Licences vs Leases in Commercial Property

Whether an occupation is a lease or a licence matters, because a business lease can carry security of tenure while a licence does not. Landlords sometimes prefer a licence, but you cannot dodge a lease just by calling it one.

The key difference

The classic test is exclusive possession. If the occupier has the right to exclude everyone, including the landlord, from the space for a term at a rent, the arrangement is usually a lease, whatever the document is called. A licence is a personal permission to use space without exclusive possession, for example shared or serviced space where the provider retains control.

Substance over label

Courts look at the substance of the arrangement, not the label. Writing "licence" on a document that in reality grants exclusive possession of defined premises for a term will not stop it being a lease, with the protection that brings. So a landlord cannot reliably avoid the 1954 Act simply by using the word licence.

When a licence genuinely fits

Genuine licences suit flexible, shared or serviced arrangements: co-working desks, short-term pop-ups, or space where the provider moves occupiers around and keeps control. Where you want a fixed, exclusive letting but without security of tenure, the proper route is a contracted-out lease (see contracting out), not a mislabelled licence.

Get it right

Use the right structure for what you actually intend, and take advice. A tenancy at will is another short-term option. Getting this wrong can leave you with a protected tenant you did not expect.

What is the difference between a lease and a licence?

A lease grants exclusive possession for a term at a rent; a licence is a personal permission without exclusive possession. Substance beats the label.

Can I avoid the 1954 Act by calling it a licence?

No. If the arrangement grants exclusive possession it is a lease, whatever it is called. The proper route is a contracted-out lease.