Should we sign a lease or a licence for our premises?

England and Wales: This page sets out the position in full — no consent from the Charity Commission, and strong tenant protection that can be given up only by a procedure done in the right order. Scotland: covered, and different in kind — there is no general right for a business tenant to stay on or renew, so there is almost nothing to lose by the choice of document. Northern Ireland: covered, and different the other way — tenant protection much like England and Wales, but it cannot be signed away; the notice and tribunal procedure is not set out on this page.

Lease or licence: the label does not decide

Whether you hold a lease or a licence is decided by what the arrangement is, not by what the document calls it. This is the point most small charities miss. It is often the one the landlord is counting on.

What to sign is a decision for the trustees. In the ordinary case it needs no consent from the Charity Commission. This page is for a charity taking space. If the charity is letting or selling space it owns, understand your obligations before disposing of charity land instead.

In England and Wales, a lease of business premises gives the tenant security of tenure under Part II of the Landlord and Tenant Act 1954. That means the right to stay on when the term ends, and to ask for a new tenancy on similar terms. Charities are not excluded from it, though some tenancies are, including certain short ones.

A licence gives none of that. A licence is permission to be there. It ends the way the document says.

But calling a document a licence does not make it one. A court in England and Wales looks at what the arrangement is, not what it is called. Three features point to a lease, whatever the cover says:

• Exclusive possession — the space is yours and nobody else’s.
• A term — a fixed or periodic length of time.
• Payment — rent, however described.

Say you have a room that only you use, for a fixed period, with your own key. In England and Wales, a “licence” of that room may well be a lease with the 1954 Act protection attached.

You may be offered a licence for premises you will occupy on your own. If so, the document may be taking that protection away, and that may be deliberate.

Contracting out has to happen before you are bound

In England and Wales the parties can agree that the 1954 Act protection will not apply. This is called contracting out. It is lawful, but only by the procedure in the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003. The Order has two routes:

• the advance-notice procedure
• the statutory declaration procedure

This page does not set out the steps of either. The 2003 Order does, and your adviser will.

The trap is the timing. The formalities must be completed before the tenant enters into the lease or, if earlier, becomes contractually bound to do so. An agreement for lease counts.

If they are not, section 38A of the 1954 Act makes the agreement to contract out void. Papers sent to be signed at the same sitting as the lease leave no margin for getting that order right.

Two further points:

• Contracting out is only valid for a lease for a “term of years certain”.
• Giving up the protection is a decision for the board, not a box for the conveyancer to tick. If the premises are central to the charity’s work, the right to renew may be worth more than a lower rent.

The Commission does not need to consent — but it expects care

Taking a lease as a tenant does not need an order from the Charity Commission in the ordinary case. CC33 “Acquiring land” is the Commission’s guidance. It asks the question and answers it: “Must the trustees obtain an order of the Commission before acquiring land? In most cases, no.”

An order is needed only in three narrow cases:

• acquiring non-freehold land with permanent endowment money
• acquiring from one of your own trustees or someone connected to them
• acquiring land the charity has no power to acquire

An ordinary lease of an office or a room, from a landlord with no connection to the trustees, triggers none of them.

What CC33 sets out instead is what the trustees need to make sure of when they take a lease. The list includes:

1. understanding the obligations the charity will be subject to under the lease, and that its terms are fair and reasonable
2. a rent that is fair compared with similar properties on the market
3. being able to afford it
4. appropriate professional advice, including legal advice

CC33 also “strongly recommends” that trustees proposing to buy land get a report from a designated adviser. It does not say whether that extends to taking a lease. Either way it is a recommendation, not a requirement. CC33 also asks trustees to keep a clear record of how they reached their decision.

Two things CC33 does not do. It never mentions licences, break clauses, dilapidations, or shared and hosted premises. The research for this page searched gov.uk for other guidance from the regulator on those points. It found nothing. So on the questions small charities most often face, there is no Commission guidance to follow. This page does not invent any.

