Property licences

1.1 Licences cover a relatively short period of time - up to two years.

• Leases usually run for many years.

1.2 Most licences give both the landlord and the occupier the right to terminate the agreement (see 5.2).

• Usually this will be done by giving so many weeks' or months' notice.

  Alternatively, the party wishing to end the agreement may be required to give formal notice on a specified date.

• A notice period of one month is typical.

Licensed properties with short notice periods like this are often referred to as easy-in, easy-out premises.

1.3 You have no right to renew the licence, once the landlord asks you to leave.

• Many landlords prefer to offer licences for this reason.
• In practice, the landlord will not want to move you out if you are a good tenant.

1.4 You do not need to spend a lot of money up front.

• Solicitor's fees should be low (around £200 to £400 plus VAT).
• You will need to pay some rent in advance, but usually only one month.
• You may be asked to pay a deposit.

  Typically, this will be the equivalent of one month's rent.

See 6 for more details about costs.

1.5 The variety of premises available on a licensed basis is relatively limited, compared with the range of premises that can be leased.

But there are still plenty of small offices, studios and workshop units available on licence in most parts of the country.

• Your local council or enterprise agency may maintain a property register which lists both licensed and leased premises.
• Some local authorities and enterprise agencies offer easy-in, easy-out licences for small business centres they own.

  These are sometimes offered at subsidised rates.

• Some private landlords with hard-to-let properties may grant licences for a time, while they are seeking tenants to take on a long lease.

  Some may offer fully-serviced offices on licence.

If the nature of your business means that you need specialised premises, you may have to look for leased property instead.

2.1 Is the name of the landlord correct?

• Does the landlord own the property?
• Does the landlord have the right to grant licences in this way?

  Even property licences arranged with local authorities and enterprise agencies need to be checked.

2.2 Are your name (given under Licensee), the period of the licence, the address and description of the premises, and the notice period all correct?

• If you trade as a limited company, make sure the licence is made out in the name of your company and not your personal name.

2.3 Does the agreement cover all the free services you expect to have provided at no extra cost? For example:

• Electricity, heating and air conditioning.
• Communal services, including reception and any security services, and the use of toilets, kitchens and other common parts of the premises.
• Cleaning, window cleaning and refuse collection.

2.4 Does the agreement include the provision of other services and facilities you are expecting?

• Office services, such as a telephone answering service, typing and copying.
• Basic office furniture.
• Telephone lines, including the lines you may need for internet access and fax machines.
• Parking.

What are the charges for these?

2.5 What else does the licence agreement cover?

Typical clauses will say that:

• You may not transfer the licence, sublet all or part of the premises, or share the space with others.
• You do not acquire any tenancy or leasehold rights.
• You and your employees must all conform to the terms of the licence.
• You are not allowed to alter the premises in any way - even to make improvements at your own expense.
• The landlord will not be liable for any of your losses.
• The landlord is responsible for the repair and maintenance of the property, and the provision of communal services.
• The landlord is responsible for insuring the premises, and any furnishings and fixtures that come with them.

  All other insurances are usually your responsibility.

3.1 Going into a serviced office block may mean you can expand easily if your business grows quickly.

• You may be able to rent extra office, storage or meeting room space for short periods or special projects.
• As the business expands, you may be able to take on extra offices in the building one by one, so that you are only ever renting the accommodation you need.
• You may want to switch offices entirely, into larger or better accommodation in the same building.

Being able to grow like this, with minimal disruption and keeping the same address, can be a great advantage for a start-up.

3.2 You may have flexible access to office services and equipment on a pay-as-you-go basis.

• Many landlords with offices on licence provide additional services as optional extras for their tenants.

  Paying for these when you need them may be a better short-term option than taking on more employees.

• Even if it is just for the first couple of months, being able to delay or avoid buying equipment like photocopiers or scanners may be helpful.

4.1 Limited access can create operational problems for you and security problems for the landlord.

• Will you have unrestricted access to the building at any time - in the evening, at night and at weekends?

4.2 Will you be able to operate within the restrictions that affect the premises?

• Is your business likely to generate streams of visitors or to produce noises, smells, waste or any other nuisance that will affect your neighbours?
• Does the licence allow you to put up exterior signage if you wish, or carry out minor alterations to the property?

4.3 Are the other occupants suitable neighbours for your business?

• Will their activities create a nuisance for you?
• Might new, unsuitable neighbours move in at some future date?

5.1 If you are going to pay a deposit, both parties should be clear about how it is to be treated.

• When will your money be refunded?
• What deductions is the landlord entitled to make?
• Are you entitled to interest on the deposit?
• Will the deposit be held separately from the landlord's business funds?

  What happens if the landlord goes bankrupt?

5.2 Fixed-term contracts with no get-out may mean you lose much of the flexibility associated with renting on licence.

• Beware of any licence with a long fixed term that does not give you a right to break the agreement.
• A few unscrupulous landlords even have trick clauses relating to termination in the agreements they offer. These appear innocuous but have the effect of making your break clause unenforceable - they do this by stipulating that you must have fully performed all the terms of the licence, to the letter, in order to exercise the break.

5.3 A bad landlord, or a well-meaning one who does not keep his or her promises, can lead to recurring problems.

Try to establish whether the landlord is someone you can work with.

• Ask other licensees about the landlord's performance in the past and the standard of the services provided.

  If other tenants complain that the receptionist is never there or the copier is always broken, take this as a warning.

• Look at the state of the building inside and out, and form your own opinion about how well it is maintained.

6.1 How much is the monthly licence fee or rent?

• Is it fixed, or does the landlord have the right to increase it?

  Some agreements give the landlord the right to increase the rent, with one month's notice, after a fixed length of time.

  Most landlords are unlikely to raise rents, as the licence will only be for a short period.

• The rent should usually include the uniform business rate and most services - heating and reception costs (see 2.3).

6.2 Find out whether VAT will be charged on the rent.

This will depend largely on the building and on the landlord's financial and business circumstances.

• If the rent does not include VAT now, the landlord may decide (or be compelled) to charge VAT at some future date, even though the licence does not say you have to pay VAT.

  Your rent will then rise but if you are registered for VAT, you will be able to claim the VAT back.

6.3 Will the charges for facilities and services not included in the licence fee be reasonable?

• How are these charges calculated?

  For example, does the landlord add a mark-up, in order to make a profit on telephone calls, or will you pay the standard rate?

  Is there a minimum charge for any service, even if you do not use it, for example the photocopier?

• How are the charges for utility services measured? Check the energy efficiency rating of the building. This can be a good indicator of likely energy costs. All landlords must provide potential tenants with an Energy Performance Certificate when they rent out a building.

Ask other tenants in the building if they are happy with what they have been charged for extraw.

6.4 Will you have any setting-up costs?