Understanding the Key Differences Between a Lease and a Licence

21st June, 2024

When it comes to using premises, both leases and licences offer ways to grant rights, but there are significant legal distinctions between the two that should be understood before entering an agreement. 

Lease Agreement: A lease provides a lessee with exclusive possession of a property for a specific period. Essential characteristics of a lease include: 

  • A legal relationship between landlord and tenant. 
  • Exclusive possession granted to the tenant. 
  • A fixed term with a predetermined rent. 

 Leases are ideal for tenants needing security of tenure, this ensures uninterrupted use of the property even if ownership changes. However, leases can be rigid and require the tenant to restore the property to its original condition upon termination. 


Licence Agreement: A licence, on the other hand, does not grant exclusive possession but allows the licensee to use the property under specific conditions. Licences are typically: 

  • Short-term and flexible. 
  • Documented with clear terms, including notice periods for termination. 
  • Suitable for temporary or shared use of part of a property, such as parking spaces or storage areas. 


Licences offer flexibility and ease of termination, making them suitable for temporary arrangements or when exclusive possession isn’t necessary. However, they can provide less security than leases and can be terminated more easily.  


Choosing Between a Lease and a Licence: 

  • Opt for a lease when exclusive possession and long-term security are important, such as for business premises requiring stable occupancy. 
  • Choose a licence for short-term, flexible arrangements where shared use of the property is acceptable.  


Practical Considerations: 

  • Leases are preferable for long-term security and exclusive use. 
  • Licences are beneficial for temporary needs and shared spaces.  


Understanding these differences helps stakeholders choose the appropriate agreement based on their specific needs and legal implications. Contact Castrikum Adams Legal today on (02) 66871167 with any questions you may have.