What is a seating licence? Potential pitfalls for landlords & tenants

A seating licence (sometimes called a sitting out licence) is typically a licence to occupy that grants a party the right to use specific areas of a building or premises for a set period of time without conferring any property interest in that space — in other words, without having the full rights or protections that are typically afforded to tenants under a lease.

Seating licences can be useful in various contexts — including hospitality, office or retail settings — and are commonly seen in situations where a party has a more permanent property interest but would like the ability to have an outdoor seating space.

Here, Charlotte Flanders sets out the potential pitfalls when using seating licences and how to overcome them. 

Terms & conditions

The terms and conditions of seating licences can vary. They focus on the right to use space rather than ownership or long-term occupation.

A key feature of a seating licence is that it’s a personal right to occupy for a specific period without exclusive possession — which means that the licensor can still access the space and control the area. 

A seating licence doesn’t create a proprietary interest in land and is often for short-term use such as for a specific event, days or during peak periods. 

Seating licences — potential pitfalls

When using seating licences, parties should be aware of several potential pitfalls.

1. Lack of clarity in terms

Vague or poorly defined terms can lead to confusion or disputes. If the licence doesn’t clearly outline the rights and obligations of both parties, it may result in misunderstandings about the use of the space, such as duration, fees or termination.

All parties to a seating licence should ensure that all aspects of the licence are clearly stated.

2. No security of tenure for licensees 

Unlike some leases, seating licences don’t provide licensees with security of tenure. This means that licensees have no automatic right to renew or stay beyond the term of the licence — and the licensor can terminate it with relatively short notice.

Licensees should be aware of the temporary nature of the agreement and negotiate terms that offer sufficient notice periods for termination.

3. Potential for implied exclusivity

If the licence isn’t carefully drafted, it may be interpreted as granting the tenant exclusive possession of the space, which could inadvertently create a leasehold interest and trigger leasehold rights under property law.

Both parties should ensure that the licence clearly states it’s a personal right to occupy and doesn’t convey exclusive possession. This reduces the risk of the licence being treated as a lease.

4. Difficulty in enforcing terms

Since a seating licence doesn’t grant the licensee a formal property interest, enforcing terms (such as payment or usage restrictions) can be challenging — especially if the licensee disputes the licence’s terms.

Properly drafted terms that set out enforceable obligations and remedies for breach will make enforcement easier for both parties.

5. Personal nature

A licensee can’t assign or sublet a seating licence. An agreement that caters for assignment or sub-licensing implies that the agreement isn't a licence (which is, by its very nature, a personal arrangement) and is more likely to be deemed a lease. This can be problematic if the licensee needs to exit the arrangement early or transfer the licence to another party.

Licences should consider that, on an assignment or sale of their adjoining interest, the Licensor will need to be approached to grant a fresh seating licence to the assignee or buyer (and this will likely be at the Licensor’s discretion).

6. Lack of detailed exit/termination clauses

If termination or exit terms aren’t well defined, either party could face unexpected consequences if the agreement is ended prematurely or without sufficient notice.

Both parties should agree on clear and fair termination provisions, including notice periods, conditions for termination and any financial penalties or obligations upon termination.

7. Potential tax implications

A seating licence may be treated differently than a lease for tax purposes, which could affect VAT, business rates or other financial obligations.

Both parties should seek professional advice to ensure that they understand the tax implications of entering into a seating licence versus a lease agreement.

Talk to us

While seating licences can provide a flexible and short-term solution, both landlords and tenants must be cautious of their common pitfalls. 

By ensuring clear, detailed terms and understanding the legal implications, both parties can avoid potential disputes and ensure a smooth, mutually beneficial arrangement.

If you need legal advice on seating licences, our commercial property lawyers are here to help. Talk to us by giving us a call, sending us an email or completing our contact form below.