When is a Lease not a Licence?

admin — Sat, 13 Aug 2011 10:02:54 +0000

The Distinction between a Lease and a Licence.
This is far from a straightforward issue and there have been many legal cases fought over the distinction between a license and a lease (tenancy agreement). And many people have got want they had not expected.
Property can be occupied but not necessarily “possessed”. It this subtle distinction that is very important in distinguishing the difference between a lease & Licence. Occupation of property comes under four main headings in English law: Freehold (owner), Leasehold (tenant), License (authorised occupier) and trespasser (squatter).
A license allows occupation but does not give the occupier legal title in land, as does a tenancy. So, a guest in a hotel has a license to occupy, as does a lodger in a property where the landlord is in occupation, and as does a company which occupies a serviced office or workshop space.
The big advantage to a landlord is that the licensed occupier can be removed (subject to the notice period in any agreement) without too much trouble – they have limited or no legal protection. Had the occupier been granted a tenancy, then they would have legal protection (security of tenure) either under the Housing Acts (1988 & 1996) for a residential tenancy, or under the Landlord & Tenant Act 1954, in the case of a commercial tenancy.
The crucial distinction between the two – license or tenancy – is the terms “exclusive possession” and “control”. So, where a tenant can exclude all others, including the landlord, he has a tenancy, regardless of what the landlord may title his agreement.
A lease agreement where the property owner gives another party the right to occupy the property is often identified as an agreement that contains the following aspects; it issued in exchange for consideration. Usually the right is (1) exclusive, (2) for a term of a year or more, (3) transferrable (except as stated in the lease), and (4) irrevocable. The property owner gives up a leasehold interest in the property.
Whereby a license is an agreement where the property owner gives permission to another party to use the property for a specific, limited purpose. Usually the right is (1) non-exclusive, (2) for a short term or non-consecutive use, (3) non-transferrable and (4) freely revocable. The property owner does not give up an interest in the property.
The most important distinction between a lease and license is whether the right to use the property may be revoked. A license is more appropriate for a shared, non-exclusive, revocable right to use property. For example, an organization could be given a license to use a meeting room every Monday from 6pm-7pm, or a barbeque event could be given a license to serve food one Saturday each month.
Here’s what the courts have said; “……It does not depend on whether he or she has exclusive possession or not. It does not depend on whether the room is furnished or not. It does not depend on whether the occupation is permanent or temporary. It does not depend on the label which the parties put on it. All these are factors which may influence the decision but none of them is conclusive. All the circumstances have to be worked out. Eventually the answer depends on the nature and quality of the occupancy. Was it intended that the occupier should have a stake in the room or did he have only permission for himself personally to occupy the room, whether under a contract or not………….’
So be sure to understand what type of agreement you intended and how you are going to achieve this before entering into such an agreement.

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When is a Lease not a Licence?