What are the differences between a lease and a licence

Agreements are important in commercial property because they define the terms of the relationship between the landlord and tenant. The written agreement sets out each party's rights and obligations, which can be enforceable in court if neither party doesn't uphold their end of the bargain.

A lease is a legally binding agreement that gives you exclusive occupation of a property or space within a property for the term of the lease. This means that no one else can use the space during that time (sometimes even including the landlord) and that you're generally responsible for maintaining and repairing the space. Typically there are tenant obligations such as dilapidation clauses and notice periods that will need to be agreed upon by both parties.

A licence, on the other hand, is a less formal agreement that allows you to share the space with other people and merely allows a business tenant to use the space. Licences are often used for short-term rentals, and there's usually no obligation to maintain or repair the space. Licences are usually for a shorter, specified period and do not allow the tenant to make any changes to the space.

Typically, you won't have the choice. With conventional leased and managed office spaces, where you require exclusive possession for a fixed period with rights to modify the space as required for your business, a landlord will insist on a lease. This will require legal advice on both the landlord and tenant's side to agree on the lease.

If you're looking for something shorter term such as coworking memberships or a private office suite within a serviced office or business centre, then usually a license will be proposed. These are usually agreed upon far quicker.  

Of course, there are many other types of agreements in commercial property, such as subleases, underleases, tenancies at will and more. But hopefully, this guide has helped to clear up any confusion between leases and licences.

This is a general guide only and you should always seek legal advice before entering into any commercial lease or licence agreement.

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