Category: Commercial Leases

If you have not already, check out Part One and Part Two of this series.

It’s important to distinguish between the two arrangements as it will determine the rights and remedies of the licensee or tenant. Even if the agreement is titled as a ‘license,’ if it sounds like a lease, looks like a lease, and smells like a lease, then more likely than not, it is a lease and it will be enforced as such. Careful contract drafting should be utilized by commercial property owners (or their attorneys) looking to implement an effective and enforceable license regime.

For some, a license may be the best option for their business as they can operate at a lower cost versus having to rent. A prime example of this is beauty professionals using a salon suite rather than renting a chair in a beauty salon. Many salon suites come with the furniture and/or equipment needed by the beauty professional and allows them to operate with more independence and flexibility.

For others that wish to make themselves at home in their office, the security of a lease may be more appealing to you. If you’re a potential tenant/licensee looking for clarification of an agreement presented to you or a commercial property owner looking to draft a license agreement, contact our firm for assistance.

By now you know the difference between a lease and a license from Part One of this series but what makes one option more favorable than the other? What are some disadvantages?

In the shared office space context, a licensee is granted permission to enter onto the licensor’s property to make use of an office, desk, or other space or equipment for the licnesee’s business within the hours agreed to.

Usage by way of a license can have several benefits for licensees, such as: (1) flexibility to terminate the license; (2) all-inclusive price on a cost-per-month basis, with such prices typically less than rental prices; and (3) the occupation period of the property is normally shorter.

Of course, some drawbacks include absence of long-term security for the licensee, the inability to alter the licensed space, and at-will revocation of such license. Therefore, a license agreement allows commercial property owners to eliminate the landlord-tenant relationship and avoid having to go through the traditional eviction proceedings should any issues arise.

Regardless of what the agreement might be called (the title does not have much legal significance), there are characteristics to look for to determine whether the arrangement appears to be more like a lease rather than a license: (1) whether the use will be exclusive; (2) the arrangement relates to a particular piece of real property (is it for an entire office or just a desk?); (3) whether the use will be for a specific period of time; and (4) whether such use is in exchange for regular monthly payment (pricing for licenses may change month-to-month).

Considering the advantages/disadvantages of a license versus a lease, you may be wondering what your legal rights and remedies are under both arrangements and how they differ. We’ll be covering the legal aspects in Part Three of this series.

With the boom in entrepreneurship in response to the COVID-19 pandemic, many entrepreneurs are attempting to navigate unfamiliar waters with regards to finding a location suited to their business needs. Since not all businesses are one-size-fits-all, many are discovering the perks of using shared office spaces through companies like WeWork and Workbar. However, many are being presented with a license agreement, rather than a lease, and aren’t sure of the difference and implications of such.

A lease is a property interest or estate in real property that grants a tenant the right to exclusive possession of the property for their own use and enjoyment for a period of time in exchange for payment of rent. Most people are familiar with traditional leases, whether residential or commercial.

By contract, a license is a temporary right to use property for a specific purpose. A prime example of a license agreement is when you buy a ticket to a sporting event or concert – you are granted permission from the venue to occupy the seat or space for the purpose of attending the event. The permission ends when the license is revoked or the particular purpose is over or has been completed.

Whether one option is better than another depends on the particular business. The advantages and disadvantages as well as how to distinguish one from the other is further explored in Part Two of this series.

Click here to skip to Part Three of this series.