CC33 now covers acquiring land only. Older material cites it as “Acquiring and disposing of charity land”. It is no longer published on gov.uk under that title.

If the charity is granting a lease of its own premises, or sub-letting part of them, that is a disposal of land. It falls under sections 117 to 121 of the Charities Act 2011, the England and Wales regime. The next step covers it: Can we just sell our building? That regime includes a lighter advice route for short leases.

Scotland: no renewal right to lose

The Landlord and Tenant Act 1954 does not extend to Scotland. Scotland has no general equivalent. That changes the whole question.

A Scottish commercial lease ends at its agreed end date — the ish — once either side gives valid notice to quit. If neither gives notice, the lease rolls on under tacit relocation. That is a default continuation, not a right to a new lease on new terms.

The only statutory renewal right is in the Tenancy of Shops (Scotland) Act 1949, and it is narrow:

• It covers “shop” premises only — retail or trading premises. It will not help a charity office or meeting room. A charity shop is the case it might reach.
• It is a right to ask the sheriff, who decides. It is not automatic.
• Any renewal is short and capped by the Act. The Act lists grounds on which the sheriff may dismiss the application, and the sheriff can also dismiss it where that is reasonable in all the circumstances.

The Scottish Law Commission’s Report 267, published in February 2025, recommends repealing the 1949 Act outright, with no replacement. That has not happened. Check again before relying on the Scottish Act.

So in Scotland the lease-or-licence choice matters much less for renewal. What matters is the notice terms, the end date and the exit route, read as written. On the tax side, Land and Buildings Transaction Tax applies to a Scottish lease, not Stamp Duty Land Tax. See Do we pay stamp duty when we buy a building?.

Northern Ireland: protection you cannot sign away

Northern Ireland has its own law: the Business Tenancies (Northern Ireland) Order 1996. It works much like the England and Wales Act, with one difference that decides everything.

• It covers charities. The Northern Ireland Order applies where the tenant occupies premises for a business it carries on. A charity occupying premises for its activities falls within it. There is no charity exclusion. Some tenancies are excluded, including certain short ones.
• The tenancy continues. Article 5 says: “A tenancy to which this Order applies shall not come to an end unless terminated in accordance with the provisions of this Order”.
• It cannot be contracted out of. Under Article 24, any term that tries to stop a party applying under the Order, or penalises them for it, “shall be void”. There is no Northern Ireland equivalent of the England and Wales 2003 procedure.

So in Northern Ireland, a clause saying the tenant gives up its protection does not work. A landlord who wants to avoid the protection has to rely on the tenancy falling outside the Order.

The Order also sets out how the landlord ends the tenancy, how the tenant asks for a new one, and when the Lands Tribunal decides. Those Articles were confirmed by title only, not read in full. This page does not set out the procedure. Ask the reviewer or your adviser for it.

The three nations side by side

	England and Wales	Scotland	Northern Ireland
Commission or regulator consent to take a lease	Not in the ordinary case (CC33)	Not addressed by this page’s sources	Not addressed by this page’s sources
Right to stay on and renew	Yes, for a business lease (Landlord and Tenant Act 1954 Part II)	No general right; lease ends at the ish after notice	Yes (Business Tenancies (Northern Ireland) Order 1996)
Can it be given up?	Yes, but only by the England and Wales 2003 Order procedure, before you are bound	Nothing general to give up	No — Article 24 makes it void
If nobody gives notice	Protected tenancy continues	Tacit relocation rolls it on	Tenancy continues (Article 5)
Narrow extra route	—	Shop premises only: short sheriff renewal (1949 Act)	—

Start with the agreements you already hold

Since 2026, this step is about more than the agreement in front of you.

For accounting periods beginning on or after 1 January 2026, the revised lease section of FRS 102 applies. It is adopted by the Charities SORP 2026. For a charity that is the tenant, it removes the old “operating lease” treatment, except where the charity uses the exemptions for short-term leases and leases of low-value assets. Almost every other lease moves onto the balance sheet.

