By: Rajesh K. Sharma, Advocate (LinkedIn)

Difference Between a Lease and a Licence

Leases and licences are two different legal arrangements for occupying property, each with distinct characteristics and implications. The primary difference between a lease and a licence lies in the nature of the interest in the property and the level of legal protection afforded to the occupier. Leases grant an interest in land with exclusive possession and greater legal security, while licences provide a personal permission to use the property without exclusive possession and with fewer protections.

The following chart highlights the fundamental distinctions between leases and licences:-

Aspect	Lease	Licence
Nature of Interest	A lease grants the tenant an interest in the property, creating an estate in land.	A licence grants permission to use the property without transferring any interest in the land.
Possession	The tenant typically has exclusive possession of the premises, meaning they have the right to exclude others, including the landlord, from the property.	The licensee does not have exclusive possession and cannot exclude the licensor from the property.
Legal Protection	Tenants have statutory protections and rights under tenancy laws, including protection against unjust eviction.	Licensees have fewer legal protections and can be more easily evicted.
Binding on Third Parties	Lease rights are typically binding on third parties, meaning they remain in effect even if the property is sold.	Licence rights are personal to the licensee and do not bind third parties or future property owners.
Formality	Leases usually require more formality, often needing to be in writing, especially for long-term arrangements.	Licences can be more informal and may be granted verbally or in writing.
Duration	Leases are for a fixed term, providing certainty regarding the duration of the tenancy.	Licences are often more flexible regarding duration and can be terminated at short notice.
Termination	Leases can only be terminated in accordance with the terms of the lease agreement or through legal processes.	Licences are generally revocable at the will of the licensor, subject to any terms of the agreement.
Security of Tenure	Tenants have security of tenure, meaning they have the right to stay for the lease term unless they breach the lease terms.	Licensees have less security and can be asked to leave more easily.
Examples of Use	Commercial Spaces: Offices, retail stores, warehouses. Residential Property: Apartments, houses.	Temporary Access: Hotel rooms, event spaces. Limited Use: Kiosks in malls, storage areas, parking spaces.
Maintenance Responsibility	Often shared between landlord and tenant	Typically remains with the licensor
Exclusive Possession	Yes, tenant can exclude others, including landlord	No, licensee cannot exclude the licensor
Creation of Estate in Land	Yes	No
Statutory Rights	Tenant has rights under tenancy laws	Licensee has no statutory tenancy rights
Transferability	Can be assigned or sublet subject to lease terms	Generally not transferable
Dispute Resolution	Governed by tenancy laws and courts	Governed by contract law

Example Scenario

Lease:

Fact Pattern: Sarah leases an office space from XYZ Properties for a five-year term. The lease agreement grants Sarah exclusive possession of the office, specifies a fixed rent, and details the rights and responsibilities of both parties.
Analysis: Sarah has a legal interest in the property, exclusive possession, and statutory protections. The lease is binding on XYZ Properties and any future owners of the building.

Licence:

Fact Pattern: John obtains a licence to use a conference room in a hotel for a one-day business seminar. The hotel retains the right to access the room during the event.
Analysis: John has permission to use the room but no interest in the property or exclusive possession. The hotel can revoke the licence, and John's rights are limited to the terms agreed upon.