|FROM:||The Legal Taxi|
|RE:||License v/s Lease of Residential Premises|
License v/s Lease of Residential Premises
Elements and/or factors that distinguish a license of residential premises, as opposed to lease one.
Stella had an individual, who entered an agreement to lease a furnished apartment for 150 days, paying the entire rent money in advance (full paid), $11,500, per the agreement. She wound up moving out just two days later, after she discovered mice in the apartment, and after the landlord verbally agreed to let her out of the lease.
I would like the memo that explains the difference between what constitutes a "license" versus a "lease" of residential premises. The agreement at issue in this case, claims to be an apartment "lease" but it probably only a "license" (for example, a hotel guest has a license to stay in the hotel until such time as the hotel revokes the license; the guest does not have a "lease" to stay - in other words the rights of a tenant through a landlord-tenant relationship are not created vis. a vis. the hotel and its guest).
Originating Jurisdiction Only
Relevant Statute and Cases
Elements and/or factors that distinguish a license of residential premises, as opposed to lease one.
- 1. Agreement to lease a furnished apartment for 150 days.
- 2. Entire rent money in advance (full paid) $11,500.
Difference between "license" and "lease" of residential premises.
A lease is a contract between a landlord and a tenant, which contains the terms and conditions of the rental. It cannot be changed while it is in effect unless both parties agree. Leases for apartments which are not rent stabilized may be oral or written. However, to avoid disputes, the parties may wish to enter into a written agreement. A party must sign the lease, in order to be bound by its terms. An oral lease for more than one year cannot be legally enforced. General Obligations Law § 5-701.
At a minimum, leases should identify the premises; specify the names and addresses of the parties, the amount and due dates of the rent, the duration of the rental, the conditions of occupancy, and the rights and obligations of both parties. Except, where the law provides otherwise, a landlord may rent on such terms and conditions as are agreed to by the parties.
As explained in Friedman on Leases,
- The distinction between a lease and a license is that: A lease is a conveyance of exclusive possession of specific property… usually in consideration of the payment of rent, which vests an estate in the grantee, [while] a license, on the other hand, merely makes permissible acts on the land of another that would otherwise lack permission. A license is said to be revocable at the will of the licensor, [and] creates no estate.
License as defined in Walsh, Law of Property [2d ed.], § 150; Kaypar Corp. v. Fosterport Realty Corp., 1 Misc.2d 469, affd. 272 App. Div. 878 -
- “A license has been defined as a mere privilege or permission given by the owner of land authorizing another to enter and use or occupy the land or part thereof for any special purpose.”
In Miriam Miller, v. City of New York1 , was decided by Court of Appeals of New York, on December 3, 1964, court discussed:
- The city’s Park Commissioner made an agreement with a private business corporation granting the latter the right to construct on a 30-acre site in a public park, a golf-driving range with accessory buildings including a parking lot, shops, etc., and to operate the enterprise on a percentage rental basis for 20 years with certain termination rights reserved to the New York City Park Commissioner. The taxpayers were awarded summary judgment and the trial court enjoined the construction work because the agreement was a lease of park property and beyond the Commissioner's powers. On appeal the court affirmed, holding that although the contract spoke of a "license" and avoided use of the word "lease", it contained many provisions typical of a lease and conferred rights well beyond those of a licensee or holder of a mere temporary privilege. These included, in part: exclusive use of a specifically bounded 30-acre area, a 20-year term, rental fixed at a percentage of gross receipts, construction and repair by grantee at its own cost of extensive buildings, a large parking lot, fences, flood-lighting, etc. The city's termination rights were merely those common in ordinary commercial leases.
A document calling itself a 'license' is still a lease if it grants not merely a revocable right to be exercised over the grantor's land without possessing any interest therein but the exclusive right to use and occupy that land.
- Further it was held that, the difference between a license and a lease is plain enough although in borderline cases sometimes difficult to apply.
In Schloss v. Sachs2 , was decided by State Of Ohio, Hamilton Municipal Court, on November 30, 1993.
