What would be better a Lease or a Licence?

7 March 2022 | Home, Property & Land | Author: Donna Ennis

Leases and licences are often confused by landowners or property owners and occupiers so it’s hard to know what would be better in what circumstances. The legal reason for occupation should be fully understood prior to agreeing a lease or a licence.  There are serious legal consequences that occur if landowner and occupier agree a lease or licence without having all of the correct information to hand.

What are Licenses?

Licences are a personal right to occupy a property for a short period of time of up to six months.  You cannot transfer a licence like a lease and there is no right of exclusive possession, therefore the Licensee (being the Occupier) cannot exclude all others from the property which is provided for in a lease, you have very little control over the property or land in comparison to a lease

When would I typically need a license?

Licences are more generally used without input from a Solicitor, and sometimes can result in landowners and occupiers getting themselves in sticky situations.  Firstly, it should be noted that under the terms of the licence you will be a Licensee and Licensor not Landlord and Tenant. 

A licence can be revoked at any time by the landowner, therefore you would have no right to stay in the property or on the land if the Licensor (Landowner) asks you to leave.  In the event that the Licensor sells the property the Licence will automatically come to an end. 

When would licenses be generally used?

Licences can be granted quickly and often cheaply, but legal advice should still be sought to make sure that neither the landowner nor the occupier falls into the trap of inadvertently granting a lease.  For the occupiers themselves, they should think carefully whether a licence does actually cater to their needs, if you have a business to run from the property and you are suddenly requested to leave under the terms of the licence then this will be particularly disruptive to your business and therefore it is important to consider whether a licence or lease would be best in your particular circumstances.

What are the benefits of a having a lease?

Leases provide more certainty for the occupier, there will be exclusive possession granted for a period of time, this is where you are able to occupy the property to the exclusion of all others, giving you more control over the property.

As a Landlord you can exclude the Landlord and Tenant Act 1954, which means the tenant has no right to hold over at the end of the term and no right to a new lease. Alternatively if you are a Tenant and would like that to be included in your lease that would provide a lot more certainty. If the 1954 Act was to be included in your lease you would have a right to holdover at the end of the term, essentially, you would be able to stay in occupation of the property after the lease term ends.

What are the common mistakes made?

The Landlord and Tenant Act 1954 does not apply to Licences however parties must be particularly careful when granting licences to make sure that exclusive possession is not provided for.  If exclusive possession is unintentionally granted then the parties may have unwittingly entered into a lease not a licence and therefore it may be included within the Landlord and Tenant Act 1954, if this were to happen the Landowner may find it particularly difficult to end the occupiers right to remain in the land or property, ultimately causing long term issues.

Find out what’s right for you

Both leases and licences are extremely beneficial to both landowners and occupiers alike, it is just using the right document at the right time, and obtaining the necessary legal advice.