Lease or Licence?

Practices allowing associated health professionals to use space within their premises must be careful not to unwittingly grant a lease as opposed to a licence to occupy space.

When it comes to commercial law there is no subject quite as abstruse as how a lease and a licence differ. It is essential to distinguish whether an occupier has a lease or merely a contractual licence. Licences do not usually bind third parties and do not benefit from the security of tenure provisions in Part 2 of the Landlord & Tenant Act 1954.

Over the years there have been numerous cases surrounding the subject, including a House of Lords judgement: Street v Mountford 1985. In the House of Lords judgement, the single most important fact surrounding the case was whether or not exclusive possession had been granted.

It is worth pointing out that there are other factors that may muddy the waters, such as whether or not there is a fixed term in place and whether a rent is being received. However, in the court’s eye, the single most determining factor comes down to whether or not exclusive possession has been granted; the rest is secondary.

Exclusivity according to the Collins dictionary is, “belonging to a particular individual or group and to no other; not shared”. Essentially, it is a right of a tenant to exclude all other people, including the landlord and their agents from the property, in particular a tenant can exclude the landlord from entering the leased land or building.

Once exclusive possession has been granted, a lease is in place. If the occupier has no right to exclusive possession of the premises then his right to use the premises cannot amount to a lease, but may be some lesser right, such as a licence. If a landlord is to grant a licence, it is essential that the occupier has not been granted exclusive possession to the land. How the landlord avoids this scenario is another matter.

I was recently asked by a Practice Manager how the practice should approach allowing medical visitors such as physiotherapists or dieticians to occupy some medical space within the premises on a weekly basis, possibly for evening classes or for appointments. This is an excellent practical example of how without seeking professional advice a Practice Manager could unwittingly grant a lease as opposed to a licence to occupy, which could lead to serious problems further down the line.

Should you have any further queries please do not hesitate to contact me on 01604 799010.

About Robert

Robert has a master’s degree in Property, Investment and Development from the University of Ulster. Having joined Neil Mason Associates as a graduate surveyor in December 2011, he is currently training for his APC, specialising in property management, lease consultancy and valuation. In his spare time Robert enjoys taking part in a variety of outdoor sporting activities as well as adding to his every growing DVD box set collection.

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