There are a number of ways that a business can occupy premises, offering varying degrees of flexibility:
- Leases are traditional occupational arrangements, providing the most security and certainty for both landlord and tenant, and freedom for the tenant to personalise the premises. A lease grants the tenant exclusive use of defined premises for a fixed term at an agreed rent.
However, the tenant’s obligations can be onerous, usually including covenants to repair and upkeep the premises, and there is often little flexibility, with the tenant tied in for the duration of the fixed term. Costs can add up; in addition to rent, the tenant will usually be responsible for all occupation costs (service charges, building insurance, business rates, utilities etc.). Depending on the term length and the level of rent, the tenant may have to pay Stamp Duty Land Tax when it takes the lease.
- Licences to occupy and tenancies at will can be used where more flexibility is required, typically for periods of months rather than years.
A licence to occupy is usually for a short fixed period, terminable by either party giving notice; it does not give the occupier exclusive use of the property, and the area occupied may be changed by the licensor.
A tenancy at will is an agreement that can be terminated by either party immediately, “at will”, so gives both parties maximum flexibility, but very little certainty. It is most commonly encountered to allow occupation during the negotiation of a more permanent solution.
These arrangements are often on an “all-inclusive” basis, which can keep costs manageable and help with budgeting, and the occupier's obligations (e.g. to repair and maintain the premises) are usually much more limited than with a lease.
- Serviced offices or coworking spaces can be a good starting point for businesses of all sizes, offering quality office space for a fixed price. More (or fewer) spaces can be taken as and when needed, and additional facilities are usually available. However, as ever, flexibility comes at the expense of certainty.