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Lease or License: What’s the Difference and Why Does it Matter? – Part Two

Posted on September 7, 2022November 1, 2022 by g83js92js91

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?

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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.

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