The lessee claimed that the lessor breached its oral agreement to rent and pay half the construction costs of a kiosk at a mall. She claimed that the agreement was a license, not a lease, and, therefore, not governed by the statute of frauds, which required leases to be in writing. The court dismissed the suit for failure to state a claim because the agreement was a lease and unenforceable under the statute of frauds. The lessee would have had exclusive possession and control of the area within the kiosk, and the use of the property was not incidental to the main purpose of the alleged license. Therefore, the agreement was a conveyance of a possessory interest in real property and unenforceable under the statute of frauds. The lessee's preparation to perform was not partial performance, and promissory estoppel could not defeat the statute of frauds in a real estate context.
1. 15 N.Y.2d 34; 203 N.E.2d 478; 255 N.Y.S.2d 78; 1964 N.Y. LEXIS 783
2. 63 Ohio Misc. 2d 457; 631 N.E.2d 212; 1993 Ohio Misc. LEXIS 76
“The key fact in determining whether an agreement constitutes a license or a lease is whether the lessee/licensee has exclusive possession and the power to exclude the lessor/licensor from a specific area. If the lessee/licensee has the right of exclusive possession irrespective of how much control the lessor/licensor has over the lessee/licensee or the operation of its business, then the agreement constitutes a lease since a possessory interest in real estate has been conveyed. This is true even if the lessor/licensor has the power to change the specific area of exclusive possession over the lessee/licensee.”
In Young park, v. Automotive realty corporation et. al. 3 , was decided by United States District Court For The Southern District Of New York, on January 29, 1998.
- Plaintiff, a lessee, filed an action against defendants, a lessor, former lessee, sub-lessee, and others, which alleged unlawful eviction and unlawful conversion of merchandise and fixtures from a retail booth. The lessor sought summary judgment on the grounds that the lessee had only a license, rather than a lease, and therefore, could not have been wrongfully evicted.
The lessee subleased the booth from the sub-lessee, who subleased the entire building from the former lessee. The agreement between the lessee and the sub-lessee was titled a license. However, the agreement provided that the lessee had exclusive possession and control over the booth. In addition, when the lessee took possession of the booth, she acknowledged that she examined and inspected the booth, was fully familiar with its condition, and took possession of it in "as is" condition. The lessee also agreed to install fixtures at her own cost in order to make the booth suitable for her business. Thus, the agreement conveyed exclusive possession and control over the booth to the lessee to the exclusion of others. The limitations on use and the restrictions imposed on the operation of the business did not affect the existence of a lease. Additionally, the agreement, unlike a license, was assignable. Here, the agreement provided that the lessee could assign with permission of the sub-lessee and permission could not be unreasonably withheld. Finally, unlike a license, the agreement was not terminable at will by the sub-lessee. Accordingly, the agreement was a lease, not a license.
- Court Held that:
Although the language of an agreement may be indicative of the parties' intent, it is not conclusive as to whether an agreement is a lease or a license. A court must go beyond whether the contract calls itself a license or a lease and look to the manifest intent of the parties as gleaned from the entire contents of the instrument.
3. 1998 U.S. Dist. LEXIS 857
- Licenses are cancelable at will, and without cause. Leases, on the other hand, are created where one party's interest in another's real property exists for a fixed term, not revocable at will, and terminable only on notice.
- An agreement is generally a license when the place or space is most easily described in terms of the licensee's use.
- The nature of the transfer of absolute control and possession is what differentiates a lease from a license or any other arrangement dealing with property rights. A license in the real property context connotes use or occupancy of the grantor's premises, where as a lease grants exclusive possession of designated space to a tenant, subject to the rights specifically reserved by the lessor. Licenses are cancelable at will, and without cause. Leases, on the other hand, are created where one party's interest in another's real property exists for a fixed term, not revocable at will, and terminable only on notice. A document calling itself a license is still a lease if it grants not merely a revocable right to be exercised over the grantor's land without possessing any interest therein but the exclusive right to use and occupy that land.”
Dime Laundry Service, Inc. v. 230 Apartments Corp4 , was decided by Supreme Court of New York, Special Term, New York County, on May 4, 1983.
