Often owners of commercial properties allow someone into occupation of their property without having a written document which sets out the basis upon which they are to occupy the property.
Written agreements are designed to protect the person in occupancy of the property as well as the landlord. Having a written agreement provides both parties with an opportunity to negotiate the terms of occupation and provides a sense of security to the parties who always have a point of reference should any issues arise during the period of occupancy.
The first issue an oral tenancy causes is what legal interest has been created by allowing the property to be occupied. There are various types of legal interest that could be created which all create different rights and obligations on both the tenant and landlord, a few examples are set out below:
A licence to occupy – this is a personal right to occupy part of a property and not have exclusive possession.
A tenancy at will – this does not grant exclusive possession of the property and exists where the tenancy can be determined i.e. ended immediately by either party at any time;
A periodic tenancy – this may be by express agreement or by implication where there is a landlord and tenant relationship and a payment of rent. The period of the tenancy is determined by when the rent is paid, for example if the rent is paid weekly it is a weekly periodic tenancy.
Each of the above, and other forms of tenancy not mentioned, come with their own problems. However, what they all have in common is that any form of tenancy which is formed on the basis of an oral agreement have a level of risk that is reduced if the agreement is in writing.
Some of the many common problems that occur when an agreement is oral are:
Disputes over the legal interest the agreement forms;
Disputes over notice periods;
Disputes over rent reviews; and
Disputes over tenant and landlord obligations.
If you find yourself in an oral tenancy agreement, you and your landlord will be protected by the Landlord and Tenant Act 1954 to a certain extent. Although this offers a level of protection to the parties involved in the agreement, it does not allow for the terms of an agreement to be negotiated so you may find yourself in a position where the statutory provisions implied in an oral agreement are not to your advantage.
Therefore, it is always best to have a written agreement drawn up and negotiated by a solicitor so you can ensure your tenancy agreement contains provisions that you are agreeable with and provides as much protection to you as possible.
If you have an oral tenancy agreement and would like advice on having a written agreement drawn up, or if you have an oral tenancy agreement and find yourself in dispute with the other party to the agreement, please speak to one of our specialists at Farleys on 0845 287 0939 or contact us by email.