Lease or a licence: which is best and what are the differences?

A tenant can be given a right to occupy a property under either a lease or a licence. However, besides this, they are substantially different from one another. It is important to know what these are and how they differ.

A lease is a legally binding contract, that gives the tenant exclusive right over a property for specified length of time (commonly between 5 and 10 years). It also outlines the tenant’s rights and responsibilities. It is a more secure document that cannot be changed unless agreed by both parties.

A licence on the other hand is more informal. It still gives the tenant permission to use the property for a specified length of time, but these are often temporary arrangements which can be terminated at any time. A licence also does not give the tenant exclusive possession.

The main difference between a lease and a licence is the amount of control and rights that a prospective tenant has. For instance, as mentioned above a licence can be terminated at any time, while a lease has the security that it will run for the agreed time. It is important to understand the distinctions between the two so that you can make an informed decision when entering a rental agreement.

For a commercial property, a licence can be seen as a quick fix to get the prospective tenant in and trading. However, in return for speed, the tenant will sacrifice some of their rights and allow the landlord to retain more control over the property.

At Attwells Solicitors, our team of Commercial Property lawyers can assist in identifying whether to use a lease or a licence and draft or advise on a lease or a licence. To find out more, please contact Nick Attwell on 01473 229242 or email Nick at [email protected].

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