Prospective tenants who want early possession of commercial premises often want to know if they can take possession as a matter of urgency under an agreement for lease. The usual answer will be no because for an agreement for lease to be legally enforceable the form of lease needs to have been agreed and attached to the agreement. If it is simply a matter of speed then an agreement for lease is not going to assist.
On what other basis can the tenant take occupation? Legal issues relating to early access by tenants arise primarily because giving a person exclusive possession of premises is generally indicative of the creation of a tenancy. Tenancies of business premises give tenants rights to renew their leases (“security of tenure”) so this creates a particular risk for landlords. There is well established authority that a tenant which takes occupation during the course of negotiations for a lease will, in the absence of special circumstances, normally be regarded as a tenant at will. A tenancy at will does not attract security of tenure so there is no risk for the landlord in this respect. Although a tenancy at will will normally be implied in these circumstances, it is common for well advised parties to enter into an express tenancy at will in these circumstances.
Taking occupation as a tenant at will may not be practicable. A tenancy at will can be terminated by either party at any time without notice (although the tenant would have a reasonable time to vacate). There is, therefore, risk for tenants if they are, for example, incurring substantial expenditure or have other arrangements which would make such tenuous occupation unacceptable. There will normally need to be a fair amount of trust between the parties. The risk in this context applies equally to the landlord if it is entering into arrangements which would cost it money or have other unacceptable implications if the tenant walks away.
There are many circumstances, of course, where an agreement for lease will be appropriate. For example, if the reason the lease cannot be completed is because the landlord, the tenant or both need to carry out works as a condition of the grant of lease then this is an obvious example of where an agreement will be used.
There are situations where a prospective tenant might want to enter the property for specific limited purposes at its own risk (for example to carry out minor decorative works or minor fit out works). In these situations, the landlord will sometimes allow the tenant to have early access for such purposes by way of licence so that, consent is given for the tenant to have access with contractors solely for the specified purpose. It is not uncommon under the terms of such a licence for the tenant to have an obligation to return the keys to the premises to the landlord at the end of each day.
