In his first article, Commercial Property Solicitor Richard Ramshaw outlines the difference between a commercial lease and licence.
Richard goes on to discuss which is best, from both a landlord and tenant perspective.
What is a commercial lease?
A commercial lease is a contract used to transfer property from one party to another for a specified length of time.
A commercial lease will set out all the obligations placed on each party.
What is a commercial licence?
A commercial licence is usually used when property access is required for a short period of time.
For example, to ‘fit-out’ the property before the lease starts.
In what ways are commercial leases and licences similar?
They both grant permission to use the whole or part of a commercial property.
What are the differences between commercial lease and licence?
There are many differences between commercial leases and licences. I outline below some of these differences to clear up any confusion.
- Licences do not provide the same security that a lease would because either party can terminate a licence on 1 weeks’ notice.
- Leases grant exclusive possession of the property whereas a landlord can enter the property at anytime under a licence.
- Licences are used for a specific purpose, such as to carry out alterations to a property.
- Licences do not grant any other rights to use the property and the person with the benefit of it will not own the property in any way, they are simply given permission to use it.
- Leases create a legal interest, whereas licences do not.
- Leases can be assignable, whereas licences are personal to one individual and cannot be transferred.
Which is better lease or licence?
This really does depend on your circumstances and what it is you would like to achieve.
Below I outline some scenarios when a lease or a licence may be more advantageous…
What advantages does a commercial lease have for tenants?
When a tenant requires exclusive possession of a property for a long period of time, a lease will be more beneficial to them than a licence.
For example, when the tenant wants to run a business from the property for a considerable number of years.
How does a commercial lease benefit the landlord?
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