Agreements: The Lease Agreement vs. The License Agreement

Although on the surface an Agreement to Lease Space or a License to Use Space may appear similar, the rights embedded in the documents are inherently different.

In the absence of a document setting out the parties’ intentions, if the relationship deteriorates it can be difficult to determine whether the agreement constitutes a lease or a license.

From either party’s perspective, License Agreements are generally personal and specific to both the current operator and property owner. By legal definition, a lease is a bundle of rights given from the Landlord to the Tenant, which are embedded in the land. In comparison, a license merely conveys a privilege to use the property, making this act lawful.

Here are three key differences that are worth noting before entering into an Agreement to Lease Space or a License to Use Space:

Transferability

When ownership of leased land is transferred, it remains subject to the rights granted in the leases tied to the property. The new owners cannot evict a tenant, increase the rent, or impose other financial obligations outside the scope of the governing document.

Comparatively, a License constitutes permission from an owner to use all or a portion of the owner’s property. A License does not create any estate or interest in the property to which it relates, and therefore there is no ability to register a License Agreement against title to land.

Term

 Generally speaking, License Agreements are made for significantly shorter periods – usually monthly, or perhaps a year-long term.

Leases are typically made for periods of no less than one year and can last for periods in excess of 25 years when renewal options are considered.

Value

In the case of a License, since there is no ability to transfer the rights to the space, there is little to no value in the document itself and therefore subordination rights aren’t even a consideration. Basically – everyone else’s rights to the land supersede those of a Licensee.

In more official terms published by the Canadian Court of Appeal,

“An agreement which confers exclusive possession of the premises as against all the world, including the owner, is a lease, while if it merely confers a privilege to occupy under the owner, it is a license…the general concept of a license is that it is a mere permission to occupy the land of another for some particular purpose.”

Whether you are a land owner or potential lessee, it pays to be educated when it comes to a legal document of such high importance as a Lease Agreement or License to Use.

Before signing on the dotted line, carefully consider the following implications:

  1. Unlike with a Lease, it is impossible to transfer interest in a pure license agreement.
    2. Unlike a Lease, a License can easily be revoked, leaving you compromised.
    3. A Lease grants the Tenant the exclusiveright to use a property, while a License grants the Licensee a non-exclusiveright to use the property as its legal ownership remains with the original licensor.

Happy renting!

** Jensen Consulting is not a law firm and is not in any way providing any form of legal or professional advice and the information provided on this website is for general information purposes only. Your use of, the site does not create a service provider-client relationship and the posts provided in the Site are not intended, nor should be considered, as any form of legal advice. Consulting services provided by Jensen Consulting are not professional advice or an opinion relating to law of any kind. You are advised to seek legal advice by contacting a lawyer in relation to your specific legal issues.

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Katherine Jensen
Katherine has spent over a decade immersed in the world of Real Estate and Corporate legal administration. After graduation in 2006 Katherine took a role in a small law firm, drafting real estate documents from scratch and assisting with estate administration. From there grew to a clerk role in a larger law firm and then transitioned to an in-house role with a commercial developer in Saskatchewan. Working for a development and property management firm gave Katherine experience working with complex corporate structure and drafting intricate lease contracts for a variety of properties and tenancies including both office and retail. Moving back to Ontario, Katherine took a role analyzing leases for major landlords and tenants across Canada, offering solutions to maximize profits in their portfolios. Currently Katherine owns Jensen Consulting, and offers her expertise as a consultant to help landlords and tenants across Canada with drafting and auditing their Commercial Leases.

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