A laundry service brought an action for declaratory judgment relating to a contract for the lease of laundry equipment in a building basement. The laundry service contended the agreement was in effect because, not having received notice to the contrary, the agreement was renewed for an additional three years period pursuant to an automatic renewal clause in the agreement. The court rejected this contention, finding that despite the "exclusive use" language of the agreement, there was no evidence of sole and exclusive dominion by the laundry service over the area where its machines were installed. The court noted that indicia of exclusivity, such as control over the patrons of the laundry services, control of the keys, or exclusion of other vending machines or services, were lacking. In light of the foregoing, the court held that what was called a standard form of coin-metered laundry equipment lease was a contract for services to personal property as contemplated in N.Y. Gen. Oblig. Law § 5-903. Because the notice required by the statute was not given, the court found the "lease" expired at the end of its original term and was no longer in effect.
“The court holds that what is called a standard form of coin-metered laundry equipment lease is a contract for services to personal property as contemplated in section 5-903 of the General Obligations Law. Since notice required by the statute was not given, the "lease" expired at the end of its original term and is no longer in effect.
4. 120 Misc. 2d 399; 466 N.Y.S.2d 117; 1983 N.Y. Misc. LEXIS 3726
- Had the court not held the General Obligations Law controlling, its finding that the agreement was not a lease but a license only would have compelled the same result. A license is a personal, revocable and non assignable privilege.”
- 1. Feder v. Caliguira 5 , was decided by Supreme Court Of New York, Appellate Division, Second Department, on December 31, 1959.
The machine owner brought a lawsuit against the premise owner to recover damages for breach of a contract to install and maintain a coin-operated phonograph on the premises. The municipal court granted the machine owner's cross motion for summary judgment striking out the premise owner's answer and denied the premise owner's motion for summary judgment dismissing the complaint. The appellate court reversed both orders. On appeal, the court held that no appeal was viable from the judgment pursuant to N.Y. Civ. Prac. Act § 623. The court found that the agreement was not a lease of personal property within the description or contemplation of N.Y. Gen. Bus. Law § 399, and did not impose a continuing financial burden upon the businessman. The court observed that there was no binding statement to the contrary and concluded that triable issues were presented, particularly as to whether the whole agreement between the parties included the payment of a bonus for each renewal term and as to the effect of the oral modification of the agreement during the first term.
"It is the transfer of absolute control and possession of property at an agreed rental which differentiates a lease from other arrangements dealing with property rights."
- 2. American Jewish Theatre, Inc. v Roundabout Theatre Co., Inc. 6 , was decided by Supreme Court Of New York, Appellate Division, First Department, on April 21, 1994.
The theatre company entered into an agreement with the owners for the use of the premises for a six-month period, which was extended pursuant to an option to renew. The agreement contained a broad arbitration clause for the resolution of all disputes. The owners argued that the agreement was a license and revocable at will. The theatre company countered that the agreement was a leasehold entitling it to protection from summary eviction. On appeal, the court concluded that the trial court correctly recognized, at least prima facie, a leasehold relationship between the parties. The court explained that where one party's interest in another's real property existed for a fixed term, not revocable at will, and terminable only on notice, a landlord-tenant relationship was created. Because arbitration was the designated avenue for dispute resolution, the questions of liability and damages for breach of the agreement were to be determined in that forum. The court, however, concluded that there was no necessity for injunctive relief beyond the date beyond which the interest in the property could not extend.
“The difference between a license and a lease is that a lease conveys to the lessee absolute possession and control of the premises for a specific term and rent, subject to the lessor's rights, whereas a licensee does not obtain exclusive possession, and its right to possession is revocable at will and without cause. Parties' characterization of an agreement is not dispositive.”
A lease is a contract between a landlord and tenant which contains the terms and conditions of rental. The vast majority of leases are written, although oral rental agreements are common. Whereas the license agreements permit property owners to eliminate the landlord-tenant relationship entirely and thus avoid those burdens often experienced in the legal framework of traditional landlord-tenant proceedings. Also the license agreement provides for non exclusive use of premises, which can be revoked at the option of licensor.
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