Lease or License? What’s the Difference and Why Does it Matter

Lease agreements and license agreements have similar objectives – to grant occupancy rights to the recipient usually for a specified time period.  Licensees, however, are distinct from tenants and generally have fewer legal protections.  A recent California appellate court decision captioned Castaic Studios, LLC vs. Wonderland Studios held that an agreement granting use of commercial property was not a lease and therefore not subject to landlord tenant laws.  As such, the landlord was precluded from using the unlawful detainer procedure to oust the occupant from the property. 

Difference Between a Tenant and a Licensee

In California, a tenant is defined as “a person entitled by written or oral agreement, sub-tenancy approved by the landlord, or by sufferance, to occupy a residential dwelling unit to the exclusion of others” (Danger Panda, LLC v. Launiu (2017) 10 Cal.App.5th 502, 513). When an owner rents property to a resident, this typically creates a landlord-tenant relationship, where the landlord agrees to accept rent and in exchange gives the tenant exclusive use and possession of the property. 

A licensee is someone who occupies a property with the owner’s permission but without forming a traditional landlord-tenant relationship. Unlike tenants, licensees do not have exclusive possession of the property.  Instead, the owner typically retains access and control over the premises.  As one commentator put it, if the contract gives exclusive possession of the premises to the tenant against all the world, including the owner, it is a lease; if it merely confers a privilege to occupy the premises under the owner, it is a license.” (6 Miller & Starr, Cal. Real Estate (2d ed. 1989) § 18:5, p. 14.)  In addition, a license to use property is often temporary and revocable. 

The Castaic Studios Decision

A recent appellate court decision illustrates the importance of using clear and explicit language when describing the type of agreement contemplated by the parties. 

In Castaic Studios, LLC vs. Wonderland Studios, 97 Cal.App.5th 209 (2024), Wonderland defaulted under an agreement allowing it to occupy the plaintiff’s real property. The property owner sought to maintain an unlawful detainer action to remove Wonderland from the property.  The appellate court upheld dismissal of the case, holding that the unlawful detainer procedure was unavailable since the parties’ agreement had several characteristics of a licensing arrangement.  The court held further that even though the agreement contained some elements of a lease, its express terms show the parties’ intent to waive any rights afforded by the landlord tenant laws, including a landlord’s remedy of unlawful detainer.

Castaic highlights that if an agreement is clear that it is a license and not a lease, the courts will uphold its plain language.  If the parties’ clearly intend to avoid application of landlord-tenant law, that intent will be enforced. 

Lynx Legal has substantial experience handling commercial evictions from start to finish.  Call us today for a quote at 888-441-2355 or email us at info@lynxlegal.com.  Our experienced professionals are standing by to take your order or answer any questions you may have about the process.