The difference between a lease and licence is not always understood. Whereas a lease confers on the lessee an interest in land, a licence is a personal right only, with no interest in land attaching to the licensee.
A licence comprises a permission to enter land and to use it for some stipulated purpose eg to live in it, use it for farming and grazing or to store goods. There are different types of licences. One type of licence is a contractual licence. A licence to enter and occupy land is a contractual licence, if there is a binding contract between the licensor and licensee. Such a licence may be revocable or irrevocable, assignable or merely personal to the licensee, according to what terms have been agreed upon or implied between the parties.
So what distinguishes a lease from a licence? The test to be applied is whether the legal right to exclusive possession in respect to certain land or premises has been conferred on the occupier. A court will ascertain what the intention of the parties entering into the transaction is. The court will therefore look at the terms of the agreement between the parties to judge whether it is intended to confer exclusive possession on the occupier and therefore determine whether a lease or licence has been created. Some important circumstances in resolving this issue include the degree of control over the premises retained by the owner, including the owner’s failure to exercise that control, the nature and frequency of cleaning and other duties performed by the owner, supplying linen, providing occupants with
meals, sharing amenities, whether it is a family arrangement and if there is no rent or
It is sometimes important to determine whether the arrangement between an owner and an occupier is one of licensor and licensee or landlord and tenant. Different legal rights can flow depending on what the correct relationship is in law.