Picture Credit: Llanfrechfra Grange, Newport
A lease is a contract that specifies the terms under which one party agrees to allow another party to occupy their land
A lease will guarantee the tenant use of the land and in exchange, guarantees the landlord any agreed rental income and occupation of a site that the landlord has no intended use for in the near future.
Leases should be made in writing. This allows both the landlord and tenant to have a clear understanding of what their rights and obligations are in relation to the land. The lease should specify the start date and length of the lease, the area to be let and the rent (although these are not an essential requirements). The property is returned to the owner when the lease comes to an end.
Why you might need a lease
A lease may be needed for various reasons.
- Having a lease, particularly a written lease, will help avoid any misunderstandings. It allows both the landlord and tenant to be clear about what they have agreed, their rights and their obligations. Each party therefore knows what they can and cannot do under the terms of the lease and also, who is responsible for what. This will also assist in avoiding disputes.
- If one party allows another to use its land without a formal agreement it can lead to uncertainty. In some circumstances tenants can also accidentally acquire certain statutory rights if nothing has been agreed in writing. Landowners will want to avoid this.
- Community groups should have a lease because you must seek permission if you want to use land that does not belong to you.
- Some community groups may be looking to secure charitable or grant funding. Some organisations make having a formal lease in place a condition of providing this.
- Spending a lot of time, resources and money. it is not advisable to invest a lot into a site without having a lease which gives you a guaranteed period of occupation.
Take a look at this flowchart for acquiring land.
What’s the difference between a lease and licence?
A licence is a personal permission granted by a landlord for someone to use their land. It does not give the licensee a legal interest or exclusive use of the land but is a quicker process than the creation of a lease. It may be beneficial for short-term land agreements, e.g. restoration projects.
Under a licence, you do not have the right to exclude all others (including the landowner) from the land, whereas under a lease, the landlord's right to enter the land is restricted.
A licence can normally be terminated at relatively short notice which gives you very little security, as opposed to a fixed term under a lease. Some licenses do include fixed or periodic terms, but this will not always be the case. If the land is sold by the landlord, your rights to the use of the land under a licence will not bind the purchaser and in this instance, you would have to vacate the land.
If you are unsure whether a lease or licence will best suit your needs, speak to our Community Land Advice Service team or seek legal advice.
There are certain things in law to be aware of with licences. You may intend to have a licence but you may actually have a lease. Please read this article from Wright Hassall Solicitors about the important differences between leases and licences. The case law mentioned teaches us that even though there is a written licence, what happens in practice, can be more important to the courts and a lease may have been granted without either party realising.
Early lease terms to think about
A clear description of the land with site address and an OS extract plan to scale with the site outlined in red.
Landlord name and address – check the land registry to check you have all the landowners included and their details correct
The Tenant - Sign the lease in the name of an incorporated legal entity. We do not recommend signing a lease in personal names of the tenant. Charities and constituted groups are not legal entities. set up a LTD company, CIO or CIC – see our webinar on good governance.
Length of lease - fixed (specific amount of time) or periodic (for a specific period that can be continually repeated until one party gives notice bringing it to an end although periodic leases are rare)
Whether you want a break clause where one party can pull out of the lease at a certain point in time (often halfway through the lease term). Funders do not necessarily like break clauses so be careful.
Rent - will it be peppercorn (£1 a yr) or a larger sum? Check you can afford to pay this without funding. The project needs to be sustainable.
The intended use - think about all the things the project might want to do on the site during the lease term.
Rights granted with the property (i.e. access over paths or land the landlord is retaining);
Regulations (things you should and should not do)
Tenant’s obligations (what you are responsible for i.e. repair)
Access (the owner will usually still have rights of access to land for specific purposes (inspection, repair, etc.)); and
Landlord’s obligations (what the owner is responsible for)
For more valuable or complicated sites, other details may need to be included. The essentials that have been listed above are usually set out in a document known as Head of Terms which are agreed by the parties before the lease is prepared.
Different types of leases
- Farm Business Tenancies (FBT) - a specialised form of lease for use where a farming business is involved. This type of lease is lengthy and complex. Legal advice is strongly recommended if you are offered a farm business tenancy. It is unlikely you will need one of these if you simply wish to grow on a small scale.
- Business Leases of land or buildings – business or non business use.
- Leases of allotments: tenancy agreements will vary between allotment providers. Many sites will have additional or specific rules created by the allotment provider.
For any more information on what constitutes a lease or the different types available, please seek legal advice or speak to our Community Land Advisory Service team.
Take a look at our FBT or Business Lease flow chart.
Signing a lease
Generally, a lease is signed by the landlord and tenant. Exactly who must physically sign the lease will depend on what type of legal entity the parties are. A lease can only be signed by a legal entity. An incorporated organisation has a separate legal identity from the people who run it. It is a ‘corporate body’. Therefore, as an incorporated structure, an organisation can do the following activities in its own right.
- Own freehold or leasehold land or other property
- Deliver services under contractual agreements
- Enter into commercial contracts
- Employ paid staff
- Incorporated legal structures include Company Limited by Guarantee, Registered societies (Previously industrial and provident societies), Community Interest Company (CIC) and Charitable Incorporated Organisation (CIO).
- Private individuals are legal entities so a lease between Mr A and Mr B would be signed by them both personally.
Legal entities
When an incorporated group enters into a lease, the lease is signed by representatives on behalf of the group. It is the group that is party to the lease as oppose to the individuals who sign. If the individuals who sign as representatives leave in the future, the lease continues as the incorporated group still exists and is the party to the lease. In the case of a company, two directors of the company or one director and the company secretary would sign as representatives.
Seeking legal advice
You do not need a lawyer to enter into an agreement, but it is always advisable to take legal advice before entering into any agreement, especially one with responsibilities, levels of risk and financial consequences over a period of years. Not everyone feels they need a lawyer, though not everyone can manage without one- it is largely dependent on the case. In practice, however, the longer a lease is to run, the more complicated it can be. CLAS can help in the early stages of putting a lease together and helping to agree terms but it is advisable to seek legal advice before signing a lease.
Our Heads of Terms page may be useful as a negotiation tool when beginning to agree the terms of use for the land. Once the terms have been discussed between the landlord and the tenant. Should you choose to use a lawyer, let them know your agreed terms and instruct them on this basis. They will be able to clearly explain your rights and responsibilities in relation to the proposed lease and any relevant law. In addition, they will also check whether the landowner actually owns the land in question and whether they are in a position to grant a lease. They will also be able to consider the legal status of a community group and their ability to enter into a lease.