In short
A licence to occupy grants a personal right to use premises without giving the occupier exclusive possession, which is what legally distinguishes it from a lease. Calling an arrangement a 'licence' doesn't make it one — courts look at whether exclusive possession was actually granted, and a mislabelled arrangement can be reclassified as a lease with all the statutory protections and obligations that come with it.
Why the label doesn't decide the outcome
Landlords and licensors often prefer licences because they're easier to terminate and generally sit outside the retail lease regimes, but the difference between a licence and a lease is a question of substance, not the document's title. The key test is exclusive possession — if the occupier has the right to exclude everyone, including the owner, from the space during the term, courts will typically find a lease exists regardless of what the document calls itself. We draft licence arrangements to genuinely preserve the owner's right of access and control, because a licence that in practice hands over exclusive possession is a lease in disguise and exposes the owner to retail lease compliance obligations they didn't plan for.
Where licences are actually the right tool
Licences suit shared or non-exclusive arrangements — a market stall, a pop-up within a larger retail space, a co-working desk, storage in a shared warehouse, or short-term event space — where the owner retains genuine operational control and the occupier's use coexists with the owner's own use or other licensees' use of the same or adjoining space. We test the proposed arrangement against these features before recommending a licence rather than defaulting to it because it sounds simpler to draft or terminate.
What a properly drafted licence needs to cover
Beyond avoiding exclusive possession, a licence needs to clearly document that it's revocable (or terminable on notice), specify the exact scope of permitted use and any shared facilities, deal with the licensor's right of access at will, and address liability and insurance given the licensee typically doesn't have the same control over the space that a tenant would. We also address fee structure (often a licence fee rather than 'rent', which matters for how the arrangement is characterised) and outgoings contribution, since ambiguity here is another factor courts consider when a licence is later challenged.
Consequences of getting the classification wrong
If a licence is reclassified as a lease, the practical consequences can include the occupier gaining rights the licensor never intended to grant — security of tenure arguments, retail lease disclosure and mandatory term obligations, and restrictions on how and when the arrangement can be terminated. For the occupier, discovering their 'licence' is actually a lease can also work in their favour, but only after a dispute, which is an expensive way to find out. We build the licence with the practical features (revocability, non-exclusivity, shared use) that support the classification the parties actually intend, rather than relying on the document's title to do that work.
Termination and holdover
Because licences are personal rights rather than proprietary interests in land, they can generally be terminated on the notice period specified in the licence without the formal process a lease requires, but the notice terms still need to be clearly drafted and consistently followed in practice — a licensor who never actually exercises the stated right of access or control, or who lets an arrangement continue on an exclusive basis for years, weakens their own position if the arrangement is ever challenged.
What the fixed fee covers
- Assessment of whether the arrangement should be a licence or a lease
- Drafting of the licence to occupy, including scope of use and access rights
- Fee, outgoings contribution and insurance clauses
- Termination and revocation provisions
- Advice on the exclusive possession risk specific to your arrangement
Mistakes we see
- Granting exclusive use of a defined space and calling it a licence
- Never actually exercising the licensor's stated right of access, undermining the classification in practice
- Using lease terminology like 'rent' and 'tenant' throughout a document meant to be a licence
- Failing to address liability and insurance because the arrangement is assumed to be low-risk
- Letting a short-term licence run on indefinitely without ever revisiting the arrangement
Who this is for
- Retailers offering pop-up or market stall space
- Co-working and shared workspace operators
- Businesses granting storage or short-term use of part of their premises
- Event and venue operators granting short-term occupation rights
Frequently asked questions
- What's the real difference between a licence and a lease?
- A lease grants exclusive possession of defined premises for a term; a licence grants only a personal right to use space without excluding the owner or others. The label on the document doesn't control this — a court looks at what rights were actually granted in substance.
- Can I convert an existing lease into a licence to avoid retail lease obligations?
- Not just by re-papering it. If the occupier retains exclusive possession in practice, relabelling the document as a licence doesn't change its legal character, and a court can still treat it as a lease if the substance hasn't changed.
- Do licences need to be registered like leases sometimes are?
- No — because a licence doesn't create an interest in land, it isn't registered on title in the way a longer-term lease might be, which is one of the practical advantages of a genuine licence arrangement.
- Can I terminate a licence at any time?
- Only in accordance with whatever notice or revocation terms the licence itself sets out — most licences aren't terminable instantly without notice unless specifically drafted that way, so the termination clause needs to reflect what the parties actually intend.
- Is a licence fee treated differently to rent for tax or accounting purposes?
- It can be, and the characterisation as a licence fee rather than rent is also a factor courts weigh when assessing whether an arrangement is genuinely a licence, so we recommend getting accounting advice alongside the legal drafting.
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