What is the difference between a license and a lease for office space?

Under a lease agreement, tenants have the right to exclusive possession of the space and may be allowed to carry out certain types of alterations. On the other hand, a license for office space simply grants the tenant the permission to occupy a space. Leases are transferable while licenses are not. Under certain circumstances, lease agreements need to be registered with the land registry, but this is never the case with licenses.

Licenses for office space are valid for a maximum of two years, while leases cover longer periods of time. Unless otherwise specified, licensed office space is not up for renewal once the license period has expired.

Office space can be rented out under a variety of terms and conditions. Leases and licences are different types of tenancy agreements, and they differ from each other in several significant aspects. One of the most important differences is that a lease grants tenants exclusive possession rights. This means that (unless contractual terms say otherwise), a tenant can exercise the same rights as the land or property owner, including granting or restricting access to the property. Licences do not confer exclusive possession of a property, although by law they guarantee certain rights and privileges. Broadly speaking, a licence grants the tenant permission to use a property under the specific terms and conditions set out in the contract. According to case law, leased office space also creates a legal interest in the land or property in question, whereas a licence simply creates rights to use the property.

Exclusive possession rights often entail that the tenant is responsible for maintaining the premises. This is not the case of licences, which usually stipulate that the landlord is responsible for covering the costs of maintenance and repairs. It is also important to note that licences do not necessarily require a written contract, as they can be enforced following a verbal agreement. On the other hand, leases are written (and often lengthy) tenancy agreements.

In addition, lease agreements offer tenants additional security with regards to the duration of their tenancy. Whereas a licence can be terminated by either party by simply giving notice (often short notice), the duration of a lease is protected by law and cannot be easily altered. One of the key characteristics of a lease is that it exists for what is known as a fixed term. Leases are long-term tenancy agreements that often involve long notice periods, with 12 months notice being very common. By contrast, licenses are short-term agreements that allow the licensee to use the premises for a limited period of time (2 years being the norm). Once a license term is over, the tenant is not entitled to renewal, whereas a lease confers tenants the right to renew their contract once the initial term is over. Whenever landlords decide to terminate a lease contract earlier than agreed, they must abide by the guidelines set out in the Landlord and Tenant Act of 1954. In many cases, early termination of a lease agreement requires financial compensation. More information can be found here.

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