What is the Difference Between a Lease and a Licence?
When taking occupation of a commercial property it is essential to ensure that your occupation gives you rights appropriate to your needs.
One of the first things to consider is whether you are being offered a lease or a licence. The two often appear very similar, but the consequences can be significant for the security of your occupation and your right to dispose of the property.
The Difference Between Lease and Licence Explained
At its simplest, a lease is a right to possess a property to the exclusion of all others, whereas a licence is merely a personal right to use property (either individually or in conjunction with others). This can have a number of consequences.
The main differences are:
- As a lease is an interest in land, a tenant can generally create new rights (such as sub-tenancies) or assign the lease to another person. By contrast, a licence is a personal right which cannot be assigned and which usually comes to an end automatically if either party changes.
- A lease grants exclusive possession, which entitles the tenant to exclude anybody else, including the landlord, from the property. On the other hand, a licence does not entitle the licensee to exclude the owner of the property or anyone else who is allowed by them to be there.
- A lease usually requires a tenant to pay a regular rent. A licence may also be granted in exchange for payment, but this is not necessarily the case.
- A lease will generally have a fixed or periodic duration and can usually only be brought to an end in certain circumstances. Leases of business premises may also benefit from a statutory right to renew. By contrast, a true licence can generally be terminated by either party on reasonable notice.
These general rules can be modified by the terms of the agreement or by occupation which in practice differs from the written terms. As a result, the distinction between leases and licences will often be very slight and can lead to confusion or disputes between parties.
If you are unsure, it is always best to seek legal advice.
If you're a landlord or tenant and would like to know more about your rights, please contact Harriet Benson in our Commercial Property team on 0117 314 5254 to discuss how we can help.