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Paper 1 · Lesson 7 — Leases and Tenancies

Lease vs licence

Lease vs licence: exclusive possession for a term at a rent points to a lease, whatever the label.

2 questionsAnswers & explanations includedFree — no sign-up

Question 1

A property owner offers "a licence, not a lease" over a shop unit, hoping to keep the arrangement personal and revocable. In fact the occupier is given the unit to himself, for a fixed term, at a rent reserved monthly, and no one else may use the space during that time. The owner is adamant that, because the document is headed a licence, the occupier can be turned out whenever the owner pleases.

Consider the following statements.

  1. (i) The decisive test between a lease and a licence is whether exclusive possession is given.
  2. (ii) On these facts the arrangement is likely a lease despite being labelled a licence.
  3. (iii) Calling the document a licence is conclusive, whatever rights it actually confers.
  4. (iv) A lease gives the occupier a proprietary interest that a licence does not.
  1. A. (i), (ii) and (iv)
  2. B. (i), (ii), (iii) and (iv)
  3. C. (i) and (iv)
  4. D. (ii), (iii) and (iv)
Show the answer and full explanation

Answer: A

The rule. The decisive test between a lease and a licence is whether exclusive possession has been granted. A lease gives exclusive possession and a proprietary interest; a licence is a personal permission. The label the parties use does not decide the matter.

Why A is correct. (i), (ii) and (iv) are accurate — the exclusive-possession test, the likelihood that this arrangement is a lease, and the proprietary interest a lease confers. (iii) is false: the "licence" label is not conclusive.

The other options.

  • B adds the false (iii), making the label conclusive.
  • C pairs (i) with the false (iii).
  • D drops the correct (i), the exclusive-possession test.

Exam note. Exclusive possession makes a lease, whatever the document is called. The label does not govern.

The decisive test between a lease and a licence is whether exclusive possession has been granted →

Question 2

A building owner has two occupiers to consider before selling the block. Mr Aziz holds a shop unit under a two-year arrangement, with the unit to himself; Mr Boey is merely allowed to set up a kiosk in a corner of the shared lobby on a personal footing the owner may withdraw when he pleases. The owner wants to know how the two men's positions differ in law.

Consider the following statements.

  1. (i) Mr Aziz's interest can run with the land and be assigned; Mr Boey's permission is personal to him.
  2. (ii) Mr Aziz cannot be turned out at will during his term; Mr Boey generally can be.
  3. (iii) Mr Aziz has exclusive possession of his unit; Mr Boey has no such possession of the lobby.
  4. (iv) The two men stand in the same position in law, only the labels used telling them apart.
  1. A. (ii), (iii) and (iv)
  2. B. (i), (ii), (iii) and (iv)
  3. C. (i) and (iii)
  4. D. (i), (ii) and (iii)
Show the answer and full explanation

Answer: D

The rule. A lease is capable of running with the land and being assigned, is not revocable at will during its term, and confers exclusive possession. A licence is personal, generally revocable, and confers no such possession. The two are not the same, and the label alone does not mark them apart.

Why D is correct. (i), (ii) and (iii) capture the real differences as they play out here — Mr Aziz's interest is assignable and secure for its term with exclusive possession, while Mr Boey's use is personal, revocable and without possession. (iv) is false: the two differ in substance, not merely in name.

The other options.

  • B adds the false (iv), reducing the distinction to a label.
  • C drops the security-of-term point at (ii).
  • A takes the false (iv) and drops the assignability point at (i).

Exam note. Lease: runs with the land, secure for the term, exclusive possession. Licence: personal, revocable, no possession. The difference is real, not nominal.

A licence is personal, generally revocable, and confers no such possession →

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