Tenants are people (or companies) who have tenancies. That might seem an obvious thing to say but there are occupiers of properties who are not tenants, and therefore don’t have the legal rights of tenants.
One group of occupiers who are definitely tenants are those who hold leases. Leases are written grants of property for a specific term and at an agreed rent. Most of the rights and obligations of tenants who hold leases are set out in the pages of the lease in question (often at great length). But tenants under leases also have other rights which arose under common law – originally when written agreements were not so common – and under legislation.
You can still be a tenant without a written document. Even a purely verbal agreement between the property owner and the prospective occupier is enough to create a tenancy when rent is paid and received. The term of such a tenancy depends usually on the frequency of payment. If rent is paid once a month, it’s a monthly tenancy. If it’s paid once a quarter, it’s a quarterly tenancy. These are known as “periodic tenancies”. One important result of the period of the tenancy is the notice needed to terminate it. Usually the landlord or tenant has to serve notice of at least one rent period to terminate the tenancy.
A tenant has a lot of unwritten rights which are attached even to such verbal tenancies. For example, the landlords’ notice to terminate does not necessarily terminate the tenancy. The tenant may have the right granted by the Landlord and Tenant Act 1954 to stay and demand an extension tenancy.
But not all occupiers without a written agreement are tenants. Under some circumstances, the nature of the occupation may be a “licence”. In that case, the occupiers are not tenants, and most of the rights which automatically attach to tenancies will not apply. You would need legal advice to tell you on which side of the line your situation falls.
The most usual case, of course, is that occupiers have a lease and are tenants. (A tenancy agreement means the same thing as a lease in practice.)
You do not necessarily have to become the tenant yourself, If you want to take some premises, you may want to set up a limited company or a limited liability partnership (an “LLP”) to be the legal tenant. This would certainly be the case if you are intending to trade through a limited company or LLP anyway. But even if you’re not, you might still prefer to have a limited company as the tenant of the property, because it protects you from personal liability if things go wrong (unless you also sign as a guarantor of the company).
Landlords are often prepared to accept new companies with no assets or financial history as tenants provided that they put up a rent deposit – for example, three months’ or six months’ rent. This is designed to cushion the landlord against the loss of rent while they seek a new tenant.
If two or more people sign up as tenants, they are jointly and severally liable for all the obligations under the lease. That means that each one of them can lose everything they own if they’re sued by the landlord’s, and the richest stand to lose more than the poorest. Individual tenants can be bankrupted.
You would need to take accountants’ advice on the structure that works best for you as a business, and legal advice on how to protect yourself from liability as a tenant.