There is always confusion as to whether leases and licences are basically the same thing, but they most certainly are not.
The essential difference between them is that a lease confers on the tenant an interest in the property and usually exclusive possession. A licence, on the other hand, grants only a bare permission to use part or all a property and never gives exclusive possession.
Size does not matter. A small garage can be occupied under lease while a ballroom can be held under licence.
A lease contains various covenants protective of the tenant while a licence affords few protections for the licencee. A licencee can often be asked, for example, to move his premises within a larger store.
A lease usually confers statutory rights on the tenant, for example, the very important right to renew his lease. A licencee does not have such protection and may have to vacate his store on expiry of the licence or sometimes even sooner.
A store owner could have two shops, one held under a lease and the other under a licence. In these circumstances, disputes can arise after several years as to whether a particular premises were in fact held under a lease or licence as both have common features.
The courts will not pay much attention to what the parties say in court proceedings or what label they put on the agreement but will look closely at what the parties intended and what activities they carried out on the ground.
So, if an agreement has all the characteristics of a lease or tenancy, (renewal options, exclusive possession etc.) the court will reject any contention by the parties that what they signed was only a bare licence.
A licence agreement allowing a shop owner exclusive possession of the premises is likely to be held by the court to be a lease and not a licence.
In summary, the main features of a licence usually are:
No interest in the land is granted.
It is often revocable at the behest of licensor.
The licensee does not enjoy exclusive possession.
The rights of the licensee are personal and cannot be assigned.
Property or shop owners who enter into an agreement allowing another party to occupy their premises for certain monthly or other payments, must be clear in advance as to what their relationship really is and would be best advised to retain a solicitor draft up a proper licence agreement. They also need to make sure the activities of the occupier on the ground comply with the terms of the licence and do not accidentally create a lease if that was never intended.