As remote offices and hoteling arrangements become the norm, it is important to understand the difference a lease and a license. While a lease and a license may both give you access to a property, they offer very different legal protections and levels of control of the property. Here are the four key differences to know about so that you are in the best position to make an informed decision before you sign an agreement.
Exclusive Use
A lease gives you exclusive rights to occupy and control a defined space for a specific period of time – a real property leasehold interest. This means you have a legal right to control and restrict access to the property. Even the property owner or landlord needs to provide reasonable notice before entering the space.
A license is usually limited to certain hours/areas of the premise and the property owner or landlord can typically enter the space at will.
Formalities
Leases are typically more formal and require a written agreement.
Licenses can be less formal and are sometimes verbal instead of written – but that doesn’t mean you should bypass a written agreement.
Term
Leases have a longer, fixed term which offers stability and predictability for the business occupying the property.
Licenses, however, are more temporary, short-term arrangements and can be more easily terminated by either party with little notice.
Assignability
With a lease, you may be able to assign the property or sublease to another party. If this an important factor in your decision-making process, it’s important to determine that your lease includes language allowing you to do so.
Licenses are personal and not transferable. This means that if you enter into a license for property, you are not permitted to transfer the license to another party.
Understanding the Difference Matters. Nazareth Bonifacino Law can help.
If you need stability, control and a long-term commitment, a lease might be the right fit, such as with a restaurant, medical practice, or retail store. If you want short-term flexibility, a license may work better. Either way, knowing the difference can help you avoid legal surprises and set your business up for success.
Need help reviewing or negotiating your agreement? We’re here to help.
