Leasehold legal issues

Lease or licence

Lease or licence?

A lease can be described as a right of temporary exclusive ownership of a defined space (possibly with additional rights to use other facilities on a non-exclusive basis).  “Licence” is technical term for a contractual agreement to occupy space falling short of a lease.

  • A tenant has obligations under some leases to pay Stamp Duty Land Tax.  This does not generally arise for licences.
  • A lease for a period of more than seven years may also be registered at the Land Registry, and shorter leases can be noted against the landlord’s Land Registry title.  This does not apply to licences. [What the Land Registry shows you]
  • There are a number of statutory protections under leases that can apply to liability for repairing obligations and termination by the landlord for breach of obligations (forfeiture).  These do not apply to licences. [What’s in a lease]
  • One of the most significant issues is that the protection under the Landlord and Tenant Act 1954 only applies to tenants under  leases and not licensees.  [Landlord and Tenant Act 1954]
  • Occupation arrangements that are described as licences can be regarded in law as amounting to a lease or tenancy . The tenant will then have the full legal obligations and rights of a tenant.
  • It is not a question of formality.  An informal arrangement involving regular payments for use of space a periodic tenancy can arise in relation to property by virtue of payment of rent by the tenant and acceptance by the landlord.
  • Generally, the granting of occupation rights over a particular space at a price is most likely to give rise to a tenancy unless there are reasons why this should not be the case.   It is the overall position that is important; the following factors usually indicate that there is a licence.
  • If there is no defined space but just use of an undefined space or facilities, as in a desk space licence or market stall concession; or if the space is not exclusively used but is used with others, there can be no exclusive possession.
  • If the owner of the property has the right to move the occupier to an alternative part of the building, there is no possession of the part of the building that is used at various times.
  • If there is a special relationship between landlord and tenant, for example both are charities carrying out similar functions or if there is an overriding purpose to the arrangement that amounts to more than just occupation of space for a rent, for example some kind of joint venture between the parties, then although possession of the property may be regarded as exclusive the background to the arrangement may be regarded as negativing the presumption that there is a lease.