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Lease or Licence: What’s the difference?

Factsheets - all you need to know about the services we offer

3rd October 2018

There are various ways of allowing someone to use your property. The two most common are leases and licences.

Many of our clients ask whether it’s possible to grant a licence to their property instead of a lease, and vice versa. It’s important to understand the difference between them if you are considering becoming a commercial landlord or a tenant. In a nutshell, occupation under a lease of business premises is very much more secure than occupation under a licence. Under a business lease a tenant not only has the sole right of occupation during the term, but in most cases the right to a replacement lease at the end of the term. Under a licence, no such rights exist.

What is a lease?

A lease is the right to exclusive possession of a property for a specific period of time.

The terms ‘exclusive possession’ and the time period (which can be fixed or periodic, but either way, specified) were set out in 1985 in the case of Street v Mountford. These underlay the distinction between lease and licence. A lease will also generally be at a rent, although it is possible for a lease to arise without rent. 

What is a licence?

A licence is personal permission to use the property for a specified purpose. It merely means that by occupying the property, you are not trespassing.

A licence does not grant exclusive possession. As the licensee, you have very limited security. A licence is not transferrable and can be revoked at short notice.

As a landlord, it is important to bear in mind that simply calling a document a licence will not make it a licence. It’s crucial to make sure that your documentation, for both landlords and tenants, is properly validated to avoid potential future pitfalls.

If you’re unsure whether you should grant a lease or a licence for another’s use of your property, or you want to check how secure you are as a tenant, come and talk to us. We have a dedicated commercial property team that can answer all your questions and advise any issues that may arise later.

Please call our team on 01273 324041 or email us at

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