A comprehensive guide: Distinction between a lease and a licence

General Principles

The general rule under Cyprus law is that an agreement to grant exclusive possession for a term at a rent, is a tenancy and the Cypriot Courts will ignore any shams or pretences aimed at misleading the Court. This general rule is subject to certain exceptions, for example a lack of intention to create legal relations or allowing into occupation pending the grant of a lease.

While payment of rent is not an essential component of a lease, exclusive possession is essential. There seems to have been a greater readiness by the Courts to find that exclusive possession was not granted in commercial property cases than in residential cases.

One factor in determining exclusive possession is the degree of control exercised over the property by the owner. For example the Cypriot Courts will be reluctant to held that exclusive possession of a commercial property has been granted if the landlord had retained extensive rights to control the operation and layout of the property, going beyond usual rights of access.

The court will look at the agreement as a whole, and in construing any agreement, the terminology used by the parties is not decisive. A lease cannot be turned into a licence simply by labelling it as such.

Distinction between a lease and a licence

Under Cyprus law, there is a legal distinction between a lease and a licence for an immovable property. The main differences between these two concepts are outlined below:

Lease:

1. Nature: A lease is a contract granting exclusive possession and use of a property to a tenant, for a specified period of time.
2. Legal Status: A lease is considered a proprietary right and creates a landlord-tenant relationship.
3. Exclusive Possession: The tenant has the exclusive right to possess and enjoy the property during the lease term, subject to the terms and conditions of the lease agreement.
4. Duration: A lease typically has a fixed term, and the tenant enjoys security of tenure during that period.
5. Compensation: The tenant pays rent to the landlord as consideration for the right to use the property.
6. Transferability: A lease is generally transferable to a third party with the landlord’s consent, subject to any provisions in the lease agreement or applicable laws.

Licence:

1. Nature: A license is a personal permission or privilege granted by the owner of the property to another person, allowing them to use the property for a specific purpose.
2. Legal Status: A license does not create a proprietary right and does not establish a landlord-tenant relationship.
3. Revocability: Unlike a lease, a licence can be revoked or terminated by the licensor at any time, unless there is an agreement specifying otherwise.
4. Non-exclusive Use: A licensee does not have exclusive possession of the property and may share it with others, subject to any restrictions set forth in the license agreement.
5. Purpose-specific: A license is typically granted for a specific purpose or activity, such as accessing a particular area or using certain facilities.
6. Consideration: While licenses may involve payment of fees or charges, they are generally not characterized by regular rental payments as in a lease.
7. Non-transferability: A license is personal to the licensee and generally cannot be transferred or assigned to a third party without the licensor’s consent.

It is important to note that the specific terms and conditions of a lease or a license may vary depending on the agreement between the parties and any applicable laws or regulations. It is advisable to seek legal advice or consult the relevant statutes in Cyprus for a comprehensive understanding of the rights and obligations associated with leases and licenses of immovable properties.

We are delighted to announce that our law firm has been appointed as the legal advisors of a well established hospital in Cyprus in relation to immovable property matters. This appointment signifies the trust and confidence placed in our firm’s expertise and experience in handling complex legal issues within the industry.

As legal advisors, our role will be to provide comprehensive guidance and support regarding various immovable property matters. Our objective is to help foster an environment of transparency and security within the company, ensuring compliance with relevant laws and regulations of Cyprus National Health System.