Lease and License Overview

The difference between lease and license is the difference between two distinct legal concepts pertaining to an individual’s duties and rights in a contract. A lease is a contract between a tenant and a landlord that provides the tenant with exclusive interest in the property. A license, on the other hand, is when the owner gives permission to a licensee to conduct an action on the owner’s property. The main difference then is that leases give an individual the right to control property, while licenses only give an individual the right to act on it.

Property Control with Leases and Licenses

There are a number of major ways that leases differ from licenses, but the primary one pertains to the matter of control. Leases, as agreements, are contracts which exercise much less control than licenses over the party that is making the payments. If you are entering into a contract where you essentially have freedom to do what you will on a piece of property, then you are probably entering into a lease.

Leases create interest in the property involved. So long as the lease is in term, the party leasing the property has some right to ownership of the property, including the right to keep any person, including the landlord, off the property (although the landlord may reserve the right to enter the property during normal daytime hours for certain, agreed-upon purposes, such as conducting repairs). Due to these ownership rights, leases can be transferred to another party; in the case of apartments, this is called subletting.

Licenses, on the other hand, allow the party accepting payment to have significantly more control over how their property is used. Pertaining to the example above, licenses cannot be transferred to a third party because the nature of the agreement is that the licensing party controls certain aspects of your conduct on the property; allowing another party to use the property instead of yourself would be a violation of that agreement. Because of this, license agreements are primarily used for shorter-term agreements involving storage, office, and small-scale retail spaces.

Contract Terms with Leases and Licenses

To understand if you are dealing with a license or a lease, how the contract is presented is another aspect that may determine the issue. A lease usually requires an oral or written agreement between the two parties involved. Such an agreement should include the following information to be complete:

  1. A description of the bounds and extent of the property being leased.
  2. The terms of the lease.
  3. The price of rent.
  4. How and when payment should be made.

Licenses, on the other hand, do not always need a written agreement to be binding. In fact, a license can be conferred upon a party without either party ever meeting. For instance, if you buy a ticket to a sporting event, the purchase of that ticket is giving you license to enter a sports venue and use a seat in that venue for a predetermined period of time. You have not met the owner of the seat, but purchasing the ticket represents a binding agreement between you and the owner. You are granted permission to use the seat, but you do not own the seat, and there are certain rules you must abide by relating to your conduct in that seat if you are to honor the terms of the license.

Thus, if there is no written agreement, you may be dealing with a lease. However, just because an agreement contains the details listed above does not mean it is by default a lease. To be so, primary control of what is done on the property must be in the hands of the tenant, not the landlord. Also, it should be noted that a lease cannot be revoked by the owner before the term is up, so long as no other terms of the contract have been violated. Licenses, in contrast, can be revoked at any time.

A final consideration to make is that a party cannot turn a lease into a license by merely calling it that; the terms of the agreement and the nature of control are the main determining factors. There may be some grey area from time to time, but usually the division will be easy to discern with proper consideration.

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