Aimee B. Davis Law P.C.

What is the Difference Between a Lease and a License?

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{4 minutes to read} Although the words “Lease” and “License” are sometimes used interchangeably, these are separate legal concepts that convey different rights and duties to the recipient.

 

A Lease is an agreement granting a tenant an exclusive interest in property during the term; whereas a License conveys to a licensee permission to use property or to do certain specified things on the property. In determining whether you have a Lease versus a License, an attorney can help by reviewing the specific terms of the agreement and understanding the nature of control granted over the property. For example, a skating rink could be leased to an operator, and then licensed by the operator to a skater/someone hosting a party at the rink.

 

Leases tend to allow tenants more freedom to do what they want on a piece of property, and these rights may be transferable to third parties. A Lease conveys some ownership rights in and to the property during the term. For example, a tenant may have the right to keep others (including the landlord) off the property. However, as with all things law related, this distinction may not be crystal clear. A landlord may reserve the right to enter the property during normal business hours for certain, agreed-upon purposes, such as conducting repairs.

A License doesn’t create an interest in the property, and as such, it may be revocable prior to the expiration of the term. It is also not required that a License be in writing to be binding. Licenses are generally not transferable, and are typically used for shorter-terms.

 

In making this determination, some things to consider include:

 

  • Is the tenant/licensee being granted the exclusive right to use the property during the term?
  • Who is responsible for maintenance and repair of the property?
  • Who is responsible for the cost of utilities?
  • Who is responsible for damage to, or destruction of, the property?
  • Who is responsible for insurance with respect to the property?
  • Is the tenant/licensee agreeing to indemnify the owner for losses of the property?

 

At Aimee B. Davis Law P.C., we often represent tenants under Billboard Leases, which I have affectionately referred to as “vertical space leases.” This means that no person or entity is actually “in possession” of, or will be physically occupying the space. In our experience, the standard form of these Billboard Leases are rather favorable to the tenant. This often comes as a bit of a shock to traditional real estate attorneys representing property owners. In the case of a digital billboard, advertising copy changes are made electronically, so it may not even be necessary for the tenant to enter the premises after the digital billboard is installed. Nevertheless, if the answer to the majority of the above questions is the tenant, then the agreement would likely be characterized as a Lease because the tenant is granted significant control over the property during the term.

 

I recently received a major mark-up of our standard form Billboard Lease from opposing counsel. This attorney converted my client’s document into a License. At first, I thought I’d be engaging in another Battle of the Forms, but after learning that my client only intended to utilize certain exterior wall space for a very limited period of time (two months) and did not need to enter the premises, it turned out that entering into a License was an acceptable compromise, satisfying the respective needs of the parties.

 

If you are unable to determine whether you have a Lease or a License, Aimee B. Davis Law P.C. may be able to help..

Aimee B. Davis Law P.C. is committed to advising its clients and resolving issues relating to the legal and business matters that are important to them. If you have any questions, please feel free to contact us at (917) 617-2243 or email aimee@aimeebdavis.com.

Aimee B. Davis Law P.C.

917-617-2243
122 Ashland Place
Brooklyn, NY 11201

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