Whilst a lease and a licence may appear to be very similar, there are several key and critical differences from a legal perspective.
Are you a Tenant or Licensee?
A lease allows for a proprietary interest in land and a tenant is accordingly entitled to exclusive possession and use of the land. Alternatively, a licence is merely a personal right. That is, a contractual permission to allow someone to use another’s land for a particular purpose. A lease is grounded in property law and is, therefore, a right in land. A licence is based in contract law only and, accordingly, provides a somewhat weaker personal right.
With a leasehold interest, a tenant is entitled to take action against third parties in order to defend / protect its interest, however, a licence holder cannot.
A lease allows greater security than a licence because a tenant is entitled to exclusive possession of the property for the term of the lease. A licence can be revoked by the one granting the licence at any point.
Revocation of a licence may be a breach of contract, entitling the licence holder to sue. However, the licence holder would still not be able to enter the land because their authority from the owner of the land would be gone. Leasehold interests can also be bought to an end, however, the protections that this type of interest provides make it far more difficult for a landlord to end a lease.
Licensees are not given rights under tenancy legislation or leases. It can be quite difficult to determine who is, in fact, a licensee because often they look very similar to tenants. Therefore, it is often necessary to determine whether or not exclusive possession exists. Some factors which may indicate that exclusive possession exists are whether the licensor also uses the land / building and / or whether the licensee can exclude others from those premises.
If this blog has prompted you to think that you may require legal assistance please don’t hesitate to contact us on + 61 3 9822 8588 or email us HERE.
