Having your occupancy of a property documented is vital to ensuring that the terms of the occupation are clearly laid out according to B P Collins’ property team. This will prevent any misunderstandings and ensure that all requirements for the property are covered. It may also help prevent any disputes that could arise between the parties. There are also potential risks to both parties if the occupation is not documented.
Risks for landlords
If a landlord and tenant relationship is established between parties but is not documented then this could lead to a periodic tenancy (a rental agreement that automatically renews). This is risky for a landlord as this will require a notice to properly be served with an appropriate notice period. Equally if the tenant remains in occupation for an extended period of time and is occupying their premises for the purpose of their business, they may obtain a protected lease under the Landlord and Tenant Act 1954. Please see our article Commercial Leases: Protected or Excluded? for further information. The risk this poses to landlords is that they may be forced to go through the statutory process to regain possession of the property (relying on one of the limited grounds) and they may need to pay compensation to the tenant. These risks could be costly for the landlord with any professional fees they need to pay.
The tenant may obtain rights which the landlord did not intend them to have. For example, they may gain a right of access to an area of land which was unintended. Equally without proper documentation there will be no covenants on the tenant for the upkeep of the property. If they then cause any damage or do not keep the property maintained then the landlord will find it difficult to claim any compensation as normally a written agreement will lay out the tenant’s obligation to maintain the property and the landlord’s right to recover any costs in relation to this. The landlord will also not have an easy route to recover any unpaid rent or service charge such as payments for utilities without any documentation obligating the tenant to pay these.
Risks for tenants
Without documentation for a tenant’s occupation of a property they may be at risk of suddenly being forced to leave the property because there is no obligation for the landlord to provide formal notice. This could lead to a disruption in the tenant’s business and it may be costly for them to move out quickly.
As with the landlords, without proper documentation it will not be clearly stated what rights are granted to the tenant and what obligations are on the landlord. It also may lead to uncertainty if a tenant believes they have a right which the landlord does not believe has been granted. This could lead to a costly dispute and potentially an end to their occupancy.
It is also important to have the occupation documented in case the landlord chooses to sell the property. Without formal documentation, the incoming landlord may not be under any obligation to take on the tenant and again the tenant could be forced to vacate the property. By having the occupation formally documented any successors in title will buy the property subject to the tenant’s occupation.
Conclusion
It is vital both for landlords and tenants that any occupation of a property is properly documented. Without any formal agreement, landlords and tenants can be exposed to significant risks which may incur legal, financial and practical troubles.
If you believe that you occupy a property without formal documentation (or are unsure as to whether you do), then our property team at B P Collins would be happy to assist you. Please email enquiries@bpcollins.co.uk or call 01753 889995 for further advice.
