Lease vs. License: Short-Term Property Use, Access and Exclusive Control, Termination, Remedies

Description

Landlord attorneys have either overlooked or been too cautious to suggest the use of license agreements to their clients. Currently, real estate license agreements are utilized primarily by owners of properties licensed to short-term users: office space, laundry facilities, certain types of storage spaces, and kiosks in shopping malls. More firms are now adopting a "hybrid" model where employees divide their time between working remotely and working in the office. This greater demand for part-time office space may result in an increased use of license agreements. Whether there is a market for real estate license agreements for other types of occupancy is not as apparent but given the landlords' need to be relieved of the frustrations of traditional landlord-tenant litigation, such an agreement may be useful for the right business plan.

A major benefit of the owner-licensor's rights in a license relationship is the right to revoke the license "at will" and to use "self-help" to remove a defaulting licensee from the licensed premises without having to endure months or years of lengthy and frustrating litigation to regain possession of valuable real estate.

In contrast to the hostility of courts to allow traditional landlord's use of self-help, under a bona fide license agreement, the tenant-licensee owns no estate in the premises and has no right to possession. Common law principles apply and the owner-licensor has the absolute right to use peaceable self-help at any time to remove a licensee from the licensed premises for any or no reason.

From the tenant's perspective, there are occasions when a lease would be preferred to the flexibility, but lack of security, of a license. Tenants seeking REIT qualified assets will negotiate for a lease. Though some tenants will enter into license agreements, the tenant will want to review termination rights in any written agreement to clarify how a licensor can exercise such rights.

Listen as our expert panel discusses the use of license agreements, the terms that must be part of such an agreement, and how termination and remedies are addressed. The panel will address best practices for advising clients on the best options when considering a license versus a traditional lease.