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  • Writer's pictureJim Calvo

License Disguised As A Lease

Landlords that wish to maintain a particularly high level of control over space in their building will sometimes fashion the agreements to rent space in their property as a license instead of a lease. The difference between the two, including the rights and obligations between the parties is significant.

A lease is generally an agreement between a landlord and tenant where the landlord agrees to turn over exclusive possession of the space to the tenant for a certain period of time. A tenant's right to possession gives the tenant significant control over the space – subject only to any other terms of the lease. Moreover, a tenant that is removed from or locked out of the space by a landlord could bring any number of claims against the landlord, including wrongful eviction, trespass or breach of contract.

A license, on the other hand, is merely permission from the owner to the licensee to occupy the space. As a general matter, a license is freely revocable and provides little to no protection to the licensee from the licensor. The licensor can often remove the licensee at any time and for any reason, even if the licensee has complied with all the terms of the agreement.

The owners of a medical office building in our city recently used licenses to their advantage when they tore down and redeveloped a previously occupied office building. Knowing a few years in advance of their redevelopment plans, the owners signed license agreements rather than leases to allow for eassier and quicker termination of the users rights to occupy the building just prior to starting their redevelopment project.

When a dispute arises, Illinois courts will look to the terms of the agreement to determine whether the agreement is a lease or license. The document label is insignificant. If you need assistance determining whether your agreement is a lease or license, call our office today.

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