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Both a commercial lease and a commercial licence allow businesses to occupy a commercial property. Additionally, both parties are under a legal obligation to pay rent or a licence fee in exchange for using the commercial property. However, the rights of tenants and licencees differ. Understanding these differences is essential if you are considering leasing or licencing your commercial property. This article will explain what exclusive possession is and what occupation regarding commercial leases and licences.
Exclusive Possession in a Lease Agreement
In the context of commercial leases, exclusive possession refers to a tenant’s right to occupy a commercial property as their business premises. Exclusive possession means that the tenant has certain rights through their occupation of the property.
The rights that exclusive possession grants are the rights associated with those a landowner enjoys. This means that the commercial tenant can legally behave as if they were the landowner. More specifically, the lessee can:
- exclude the landlord from the property;
- receive rent where they sublet the land with the landlord’s permission;
- enjoy profits from the land; and
- exclude any other third party from entering their property.
However, you should note that while a commercial tenant enjoys these rights through exclusive possession, they cannot permanently exclude their landlord. This is because the commercial landlord can reserve some rights in the property, such as the right of entry. For example, they need to carry out work. Any reservations should be in the lease agreement.
Occupation Under a Licence
Occupation is slightly different from exclusive possession. When a person occupies a commercial property, they have the right to occupy the premises physically. They will also have an agreement which details their legally binding contract to occupy the land. However, they do not enjoy the same rights as those which tenants enjoy by having exclusive possession. These are the rights that a landowner enjoys, as described above.
Therefore, a person in occupation is a commercial tenant with:
- a commercial licence; or
- an undertenant in a commercial lease.
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Key Differences Between Exclusive Possession and Occupation
The table below summarises the key differences between exclusive possession and occupation commercial leases and licences.
| Exclusive Possession | Occupation |
| Grants the business owner exclusive occupation of part of the commercial property as the commercial tenant. | Allows the business owner to occupy part of the commercial property or commercial premises, but not to the exclusion of others. |
| Grants the occupier rights associated with those the landowner enjoys. | Does not grant the occupier any additional rights. |
| Allows the occupier to prevent the landlord and any third party from entering the premises. | Does not grant the occupier the right to exclude others, including the landlord. |
| Allows the occupier the right to sublet the property to another as a subtenant. | The occupier has no right to sublet to another as the subtenant. |
This cheat sheet outlines what you should be aware of in your lease agreement.
Key Takeaways
There are many terms a commercial landlord and tenant may come across when they enter a commercial lease or commercial licence. Two of these are the terms exclusive possession and occupation. Whilst they have similar meanings, they do not mean the same thing. Exclusive possession means that the commercial tenant has the sole occupation of the premises, so it has the same rights a landowner would have. This means they can decide if they permit the landlord to enter or any third party to. However, occupation means that although the tenant still occupies the premises, they do not enjoy landowner rights as well. Therefore, they cannot prevent third parties from entering their premises, and the landlord can enter when they wish to.
If you need help understanding the difference between exclusive possession and occupation in a commercial lease, LegalVision’s experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. So call us today on 0808 196 8584 or visit our membership page.
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