5. What is the difference between a tenancy and a licence?

A tenancy has the legal effect of passing an interest in land from the landlord to the tenant. It means that the tenant is given the right of occupation. If a landlord is in breach of a tenancy document, then the tenant can claim damages (compensation) against the landlord and continue to occupy the property in question.

In contrast, a licence creates no interest in land. The licensor only allows the licensee to use the land, not to exclusively occupy it. The licensee’s remedy against the licensor’s breach of the licence may lie only in claiming damages, but not in occupation of the property. Therefore, a licence is typically used for short-term occupation (e.g. for several weeks or months) or where the licensee does not have exclusive occupation of the property, e.g. a car parking space , a newsstand or a “kiosk” in a shopping mall .

To demonstrate the concept of “interest in land”, it is worth noting that there is no interest in land in the external walls of a building because a wall, being a vertical surface, is not land. Therefore, the owner of the rights and interests in the external walls of a building cannot let the walls to another party, but can only license the rights to use the walls.

It should also be noted that as a licence does not transfer any interest in land, it is not liable to stamp duty. However, it would be futile to label a document as a licence just to avoid stamp duty. Whether a document creates a tenancy or a licence does not depend on the name of the document, but on the factual circumstances evidenced by the document. A major factor in differentiating between a tenancy and a licence is to see whether the user has exclusive occupation or possession of the property. Subject to facts that will vary from case to case, the law generally accepts that a grant of exclusive occupation (the user can occupy the property solely and privately) for a term at periodic payments creates a tenancy.

The above matter involves complex legal arguments. You must consult a lawyer if you have further queries.