What is the Difference Between a Commercial Lease and a License to Occupy Business Space?
Nov. 15, 2019
A license is generally revocable by either party upon notice, at will – with or without cause and is usually not assignable the way a lease can be assigned to another entity with the landlord’s consent. A license to occupy is generally a personal right of the party to the license. The tenant and landlord have a relationship governed by the terms of the lease, and all the rights and remedies available under landlord-tenant laws (including the eviction laws), whereas the laws of the contract govern a licensee and licensor.
Generally, a license is for a shorter term than a lease. The parties may prefer a license agreement for an event to be held in business space for a seasonal duration (such as a Halloween store or a Christmas shop) or as a “pop up store” (which is a test run to see if the business location works). Also, in the retail context, a license for space in a larger department store is often called a “concession.” An example of a concession is a makeup counter in a retail outlet.
In the office context, a landlord may give a tenant a license to occupy space in the building while the tenant’s permanent leased space is being constructed/renovated, sometimes called “swing space.” Another example of a license of space is when a company licenses a conference room for an industry conference event to another business entity that will be occurring over only a few days. The parties do not need to enter into a full-blown lease with long provisions for such a short duration.
Both the license and lease agreements will, among other things, list the parties, a description of the space to be occupied, with a floor plan exhibit if applicable, the term (commencement date to expiration date), the fee (called rent or license fee) and the insurance to be carried by both parties. Note: A license to use space for a one-time event where food and drink will be served should include appropriate liquor coverage under the insurance coverage.
The Bottom Line
A license offers more flexibility for parties wishing to occupy space for shorter durations, with a simpler form of agreement. A lawyer can assist in reviewing whether a license or a lease is most appropriate in a given context.