice about a commercial lease. A commercial property solicitor can assist with this. And, if you do choose to plump for a tenancy at will as a short-term solution during lease negotiations, they can advise you of the best way to go about it.
Get help from Lawhive
When considering a tenancy at will, seeking legal advice in the first instance is important.
At Lawhive, our commercial property solicitors are on hand to help with drafting a tenancy agreement and reviewing the terms of a proposed agreement to make sure you’re protected as far as possible. Alternatively, they can support you in drafting a solid commercial lease should you decide a tenancy at will is not appropriate.
For more help and information regarding tenancies at will, contact our legal assessment team today for a free case assessment and fixed-fee quote.