We are regularly asked the following questions:
Answering these questions requires an understanding of the key characteristics of a lease and what distinguishes a lease from a licence. It also requires an appreciation of some associated practicalities.
The subject matter of a lease or licence is much the same – both involve a right to use premises in a certain way. However, there are key legal differences between a lease and licence that should be considered when taking a lease or a licence or granting a sublease or sublicence. In particular, a lease grants an interest in land which gives a tenant exclusive possession and security of tenure. A licence is a more flexible arrangement and does not afford the same security of tenure as a lease.
The fundamental characteristics of a lease that distinguish it from a licence are:
If a tenant defaults under its lease it does not necessarily follow that the lease will be terminated. A tenant has certain statutory rights to request a Court to reinstate its lease, despite the landlord having terminated it in consequence of the tenant’s default. Courts will generally provide relief for tenants who are able to remedy the default in order to keep the lease on foot, for example, by paying any outstanding rent. These protections are not available to a licensee of premises.
If you are taking occupation of premises it is always best to try to obtain a lease. However, a lease may not be commercially feasible because, for example, the premises are going to be shared with others and exclusive possession is therefore not practical. Other examples where taking a licence may be satisfactory or the only option available to you are:
Taking a lease is preferable to taking a licence in the following circumstances:
Circumstances where you may offer a sublicence rather than a sublease include:
We would be happy to advise you in more detail if you have any enquiries in relation to the above.
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