This article discusses the possessory differences between a landlord/tenant relationship, an easement and a license to use land.

Personal right to use property

A license, as well as an easement and a lease, is a right to use another’s property. A license is similar to an easement or a lease, yet it is neither.

Like an easement or a lease, a license is an agreement. Instead of being reduced to a writing, it is usually oral. Unlike an easement, a license does not have a perpetual life, nor does it have a specific expiration date, as does a lease.

As with an easement, the property burdened with the license is referred to as the servient tenement. However, unlike an easement, which benefits another parcel of real estate called the dominant tenement, and is an appurtenant right transferred on conveyance of the parcel, a license does not have a dominant tenement. A license is not appurtenant to any property, since it is a personal right, not a property right.

Thus, unlike an easement or a lease, a license is a personal privilege held by an individual and cannot be transferred to another individual.

The holder of a license, called a licensee,  usually does not pay rent for the right to use another person’s property. If consideration exists, it typically is in the form of an expenditure of time and money by the licensee to improve or maintain the use authorized on the burdened property by the license agreement.

There being no right to possession, a license, like an easement and unlike a lease, permits only the nonexclusive  use of the property by the licensee.

Unlike either an easement deed or a lease agreement, which are conveyances of an interest in real estate, a license agreement does not create or convey an interest in real estate. The right to use granted by a license is a mere personal privilege. It is held by an individual under an agreement with the owner of the burdened property.

A license is revocable by the owner of the burdened property at any time, unless revocation would be unfair to the licensee.

Typically, a license agreement arises between a property owner and a neighbor or friend by way of an acceptance by the owner of an informal offer to jointly or separately use a property for an activity. Often, the individual given the license agrees to maintain or improve the property for the agreed-to use.

Use as a personal privilege

Consider a broker who wants to increase his business by billboard advertising.

The broker knows a property owner who owns vacant property adjacent to a freeway. The property owner is willing to allow the broker to place a billboard on the land.

The broker determines local sign ordinances allow the billboard advertising he desires.

The broker and property owner enter into an oral understanding that allows the broker to put up a billboard. The broker may enter and exit the property to install and maintain the billboard.

A time limitation is not specified for keeping the billboard on the property, nor is any fee or other compensation established. However, the property owner does not relinquish any control over the real estate or give the broker any other right to use the property.

Have the broker and property owner established an easement or a landlord/tenant relationship?

Neither! The broker has only been given a license  to use the property.

A license to use

A license is the nonexclusive right to use a space or area within a parcel of real estate or its improvements. It is held by an individual under an agreement without the right to assign or the right to privacy. A license is subject to termination at will, unless it has become irrevocable, until the use is no longer needed by the licensee.

Consider an owner who contracts for development work to be done on his property.

The owner agrees to allow the construction company to store excess dirt on vacant lots he owns until they can haul it away.

While the dirt remains on the vacant lots, an adventurous biker endeavors to tackle the mounds and is injured. The injured biker claims the construction company, having deposited the dirt on the real estate, is liable for his injuries.

However, the construction company claims it holds a license to use the property and is exempt from liability for injuries incurred by others arising out of the recreational use  of private property.

The construction company is not liable for injuries which occur during the biker’s recreational use of the property.

Here, the licensee has a nonpossessory interest and the owner remains in possession and control of the property. However, the licensee (construction company) has recreational-user immunity since the property interest it holds exempts it from liability arising out of the recreational use of private property. The property interest which exempts a licensee from liability can be either possessory or nonpossessory. [Calif. Civil Code §846]

License vs. lease

An owner under a lease or rental agreement conveys a possessory interest in real estate which allows the tenant to exclusively occupy the leased premises in exchange for rent, called a leasehold estate. [CC §761]

A license to use another person’s real estate is a personal privilege held by an individual. A license is not an interest in personal or real property owned by another person. Thus, a license is not appurtenant to adjoining real estate. Further, a license cannot be transferred to the licensee’s successors or assignees of any real estate owned and sold by the licensee. [Beckett v. City of Paris Dry Goods Co. (1939) 14 C2d 633]

Terms which characterize and distinguish a license from a lease include:

  • no writing to formalize the agreement;
  • no rental payments;
  • no specific location on or within the property where the use will occur;
  • no intent to convey a leasehold estate;
  • no right to exclude others;
  • no termination date; and
  • the right to terminate the license at the owner’s will.

In our billboard example, the broker can use the property to set up the billboard and leave it there. Also, the broker (or his representative) has the right to go back and forth across the property to maintain or repair the billboard.

The owner can demand the removal of the broker’s billboard from the property at any time, and the broker must immediately remove it.

A common thread which runs through a license, easement and lease is the right to use another’s property. The glaring distinction between them is the lease includes the right to exclude any other person from possession.

