Property licences can often be confused with leases.
There are significant differences between a licence and a lease when it comes to the letting or use of property.
- A licence, unlike a lease, does not transfer any interest or estate in the land to the licensee
- A licence is a ‘mere permission’ to use the premises
- A lease confers statutory rights and protections whereas a licence confers none of these.
Should a dispute arise as to whether a user of a premises has a licence or a lease, a Court will look at what the parties intended, not what they say afterwards.
So, if an agreement has all the requirements of a tenancy/lease, the parties cannot insist afterwards that they only created a license.
Courts will, in the event of a dispute, look at the relationship between the parties objectively and if the agreement satisfied all the characteristics of a tenancy, decide that the agreement is a lease.
Types of Licence
There are a number of different types of licence including:
- A bare licence which is a mere personal permission. As it is personal to the licensee there is no interest that (s)he can transfer to a third party.
- A licence coupled with an interest. This type of licence can be transferred to third parties. This might arise where a person is given permission to enter another’s land to cut down and remove trees or shoot game.
- A contractual licence-this licence is created by a contract and the power to revoke the licence will be contained in the terms of the contract. There is no proprietary interest in the land though. A licensor can be prevented from revoking the licence which is not in accordance with the contract underpinning the licence.
- An estoppel licence. This will arise where a person who holds a licence relating to land sells an interest in that land to a third party who acts in good faith. The licensor in this situation may be prevented from revoking the licence as against the new purchaser and an estoppel licence may arise where the licensor is ‘estopped’ from revoking the licence.
Characteristics of a Licence
The main characteristics of a licence and distinguishing features from a lease include:
- There is no interest in land
- It may be revocable
- The licensee does not enjoy exclusive possession of the land
- The licensee occupies the land with the consent of the licensor
- The rights in the license are personal to the licensee
- The licensee agrees with the licensor to co-operate in relation to the control and management of the property.
Property owners need to be aware that entering legal relations which involve occupancy of their premises and on-going payments to them need to be clear in advance as to what the relationship is and would be advised to have a professional licence agreement drafted.