What is the difference between a lease and a licence?
Did you know that the average person is at work for 30% of their lifetime? The environment we work in affects how we feel, how productive we are and how we engage with colleagues. For business owners, the space their staff work in is also key to success. This means that having the right knowledge to call on when choosing office space is essential.One thing to get to grips with is the difference between a lease and a licence. Finding out more about this will help you make the right choice for your business. But how does each differ from the other?
Licensing and leases – what do they mean?
One way to hire office space is to enter into a licence agreement. This enables your business to use the space for a certain amount of time (this could be from 1 month to 1 year). Licence agreements are usually shorter-term and flexible, which is a bonus for many companies. Licences are also quick to set-up, so you can move into the space faster. You will normally find licence agreements applied in serviced offices or when you rent desks in someone else’s space.A lease on the other hand sees you signing up for a set term with exclusive use for your business. Lease agreements are tough to get out of once entered into which must be considered before agreeing to one. Many companies will ask for a break clause to get around this.
How do they differ?
As the above shows, leases and licences work in different ways. But what are the key differences to consider?
– licences are more flexible with short notice terms, leases are more rigid
– licences are good short-term options, leases are a better long term choice
– leases need specialist legal advice to sign, licences do not
– licences usually come as an all-inclusive deal, leases can incur significant extra costs (i.e. setting up)
– licences give you great co-working/collaboration opportunities, leases are usually exclusive to one business
– licences can be quicker to move into (2 or 3 weeks) while leases can take longer (up to 12 months)
– leases allow tenants to customise the space, licences do not normally agree to this
Leases and licences – choose the right one for your business
It really is key to select the right option when finding any new office space. As shown above, the major differences between leases and licences are timescale, cost and flexibility. In short, licences can be better for businesses who need to move fast, want transparent costs and may only be there for a little while. Leases on the other hand are ideal if you plan to stay there for the long term, are in no rush to relocate, value being able to customise the space and also desire exclusive occupation.