Recognizing the Difference between a Lease and a License in Connecticut
Hinckley Allen Retail Newsletter
February 27, 2014
By: Noble F. Allen
Although the terms are often used interchangeably, a lease and a license are distinctly different under Connecticut law. In its simplest form, a lease is a contract that conveys an exclusive possessory leasehold interest in property; whereas, a license is a mere privilege to act on another’s property and does not confer or produce a possessory interest in the property. A license is generally revocable at any time by the licensor, hence the term “revocable license” is sometimes used. The ultimate distinguishing characteristic of a lease is that the landlord or lessor surrenders exclusive possession of the premises to the tenant or lessee for a specific term or period.
By its definition, a license does not “run with the land” and therefore will not bind a subsequent purchaser. It is intended to be exercised only in the specific manner for which consent was given. To that end, a license cannot be assigned because as a matter of law, the privilege does not extend beyond the initial licensee. As a result, a property owner who acquires a property – through an assignment of lease in connection with a sale – is not bound to recognize or assume a license agreement that may have existed prior to its ownership.
Nonetheless, there is the following caveat: A license agreement that smells, feels, or tastes like a lease will be construed as a lease. Conversely, a document titled “lease agreement” but containing all the characteristics and attributes of a license agreement will be construed as a license under Connecticut law. Courts have consistently held that just because the agreement is captioned as a “lease” or a “license” will not necessarily make it so. Thus, Connecticut courts will focus on the character of the agreement itself and the intent of the parties, rather than the phraseology or nomenclature contained in the document, to determine whether a possessory interest (to the exclusion of the owner) was intended to be conveyed when the parties entered into the agreement in the first instance.
The following are some past Connecticut court decisions that should offer some guidance on this issue: a parking privilege was construed as a license and not a lease; an agreement to erect and service signage on the roof of a building was determined to be a license and not a lease; a space in the rear for a store was considered a lease rather than a license; a kiosk in a mall was construed as a license and not a lease – within the context of an eviction proceeding; a contract to install, operate, and maintain communication antennae on towers was determined to be a license; and an agreement to install video game vending machines contained attributes of both a lease and a license when that issue was presented to the court for summary judgment purposes.
As the examples above demonstrate, there is not always a bright-line test. Ultimately, the character of the agreement and the intent of the parties in totality will carry the day.
Consequently, in situations where the owner is contemplating whether to terminate a revocable license and remove a licensee from the premises without judicial process, caution must be exercised before opting for that approach, lest an owner be confronted with an unlawful detainer or a lockout complaint. Before proceeding, one should assess the following: regardless of what the agreement is titled, does it contain the necessary characteristics to enable a Connecticut court to construe the parties’ intended relationship as merely licensor/licensee rather than landlord/tenant?