Leasing 101 – Lease vs Licence – What is the Difference?
When it comes to occupying a commercial premises, it’s a simple fact that not all rights to occupy are equal. While both a lease and a licence at their core allow someone to occupy and operate from a property, there are a number of key differences between the two you should know before signing.
The most significant difference between the two relates to the use of the land itself. Under a lease, a tenant is entitled to exclusive possession of the leased property. This means the right to remove unwanted visitors – potentially including the landlord – during the term of the lease. Depending on the circumstances this may also mean the tenant can pursue an action in trespass against the unwanted visitor.
Under a licence though there is no right to exclusive possession. Instead, it provides a contractual right to occupy only with no such right to exclude others during the period of occupation. Depending on the specific terms, the owner of the land may be free to come and go as they please.
Registration and Interest in the Land
Another key difference concerns registration of the right to occupy. Where a lease is registered it will enjoy the protections of indefeasibility under the legislation, meaning that the tenant’s interest in the land will take priority over other, unregistered instruments. (We have spoken previously about lease registration, so if you would like more information on this aspect you can find it here.)
A licence, however, cannot be registered meaning that no equivalent interest in the land vests in the licensee. A licensee’s right to occupy the land is solely a contractual relationship between them and the owner and nothing more. Because of this a number of the rights and protections available to tenants under a lease are simply not available to licensees under a licence.
If you have further questions or are uncertain about whether you should be using a lease or a licence, please contact us, we are here to help.