What's the difference and why does it matter?
Whether you are the landlord or the tenant, it is important to know whether your arrangement is a lease or a licence as the rights and responsibilities for both vary depending on which it is. If there is a dispute as to whether it is a lease or a licence, the Court will decide based on the realities of the situation.
In a recent case, there was an agreement described as a licence, but in fact, it was a lease.
What’s the difference?
Licence: Does not give the tenant a legal interest in the property itself. It’s just a contract giving the tenant permission to use the property.
Lease: Does give the tenant a legal interest in the property, giving the tenant exclusive possession. If you are the tenant, this means you can exclude anyone else from the premises, even the
The Court will consider the parties intentions to decide whether it is a licence or lease. It asks what a reasonable person would think once presented with the objective facts?
The Court also considers the power dynamic of the parties, and will try to help the tenants where possible.
In the case above, the court decided that the business was availing of a lease.
The case highlights the importance of getting legal advice if there is any doubt about whether an agreement is a lease or a licence.
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