In either case the party granting the licence (the party who owns the property) is known as the licensor, and the party being allowed to access the property is the licensee.
A licence agreement is made between two parties who have reached an agreement that one party will allow the other to have access to the property even though the person occupying the property does not own it and there is no formal lease in place.
The two parties involved must agree to the licence and its terms including length of occupancy or access, and any licence fee payable.
Buying and selling property is often a game of ‘hurry up and wait,’ with contract periods of a month or more being the norm.
However, it is not uncommon for people to find themselves in a tight spot when settlement date is looming, for example where the seller can’t move out of the property in time, or the buyer needs early access to the property before settlement.
It is in one of these situations where a licence agreement may be a suitable solution, providing the parties agree.
A lease and a licence agreement have distinct meanings in law., and it is important to know the difference so you can decide whether a lease or licence would be more suitable for your circumstances. Remember to seek legal advice to make sure you make the right decision for your situation and your interests are protected.
A lease agreement is between a tenant and a landlord. It grants the tenant exclusive possession of the property for a given duration in return for rent. A lease agreement also creates a proprietary interest in the property for the tenant, and a lessee’s occupancy rights are not impinged on if the ownership of the property changes hands.
By contrast, in a licence agreement, the licensor grants an occupancy licence to the licensee in exchange for a fee. A license agreement may grant access to the property, but does not guarantee exclusive possession and is typically a short term arrangement. A licence is a personal contractual right and not a proprietary right.
The licence agreement should clearly state the details of the licence and all relevant details. For example, it should include the names of the parties, the specified period of the licence, details of the premises occupied and any licencing fee the two parties have agreed on.
Because a licence agreement is a legal contractual arrangement, it is important that it is prepared by a qualified solicitor.
The party requesting the licence agreement is normally the party who will pay for the licence agreement to be drafted.
Bare in mind though, that the other party’s solicitors will usually review licence agreements, and there may be associated legal fees.
A licence agreement is most commonly used in conveyancing in one of the two following scenarios:
If a licence agreement is drafted well and both parties are aware of their rights and responsibilities, it can be a good solution for Buyers and Sellers who find themselves in one of these situations.
However, there are limitations to what can be achieved with a licence agreement, and it is critical that each party seeks legal advice to ensure it is an appropriate solution for their needs.
The law of property in Victoria is complex. Luckily, the experts are here to help!
If you would like to talk to one of our friendly, experienced conveyancing solicitors about licencing agreements or any other aspects of conveyancing in Victoria, we are waiting to take your call! If you would like an obligation-free quote for conveyancing, head over to our quote form.
The above is not legal advice and is general information only.