For any businesses looking for a new workplace, the office space lease vs licence debate is an important one. 

Companies seeking a workspace in the capital are particularly spoilt for choice. There are numerous options available for a London office lease or licence arrangement.  

After several months where most employees were based at home due to the Covid-19 pandemic, struggling to collaborate using video conferencing, many firms want a return to the office.

And a recent survey by the Gensler Research Institute reveals that most staff also want to go back to their workplace. 

Therefore, while some companies are weighing up their future plans, the time could be right for your business to secure a London office lease or licence.

To do this you’ll need to make a decision, in terms of your office space lease vs licence considerations. We’re here to explain the differences.

Licences

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First of all in our lease v licence comparison, let’s run through the basics of a licence to occupy.

While some licences can be long, they can also be very short - for example, just a few months. 

They are usually agreed for serviced offices, or as part of an arrangement to rent spare desks or office space within another business’ workspace.

While a short notice period could give your company flexibility to leave quickly, it also means that landlords can serve notice just as fast.

Costs can be all-inclusive, although it’s important to check whether licence to occupy insurance is part of the arrangement or must be taken out separately. 

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Leases

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For a more medium to long-term option, companies often take out a lease. 

Leases tend to have longer durations than licences - lasting at least a year, often several years. 

Unlike a licence to occupy, the rent paid for a lease grants exclusivity for the premises. 

Leases do not feature the short notice periods included in licence agreements, giving the tenant business more security.

And while the overall value of a multi-year contract may be higher than for a shorter licence, leases can provide long-term cost-saving efficiency opportunities.

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Key differences: office space lease vs licence

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Therefore when trying to decide between lease vs licence in terms of what’s right for your company, there are several key considerations.

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Duration

• Licences offer the shortest contracts and can be as short as just a few months. This could suit businesses looking to briefly try out new locations.

• Leases typically last at least one year. They are well-suited for companies with plans in place to settle in one location, without regular office moves and upheaval.  

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Exclusivity

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• A licence to occupy grants non-exclusive access to a workspace.
• Leases give businesses exclusivity over their offices. This is particularly important for those looking for more flexibility to make changes e.g. for branding purposes.

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Security

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• A licence to occupy provides short notice periods, meaning landlords can also serve notice during this time.
• In contrast, leases provide more control and peace of mind for businesses looking to see out a specific contract length.  
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Another very important difference between lease and licence agreements is a legal one, around the licence to occupy specifically.

In licence to occupy UK law, the associated licence to occupy rights don’t grant the licensee the tenure security afforded by the Landlord and Tenant Act 1954.

Without security of tenure protection, it is more straightforward for landlords to potentially evict licensees. For example, this could happen once the licence to occupy has expired.

However, leases are covered by the Landlord and Tenant Act 1954. This offers businesses more control over their renewal rights at the end of their term.

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Office space lease vs licence: which is best for me?

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Ultimately weighing up office space lease vs licence considerations often comes down to the length of commitment you’re looking for, in terms of time and financing.

If you’re looking for an arrangement lasting only several months, then a licence to occupy could be a particularly good match for your business. 

For companies seeking office space to use for at least one year, a lease provides benefits in terms of exclusivity and security.

The longer-term financial commitment of some leases can deter businesses on occasion. 

But a lease becomes much more attractive when you can rely on a property company which is inexpensive and offers costs all-inclusive of service charge and insurance.    

Ideally you also want a property company which can provide the necessary legal assistance, as this is often expensive otherwise.

In theory taking out a lease means a commitment to one location for the duration of the agreement.

However that isn’t the case if your property company offers the flexibility to move within their portfolio during the lease, for example if your business expands.

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Office space lease vs licence: summary

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In short, to summarise the office space lease vs licence debate, it depends on your priorities around contract duration, exclusivity and security.

We hope this article has helped to explain the difference between lease and licence agreements for offices.

If you have further queries about the difference between lease and licence contracts, or would like to enquire about a London office lease, please get in touch.