The accounting test does not ask whether a document is called a lease. It asks whether an arrangement gives the charity control of an identified asset for a period, in exchange for payment. That catches things nobody filed as a lease:

• a photocopier rental
• a storage unit
• equipment hire
• a licence of space set aside for the charity’s use

Many small charities have no central record of these. Some are not written down at all. So the first task is a paperwork task, not an accounting one.

The charity should list every premises and equipment agreement. It should then read each one against that test. No regulator publishes a model register. This list is good practice drawn from the accounting change, not a rule of its own.

What happens to those agreements in the accounts belongs to the money part of this guide. Start with Do our office and equipment leases now go on the balance sheet?. Then read the move to accruals. After that, read the Statement of Financial Activities and the balance sheet.

Business rates on the premises are covered in Do we have to pay business rates?.

Before you sign

1. Find what you already hold. List every premises and equipment agreement, with its type, end date and exit route.
2. Read the new document for substance. Exclusive possession, a term and payment point to a lease in England and Wales, whatever it is called.
3. Decide, as a board, whether to give up renewal protection — England and Wales only. If you agree to contract out, make sure the England and Wales 2003 Order formalities are done before anyone signs the lease.
4. In Scotland, read the notice and end-date terms as the whole of your protection.
5. In Northern Ireland, do not rely on a contracting-out clause, in either direction.
6. Take advice and minute it: the rent against the market, affordability, and what the agreement binds the charity to.

Once you are in, the premises bring duties of their own. The next step in this hub is only for charities that own or let property. The one after it is for every charity with staff, volunteers or visitors on site: meet your health and safety duties.

Common mistake: accepting a “licence” without realising it carries no security of tenure

The document is short and informal, and the landlord is friendly. In England and Wales a business lease carries the 1954 Act right to stay on and renew, and charities are not excluded.

A licence carries none of it. If you are offered a licence of space you will occupy alone, you are probably losing the protection. That may be deliberate.

Common mistake: relying on the title of the document

“Licence” on the cover looks decisive. It is not. In England and Wales a court looks at the substance: exclusive possession, a term and payment. A licence with those features may be a lease, with everything that follows.

Common mistake: signing first and completing the contracting-out formalities afterwards

The landlord’s solicitor sends the statutory declaration with the lease, to be signed together. In England and Wales the formalities under the 2003 Order must be completed before the tenant is contractually bound. Afterwards is too late, and the exclusion fails. Contracting out also needs a term of years certain.

Common mistake: using CC33 as the guidance on granting a lease or sub-letting your own premises

Older material cites CC33 as covering both acquiring and disposing of land. On gov.uk today it is “Acquiring land” and covers acquisition only. Granting a lease of charity premises in England and Wales is a disposal. It falls under the Charities Act 2011 regime in the next step, including its lighter route for short leases.

Worked example

Tollgate Youth CIO is offered a “licence” of a room in a community centre in England. The room is for Tollgate’s use only. It runs for a fixed term, Tollgate has its own key, and it pays a monthly sum.

The trustees read it for substance. Exclusive possession, a term and a payment all point to a lease, whatever the cover says. If it is a lease of business premises, the England and Wales 1954 Act protection attaches unless it is contracted out. Contracting out works only if the 2003 Order procedure is completed before Tollgate is bound.

So the board faces a question it had not thought to ask: whether to give that protection up. The room is where its youth sessions run. Losing it at short notice would stop them.

The board minutes the decision and takes advice on the rent and the terms. It asks the landlord to grant a protected lease, or to explain the contracting-out procedure in writing before anything is signed.

Its costs are not given here. The research did not establish any figure for rent, fees or dilapidations. So none is published.

If the same room were in Scotland, the question would be different. There is no general renewal right to lose there. The board would read the notice and end-date terms as its whole protection. In Northern Ireland, a contracting-out clause would be void.