Difference Between Lease and License

February 2023 · 3 minute read

Lease vs License
 

When renting out a house or property for use by a tenant, the landlord is faced with decision as to whether the property should be leased or licensed. The decision as to which should be used will depend on the requirements of the landlord and the amount of freedom in the use of the property that they are willing to grant. The two concepts of leasing and licensing are quite similar to each other and are difficult to distinguish. The following article gives a clear picture of what each is and how and when they are used in renting out property.

Lease

A lease agreement gives the lessee (the tenant who leases the property from the landlord who is called a lessor) the right to possession of the property for a specified period of time. A lessee will pay rent to the lessee for the use of the property. A lessee will have greater rights and obligations and can use the property as they wish without damaging it. Since a lease agreement is set for a specific period of time, the landlord and tenant cannot terminate tenancy as and when they wish. If they wish to terminate prior to the end of the period, they may have to pay some penalty to the other party.

License

A license, on the other hand, acts as a permission to use the property. This means that the landlord also has access to the property and is allowed to look in and inspect the property whenever the need. A license agreement also gives the landlord the right to terminate tenancy at any point that he wishes. Licensing agreements usually occur in situations where a large property is being let out to a number of tenants; e.g. college students renting a large house. In this situation, since it is difficult to lease the entire property to one party, individual licensing agreements are more appropriate. Since licensing agreements also give the landlord the right to inspect and keep the property in good condition, a license would also be better in such a situation.

Lease vs License

The decision between a lease and a license is an important one, since it defines the level of authority the land lord has over their property. A lease agreement will give the landlord less control and whereas, under a license, the landlord can conduct inspections and ensure the property is maintained well. When making a decision to let out a property, a landlord who trusts his tenants and would have no need to keep his rights of maintenance and inspection will use a lease agreement. A landlord who, on the other hand, requires more control and wishes to make sure his property is maintained and well kept will sign a licensing agreement.

Summary:

Difference Between a Lease and a License

• The decision between a lease and a license is an important one, since it defines the level of authority the land lord has over their property.

• A lease agreement gives the lessee (the tenant who leases the property from the landlord) the right to possession of the property for a specified period of time.

• A license, on the other hand, acts as permission to use the property. This means that the landlord also has access to the property and is allowed to look in and inspect the property whenever the need.

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