The Differences Between Leases and Licenses in Commercial Law Cases

 Leases and licenses are similar in nature – each gives permission for someone, or a company, to use a property for their own needs. However, there are main differences that need to be looked upon to ensure that there are no surprises as to how they can utilize the space.

Similar arrangements can be done, and the terms and conditions of the contract are pivotal to understanding what regime the property was rented – especially if it becomes a litigation case and a judge needs to make a decision based on evidence.

On the next following topics, we hope to clarify the main differences between leases and licenses, and what it means to someone using that property.

The Main Differences Between Lease and License

The issue was first addressed in 1992 when the government of Canada had to clarify the difference between a lease and a license for Commercial Lawyer Calgary use. In Quebec, leases and licenses have to follow a different law code – the civil law principles. In every other province, it follows the common law.

In general terms, in every common law province, a lease gives exclusive rights of possession of the property, and a license would not. It is important to highlight that exclusive possession of a property through a lease is still subject to limitations, such as the intended use of the property.

A license while also allowing the use of a property, comes with more restrictions. A license gives the right to enter the grantor’s property in a certain way, for a certain time, and for a certain purpose. A license does not create any interest in the property – a lease, on the other hand, does confer interest and bind the property owner and the person renting it.

Other differences are more subtle. Someone on a lease can sublet their interests in the property to a third party as long as they take the lease terms and conditions into consideration, and someone under a license cannot. Furthermore, if a property gets sold and you are under a lease, your interests go along with the sale to the next owner. Under a license, the rights of use cease upon the sale of the property.

If a situation escalates to litigation, a judge will overlook the terms and conditions of the contract between the two parties. Even if the contract explicitly says it is a license, if the terms and conditions are more likely a lease, the judge will take this into consideration.

Examples of Lease and License Agreements

As mentioned, leases and licenses are similar in nature and can be tricky to differentiate if you have not been trained to do so. If a situation comes where you need to make sure you are within your rights, having a real estate lawyer with you will be in your best interest. As a trained professional, a lawyer in Calgary can help you navigate those problems in the best way.

Common situations in commercial situations that you identify as a lease is, for example, a store in a shopping mall. They leased the lot to conduct business so they have an interest in that property. If the mall gets sold to another group that will manage it, the store keeps the interest in the lot as the place they conduct business.

A license can be better seen if a company, or a group, that owns a property allows the same land to be used by a third party to conduct an event, for example. If the company sells that property for any reason, and the new owners decide they do not want to allow these events to be hosted there, it is within their rights as the third-party group's rights cease upon the sale of the property.

There are many examples of how to identify a lease from a license, but it will be in your best interest to have any contracts and situations you or your company/group join reviewed by an experienced lawyer.