A License to occupy is an alternative way of renting out a property without establishing a legal tenancy. There are some important differences to note between granting a lease and granting a license to occupy.

With a license to occupy, the person occupying the property has no security of tenure in the same way a lease would grant them. The occupants cannot sub-let the part of the property they are occupying or transfer the license. If the property is sold, they would not enjoy the same occupancy rights as for a lease. Additionally, the tenant has enjoys no rent protection from fair rent legislation and no right to buy. The only short term security of occupation tenants have is that a court order would be required to evict the tenant.

If you are renting out a room or part of a home or flat which you own and live in, this is deemed to be a license to occupy. If you are allowing a member of family to stay for a while in one of the rooms in your own home, this is also deemed to be a license to occupy - this will be an important point if you were to ask them to leave. If you have a large house that is divided into two flats and you are occupying one of the flats and renting out the other, the rented flat is usually deemed to be rented out under a license to occupy. The situation is different if you live in a flat that is part of a purpose built block of flats. If you own and rent out the other flats, they would generally be rented out under assured or assured shorthold tenancies.

You should establish a legal contract with the tenant that is clearly stated as a license to occupy or lease as appropriate to avoid future disagreements. Having no contract gives no protection to either tenant or landlord and is a cause of major disputes. A license agreement in a property with shared facilities should carefully stated what responsibilities the licensee has to the shared portions of the property, for example not blocking stairways with junk so that other people can use the stairways as well.

Other examples of license to occupy agreements are staying in hotels, and staying in student accommodation. Many homes for the elderly are also rented out under a license to occupy. Obviously a license to occupy is highly favorable to landlords and without it as an rental agreement option many types of rented accommodation would not be made available. Taking students as an example, they would have a much harder time finding they short term accommodation they require if they were required to agree a lease every time they were to move, they are rarely interested in security of tenure and a license is very appropriate to their needs.