The broker cannot fence off, lock out or quarantine in any way the ground under or around his billboard from the owner or any other person. The broker has no more right to be on the property than anyone else the owner might allow to concurrently use the property.

License distinguished from a lease

When a person enters into an agreement with an owner of real estate which grants him the exclusive right to possession of the property against all others, including the owner, the agreement is a lease or periodic rental agreement. A leasehold estate has been created, not a license.

Conversely, when the agreement confers to an individual the privilege to use property which remains under the owner’s day-to-day control, it is a license. [Von Goerlitz v. Turner (1944) 65 CA2d 425]

For example, an owner of a packing company enters into an agreement with a wholesale merchant to purchase raw materials over a three-year period.

In exchange, the packing company will pay the agreed-to price for the materials and allow the wholesale merchant to use a storage unit for temporary stockpiling, as well as an office in the packing facility to conduct business. No dollar rental amount is established for use of the space.

The agreement does not designate the exact spaces to be used by the merchant. Also, the packing company will concurrently use the same spaces, which will remain unlocked.

Two years into the arrangement, the packing company is sold. The new owner demands the wholesale merchant move out immediately.

The wholesale merchant claims a lease existed between himself and the previous owner.

Here, the wholesale merchant holds a license to use the property under which the packing company has a superior possessory right to the premises. Thus, the wholesale merchant’s concurrent use of unlocked space with others is not a lease.

The mere permission of an owner to let someone use and occupy unidentified space in a structure without payment of rent, when the owner retains possession and total control over the premises, is a license. [Caldwell v. Gem Packing Co. (1942) 52 CA2d 80]

Terms implying lease

Even if the stated intention of an owner and a user is to enter into a license, the terms and provisions of the “license” agreement may make it a lease.

For example, an optometrist enters into a written agreement with an operator of a store to establish an optical department within the store. The written agreement is entitled a license.

The agreement allows the store to determine the space the optometrist will occupy, sets the rent at a percentage of the optometrist’s total sales and requires him to make nightly deposits of receipts with the store’s cashier.

Also, the optometrist has the exclusive right to operate and secure his equipment and materials in the assigned space. The optometrist is prohibited from transferring his business and the occupancy to another without the store’s prior consent.

The agreement is for a term of three years, at which time the optometrist is to surrender the premises in good condition.

Two years later, the store hands the optometrist a notice of cancellation of their agreement for his failure to deposit his daily cash receipts with the store cashier (rather than a 3-day notice to perform or quit).

The store contends the agreement is a license, terminable at any time.

However, the terms of their agreement and the payment of rent is more in line with a lease than a license. The terms indicate the parties contemplated a landlord/tenant relationship.

The provision prohibiting assignment is only applicable to the ownership of a possessory interest in real estate, such as a lease, which is assignable. Additionally, the optometrist was given exclusive possession for a fixed period of time, an activity which interferes with the owner’s right to enter at any time. Conversely, a license is a nonexclusive personal privilege to use another person’s property and a right which is unassignable.

Thus, the arrangement is a lease, since the right to exclude others from entry for a stated term, coupled with assignment rights and rent, are characteristics of a landlord/tenant relationship, not a license. [Beckett, supra]

If an occupancy agreement contains words like lease, rent, expiration and good tenantable condition, it may be construed to be a lease rather than a license.

Now consider a developer who builds a 150-unit resort condominium and sells the units as timeshare “memberships.” A member can purchase up to four one-week timeshare interests. The membership does not have an expiration date and is assignable.

However, a member is not entitled to reserve any particular unit in advance of occupancy. The assignment of a unit for actual occupancy during the time period selected is left up to the discretion of the developer’s board of directors.

A restraining order is obtained by the Department of Real Estate (DRE) to stop sales of the memberships, because a subdivision permit and a public report to sell interest in real estate was not first obtained by the developer.

The developer claims the memberships are mere licenses held by the members to use unidentified space and are not leases or other conveyances of space which would require a permit and public report.

The developer further contends the members do not hold an interest in real estate since they do not have an exclusive right to the possession of any specific unit.

However, the occupancy right held by the members is a lease. The units to be occupied are identical, the duration of occupancy is specific and each member has the right to exclusive occupancy of a unit. [Cal-Am Corporation v. DRE (1980) 104 CA3d 453]

Recharacterization of a license

A license is usually oral with very few terms agreed to except for permission to use or conduct an activity on the property while the owner remains in actual possession. Above all else, a license does not carry with it the right to exclude anyone from the property.

However, with every additional condition agreed to between the owner and the user, a license begins to recharacterize itself more and more as a lease.

For example, a broker has an office with unoccupied desks. The broker wants to operate alone and avoid commitments to manage and supervise associate licensees. However, he is willing to share space in the office with other brokers.

