Licences in property law

In many cases, an individual or business needs to occupy a property that they do not otherwise own or have a legal right of occupation in. This permission is called a ‘licence’.

A licence is different to a lease: leases tend to be for relatively long periods of time, whereas the licensee usually needs a short-term occupation of the property. Licences, unlike leases, do not usually create or grant any legal interest in the land for the licensee. Licences operate to allow the licensee to use the property for a specific purpose for a defined period of time.

Once granted, a licence makes it lawful for a property to be used by a person who is not the legal owner – but they will not have the right to have exclusive possession of the property. Without a licence, there is no right to occupy the property.

The grant of licences

A licence may be express or implied. For instance, an everyday-life example of an implied licence arises when a shopkeeper invites customers to enter the premises to do business.

Express licences govern specific situations where permission has been expressly granted to a particular individual, for example, where a property owner invites guests to dinner or to stay in a room on their property. The licence governs only the specified period of the stay, and any re-entry after that period without further permission may constitute trespass.

An individual cannot grant a licence to themselves, nor to themselves jointly with another. It can only be granted by a property owner who is different from the licensee.

The effect of a licence

A licence gives minimal rights to the licensee. Therefore, they usually have no interest in the land and the licence does not create an interest in the land – it simply prevents the licensee from being a trespasser in law. However, the law is still evolving and the courts are moving towards accepting that in some cases, a license does create an interest in land.

Where the licence is contractual (ie. granted under a contract), the licence may specify certain rights given to the licensee. Sometimes, it can be difficult to determine whether a person is a contractual licensee or a lessee. The question can usually be resolved by looking at the substantive terms of the agreement rather than the ‘label’ given to the permission, and the terminology used.

Contractual licences

Where a licence is granted by a contract, the right to occupy is usually described as a contractual licence.

A contractual licence may be revocable or irrevocable in accordance with the terms of the contract between the parties, and their intentions when signing it. If the revocation of a licence is a breach of contract, the licensee may recover damages for the breach. Further, the rights under a contractual licence may or may not be assignable to a third party, depending on the terms of the contract.

Revocation of licences

The law relating to the revocation of licences has been a difficult area in recent years, with the courts interpreting the law in different ways. In general, the licences could be revoked through giving notice of revocation to the licensee allowing them a reasonable time to leave the property. The concept of reasonable time is flexible; however, the period specified should not be seen as oppressive.

There are some exceptions to the rule. For example, if the licence is coupled with a proprietary interest (eg. an interest in the land), then the licensor cannot revoke it. However, if there is no proprietary interest, there may be equitable remedies available to ensure fairness – eg, if the licensor cannot lawfully revoke the licence, they may be able to obtain an injunction against the licensee.

Once the licence has been revoked, if the licensee leaves the property and then re-enters – their re-entry constitutes trespass. This is so even if the revocation of the licence was unlawful.

Irrevocable licences

There are licences which cannot be revoked. A licence may be irrevocable for a number of reasons, including because the terms of the contractual licence make it such. Alternatively, it may not be able to be revoked on the basis of estoppel, eg. the licensee has spent money on improving the property because he was given to understand he would be able to remain in the property for longer.

Effect of a licence on the land

Since a licence does not create a formal interest in land, it is not binding upon a successor in title (eg. a property purchased) unless there is a ‘constructive trust’. Therefore, in principle if the property is sold to another the interest under a licence does not pass with it. A constructive trust may arise where the seller has implied that the property is subject to the licence.