Many commercial tenants value flexibility when occupying business premises, in some cases, whether this is to bridge the gap between commercial negotiations, await completion of a formal lease, or accommodate short-term operational needs.
Two common arrangements that offer some form of flexibility are tenancies at will and periodic tenancies. Although both are mechanisms to allow a tenant to occupy premises without a full formal lease being implemented first, their legal effects, associated risks, and suitability differ significantly, and they respectively entail varying practical considerations.
Key Takeaways
- A tenancy at will is a short-term, highly flexible arrangement that can be terminated immediately by either party and is typically used as a temporary solution while commercial lease negotiations are ongoing or pending completion.
- A periodic tenancy is a rolling arrangement that renews automatically by reference to the rent period, offering greater continuity but carrying a risk that statutory security of tenure under the Landlord and Tenant Act 1954 may arise if not properly managed.
- Howell Jones Solicitors advises landlords and tenants on structuring commercial property occupation arrangements correctly to minimise legal risk and avoid unintended consequences.
What Is a Tenancy at Will?
A tenancy at will is an arrangement that allows a tenant to occupy premises on flexible terms that either party can terminate at any time, with immediate effect; the tenant is allowed to occupy “at the will” of the landlord, and likewise, the tenant may exit the arrangement “at their will”.
This mechanism, which does not provide any certainty or security for either party, is commonly used as a transitional holding position; for example, when parties are close to completing a formal lease but the tenant needs to take up occupation of the property sooner, for the benefit of their business or to begin trade in time for a particular financial period or season.
Key Features of a Tenancy at Will
- Terminable at any time by either party, usually on very short or immediate notice.
- Case law has determined that such arrangements do not create long-term security of tenure protection under the Landlord and Tenant Act 1954.
- Ideal for short-term, interim occupation, particularly during ongoing lease negotiations.
- Can be written or verbal arrangement, but the best practice is to document clearly in writing to avoid ambiguity or misunderstanding between parties.
- No fixed term, nor expectation of continuity.
Advantages of a Tenancy at Will
- Maximum flexibility for both parties.
- Avoids granting statutory security of tenure protection to the tenant.
- Prevents an unwanted periodic tenancy arising through regular rent payments.
Risks and Pitfalls of a Tenancy at Will
If the arrangement ceases to be genuinely “at will” – for example, if it continues for a prolonged period, or if rent is accepted by the landlord regularly based on a formal pattern, there is a risk that the law may treat the arrangement as a periodic tenancy with very different legal consequences.
Landlords must be careful not to let the occupancy drift without oversight, as this can undermine their control, and there is a risk that a tenant could potentially be granted statutory rights.
What is a Periodic Tenancy?
A periodic tenancy is a tenancy that continues from period to period – i.e. monthly, quarterly, or yearly – depending on the rent payment cycle (usually by reference to the period by which rent is reserved, rather than payable), until it is terminated by notice to quit, which must expire at the end of a relevant period. It may arise:
- expressly, through a written agreement; or
- it can be implied, where a tenant remains in occupation of premises, and the landlord accepts rent on a continued pattern, after expiry of a previous lease or licence.
Key Features of a Periodic Tenancy
- The tenancy continues automatically unless terminated by proper notice to quit.
- Notice periods generally correspond to the rental period (e.g., one month for a monthly periodic tenancy), subject to statutory rules.
- Can arise unintentionally if the parties fail to finalise a new lease.
- Can attract security of tenure protection under the Landlord and Tenant Act 1954, unless properly excluded.
Advantages of a Periodic Tenancy
- Provides assurance to a degree for tenants: the tenancy cannot be ended immediately, and formal notice procedures must be followed.
- Provides landlords with a simplified mechanism to allow occupation without the need to negotiate a full lease.
Risks and Pitfalls of a Periodic Tenancy
- Landlords may inadvertently grant their tenant statutory security of tenure protection if a periodic tenancy arises unintentionally.
- To end the tenancy, landlords are required to give formal notice, which could delay redevelopment or re-letting plans.
- For tenants, the periodic nature does not assure long-term occupation, and in the context of business plans, projections and building goodwill based on location, a formal lease would provide certainty.
Comparing and Contrasting Tenancy at Will vs. Periodic Tenancy
| Feature | Tenancy at Will | Periodic Tenancy |
|---|---|---|
| Duration | No fixed term; terminable at any time | Renews automatically per period (e.g., monthly) |
| Termination | Immediate, minimal notice | Formal notice required, usually at least one full period |
| Security of Tenure (LTA 1954) | Not protected | Usually protected unless contracted out |
| Purpose | Short-term, interim occupation | Medium-term ongoing occupation without a full lease |
| Risk of Arising Unintentionally | Low if carefully documented | High—can arise from continued occupation + rent acceptance |
Practical Tips for Landlords
- Use a tenancy at will only as a strictly short-term measure.
- Avoid a tenancy at will continuing for months without review; this increases the risk of creating a periodic tenancy.
- Monitor rent payments carefully; structured payment patterns can lead to an implied periodic tenancy.
- If a periodic tenancy is acceptable, document it expressly and address the matter of statutory protection, with proper exclusion if required.
Practical Tips for Tenants
- Understand that a tenancy at will offers no long-term security; the landlord can terminate immediately, and this can be disruptive for your business, in practical terms and in terms of loss of profit.
- If business certainty is critical, a periodic tenancy or formal lease would be recommended.
- If occupying beyond the initial intention, always request a formal written document to avoid disputes.
Final Thoughts
Tenancies at will and periodic tenancies are valuable tools in commercial property management, but each carries different legal implications. A tenancy at will provides short-term flexibility with minimal protection, while a periodic tenancy offers continuity but could trigger unintended statutory rights.
A tenancy at will is a safer choice where negotiations for a formal lease are ongoing, and the landlord wants to retain maximum control over the process. It circumvents granting statutory rights, whilst pressure is upheld on both parties to finalise formal lease terms.
Periodic tenancies may suit situations where the parties expect and intend continued occupation of commercial premises but do not yet have (or need) a full lease, provided the statutory implications are understood and accepted by both sides.
Understanding the distinction is essential for both landlords and tenants, and ensuring the right arrangement is used at the right time can avoid costly and time-consuming disputes later.
How Howell Jones Solicitors Can Help You
At Howell Jones Surrey solicitors, our commercial property solicitors in Surrey advise both landlords and tenants on all aspects of commercial property arrangements, including tenancies at will, periodic tenancies, and formal leases. Taking early legal advice can help avoid unintended consequences and costly disputes down the line.
For clear, practical advice on the right arrangement for your business, please get in touch with the Howell Jones team on 0800 011 9813.