The broker offers another broker the use of an office, desk space, a telephone line and secretarial services. The brokers orally agree each will pay their own proportionate share of utilities, secretarial services and rent.

A time period for the use is not specified.

The office space selected by the other broker is unlocked and open to the entire office.

Here, the broker may terminate this “rent-a-space” relationship at any time without notice or cause since the other broker has been given a license to use office space.

Conversely, when a broker offers space in his office under a written agreement providing for lockable office space and a specific period for occupancy, the agreement is a lease.

With a lease (or month-to-month rental agreement) in hand, the broker has created a landlord/tenant relationship, not a license.

By specifying more and more terms regarding the right to exclude others (the locked door for a fixed period of time), what started out as a mere license to use space has been recharacterized as a lease.

A license coupled with a lease

Sometimes a license and a lease co-exist and are held by the same person.

A person can be a tenant with exclusive occupancy of part of the premises and hold a license to use an adjacent portion of the premises.

For example, a retail tenant leases space in a shopping center.

The tenant has exclusive possession of his store space, controlling who may enter. However, the tenant shares use of the sidewalks and parking lots with other shopping center tenants and all the customers of the shopping center.

The tenant has no right to exclusive possession of the sidewalk or parking area, only to the space enclosed within his unit. Thus, having access to the parking area is a license.

Now, consider a tenant who installs a satellite dish or antenna in his unit to avoid using the complex’s cable. The landlord has an agreement with the cable provider and does not want the tenant to circumvent use of (and payment for) the existing cable hookup.

However, the landlord cannot restrict the tenant from setting up his own satellite dish.

However, the tenant cannot:

  • install a satellite dish or antenna of more than one meter in diameter;
  • install the dish or antenna in any common areas, such as outside walls, windowsills or roofs, or common area balconies, stairwells or any other common area;
  • drill holes through outside walls, roofs, balconies, railings or glass; or
  • splice into any existing wires or cables.

The tenant has the right to place the dish or antenna anywhere in the space within his unit or balconies and patios attached to his unit. The dish or antenna cannot extend beyond the tenant’s balcony railing or patio line. [Federal Communications Commission Order 98-273]

An irrevocable license

An irrevocable license grants an individual the right to enter and use property as long as the specific activity for which the license was granted remains feasible.

For example, an owner of a parcel of real estate has an oral agreement to use a roadway across a neighbor’s adjoining property for access to and from his property.

The owner makes substantial improvements, including yearly maintenance and repair, to the roadway.

The adjoining owner barricades the roadway, terminating the owner’s access to his property.

The owner claims the right to use the roadway cannot be terminated by the adjoining owner since the right to use the roadway is an irrevocable license.

Does the owner have the right to use the roadway as an irrevocable license?

Yes! When a licensee makes substantial expenditures, relying on a property owner’s grant of a license for a use that appears to require a long duration, the license may be considered “irrevocable.” [Cooke v. Ramponi (1952) 38 C2d 282]

Now consider the construction of a privacy wall on the entire length of a property line between adjacent lots. The lots are located on a hillside, one above the other. Each lot is flat with a graded slope between them to adjust for the difference in the elevations of their lots. Each lot is improved with a residence.

The boundary between the lots is located at the bottom of the slope. However, for a wall to give the owner of each lot privacy, the wall must be located at the top of the slope, entirely on the uphill parcel and several feet from the boundary line.

The owner of the uphill lot agrees to allow the neighbor below to construct a masonry wall with its foundation on the top of the slope. The improvement (wall) made by the neighbor will be located entirely on the owner’s property and thus will constitute an encroachment. The owner and the neighbor agree on the height of the wall and that the neighbor may use the slope between the wall and the property line.

The owner orally grants an easement for the encroachment which is never reduced to a writing.

The neighbor constructs the masonry wall at the top of the slope. He also builds a gazebo within the slope area – beyond his boundary and a further encroachment on the owner’s property.

The owner of the uphill lot sells the property. The buyer surveys the lot and demands the neighbor remove the wall and the gazebo since they encroach on his property.

The neighbor claims he has an irrevocable license to maintain the encroachments and use the slope since he spent considerable time and money to construct the encroaching structure relying on the prior owner’s oral promise to allow him to build the wall and use the slope.

The buyer claims he should not be estopped from revoking the license since he did not have any notice the license existed and the agreed-to use of the property was not reduced to an enforceable writing.

However, a license becomes irrevocable and is, in all its essentials, an easement when substantial effort or expenditures are made in reliance on the owner’s oral promise to allow the use. Further, the buyer – as a succeeding owner of the license – need not have any knowledge of the irrevocable license to be barred from denying the neighbor’s continuing use to maintain the wall and the gazebo under the oral license. [Noronha v. Stewart (1988) 199 CA3d 485]